- March 1, 2023
- Posted by: web dev
- Category: Uncategorized
As a business owner, you know that some information is too valuable to share with others. This type of information is known as a trade secret, and it can include a wide range of things, such as formulas, processes, customer lists, and more.
In this article, we’ll explore some common trade secret examples. We will also discuss how you can protect your business’s valuable information from copycats or fraud. So let’s get into it!
Unveiling the Mysteries of Trade Secrets
Before we dive into some examples, it’s important to understand what a trade secret is and why it’s important.
According to the Uniform Trade Secrets Act (UTSA), a trade secret is defined as any information that has economic value because it is not generally known or readily obtainable by others. It is mainly information that can help a third party gain economic value that is kept close to the vest because of its importance.
In other words, a trade secret is any information that gives your business a competitive advantage and that you take steps to keep confidential. According to a report by the World Intellectual Property Organization (WIPO), trade secrets are estimated to be worth trillions of dollars globally.
Furthermore, the USTR report highlights the importance of trade secrets for the overall economy, stating that “the theft of trade secrets can result in job losses and decreased innovation, which can have a negative impact on the economy as a whole” (USTR, 2020).
So it is no secret as to why they are so important! Want to know what they are?
The 4 Most Common Trade Secrets in Business
In a survey of US business executives conducted by PwC, 40% said that trade secrets are their company’s most valuable asset, compared to 27% who said that patents were their most valuable asset (2017). And it shouldn’t come as a surprise given how much value comes with trade secrets.
Actually, according to a report by the Office of the United States Trade Representative (USTR) from 2020, trade secrets are estimated to be worth around $5 trillion in the US alone. Not only that, but if you were to lose a trade secret, the consequences could be dire.
Or so says a 2013 report by the Commission on the Theft of American Intellectual Property, which states that trade secret theft costs US businesses anywhere from $180 billion to $540 billion per year.
Conclusion? Trade secrets are not to be taken lightly.
So what types of information can be considered trade secrets? Here are some common examples:
1. Formulas and Recipes
Many businesses have formulas or recipes that give them an advantage over their competitors. For example, the Krispy Kreme classic glaze.
It is clear that if Krispy Kreme sold their formula or recipe for their world-famous donuts, they wouldn’t have the competitive edge they have over other competitors. So, you could say their trade secret keeps their business producing the amount of cash it does.
The formulas for cleaning products like Mr. Clean’s toilet scrub mix are also considered trade secrets. So formula and recipe secrets are not exclusive to the food industry.
2. Processes and Methods
In addition to formulas and recipes, businesses can also have trade secrets related to their processes and methods. Here we can take into account assembly processes, creative processes, and even programming.
To explain further, let’s take the AI revolution. Chat GPT is by far the most competitive AI software out there on the market today. The reason? No one knows how the AI is fed such on-point responses.
And while many other companies, like Google, are trying to copy the process, very few have been able to get their name out there. This makes Chat GPT a huge competitor because of the trade secret behind its creation.
Actually, this wouldn’t be the first time that Google has tried to copycat a competitor. And they have paid the consequences (as could you).
Google was sued for trade secret misappropriation in 2015 by a rival search engine company, Overture Services Inc. Overture alleged that Google had stolen its algorithm for ranking search results. The case was settled out of court, with Google paying Overture $250 million.
This comes to show just how important protecting methods and processes can be. Unless you want to go into a legal sparring war with Google!
3. Customer Lists and Contact Information
Customer lists and contact information can also be considered trade secrets, particularly if they are not publicly available. This information can give your business an advantage when it comes to marketing and sales, and it’s important to keep it confidential.
A great example of businesses that use customer list trade secrets are real estate agencies or talent recruitment agencies. They have exclusivity on “leads” or clients, which makes their businesses prosper over others in the competing market.
4. Marketing and Sales Strategies
Marketing and sales strategies can also be trade secrets. And given the importance of marketing in the tech era, you could say it is one of the most important trade secrets out there.
A great case study we could use as an example is Coca-Cola. Their commercial ads and marketing strategies like the very famous “Your name on the can,” have made Coca-Cola what it is today.
These marketing strategies are always kept under wraps until release, because if they are leaked, strong competitors like Pepsi could copy the strategy and wreak havoc on their sales.
5 Tips for Protecting Trade Secrets in the Digital Age
You may be wondering if information theft is even that common. In a survey of business leaders conducted by Deloitte in 2018, 60% of business owners said that their companies had experienced a breach of confidential information or trade secrets in the past two years.
Since information theft is such a common occurrence, it is vital that you keep your trade secrets a complete and utter mystery from your competitors.
So now that we know what trade secrets are and the most common examples, let’s talk about how you can protect your business’s valuable information.
Here are 5 of the best tips, according to industry professionals:
1. Identify Your Trade Secrets
A survey by the Ponemon Institute found that the average value of a company’s trade secrets is $7.5 million (2018). So, you may have more trade secrets than you think.
The first step in protecting your trade secrets is to identify what they are. Make a list of all the information that gives your business a competitive advantage and that you take steps to keep confidential.
2. Use Confidentiality Agreements
When you share your trade secrets with others, such as employees or contractors, it’s important to use confidentiality agreements. These agreements should clearly outline what information is confidential and what the consequences are for disclosing that information.
3. Limit Access
Another way to protect your trade secrets is to limit access to them. Only give access to employees or contractors who need it to do their jobs, and make sure they understand the importance of keeping the information confidential.
4. Use Physical and Digital Security Measures
In addition to limiting access, you should also use physical and digital security measures to protect your trade secrets. This might include things like password-protected files, secure storage areas, and security cameras.
5. Monitor for Breaches
Finally, it’s important to monitor for breaches of your trade secrets. Keep an eye out for any suspicious activity, such as employees accessing information they shouldn’t have access to, and take action immediately if you suspect a breach has occurred.
Trade secrets are an important part of many businesses, and it’s crucial to take steps to protect them. If not, your business could be severely damaged!
By identifying your trade secrets, using confidentiality agreements, limiting access, using physical and digital security measures, and monitoring for breaches, you can help ensure that your trade secrets will be protected.