Thu 5 October 2023
Legal advice on protecting trade secrets
Trade secrets are among the most important assets for most businesses. We advise corporate clients on the best way to legally protect critical business assets, we draft and advise on the documents and policies needed and where your valuable trade secrets are stolen, misused or breached, we can help you take the right steps to quickly enforce your legal rights.
What’s the legal definition of a trade secret?
Historically there was no statutory definition but since 2018, the Trade Secrets Regulations apply which supplement longstanding case law where rights have been enforced by bringing breach of confidence claims. The definition in the Regulations is wide and has 3 key elements which are :-
- The information is not generally known or easily accessible to the public
- The information or data has or is likely to have commercial value
- Steps have been taken by the owner to protect the information.
As is obvious from the above, it is essential that to be able to legally enforce rights to highly confidential information, a business must first have taken adequate steps to protect it. In legal terms, the most obvious ways to do this legally are by having well drafted employment contracts, confidentiality policies and non-disclosure agreements. There are also practical steps such as access and information security.
Examples of trade secrets
Much depends on the type of business you have. Specific assets which might be considered trade secrets can vary from one company to another. Common examples include :-
- Customer Lists - Information about existing and potential customers, including their contact details, purchasing history, preferences, and needs.
- Product Formulas or Recipes - Detailed formulations and recipes for products, including ingredients, proportions, and manufacturing processes.
- Manufacturing Processes - Proprietary methods and techniques used in manufacturing that provide a competitive advantage.
- Software Algorithms - Proprietary algorithms and code used in software applications, including source code, data structures, and databases.
- Marketing Strategies - Strategies, plans, and tactics for marketing products or services, including advertising plans, market research, and target audience data.
- Business Plans - Detailed plans for future growth, expansion, and development, including financial projections and strategic goals.
- Research and Development - Experimental data, research findings, and prototypes related to new products, technologies, or innovations.
- Financial Data - Sensitive financial information such as budgets, cost structures, pricing strategies, and profit margins.
- Customer Contracts - Details of contracts, agreements, pricing agreements and terms with customers.
- Intellectual Property - patents, trademarks, copyrights, and other intellectual property assets.
Taking action for infringement – what remedies are available?
The Trade Secrets Regulations set out remedies available for misappropriation and misuse. The general remedies were already available in common law claims (injunctions and claims for damages). The Regulations do enhance and set out specific remedies where the misuse of trade secrets has led directly to products being produced which rival or copy products protected by Trade Secrets law. So, in particular the court may order :-
- A prohibition on using or disclosing the trade secret;
- That there be no production, selling or use of infringing goods and that any goods on the market be recalled;
- An Account of Profits: In some cases, the court may order the infringing party to account for the profits they made from the unlawful use or disclosure of the trade secrets. This can be an additional remedy alongside damages.
- Delivery Up or Destruction: The court may order the infringing party to deliver up or destroy any materials, documents, or information that contains or relates to the trade secrets, to prevent further misuse.
Summary and ways to protect your business
- Identify your assets – you can’t take steps to protect unless and until you’ve established what assets you have that competitors or staff might seek to exploit.
- Think about and contractually protect your confidential data in your business contracts – especially with customers, business agents or consultant, any distributors and anyone who has access to key information such as IT suppliers.
- Access Control - Limit access to confidential information to only those who need it to perform their job functions. Implement role-based access controls and ensure employees are aware of their responsibilities.
- Recognise that employees are a big risk - Ensure that your employment contracts and policies are clear, recognise and deal with risks associated with remote working and bolster your defences with restrictive covenants and garden leave clauses for some staff and that staff are aware of what you consider to be a trade secret and expectations of staff.
- Employee Exit Protocols - When employees leave the company, ensure a thorough exit protocol is followed, including revoking access to all systems and retrieving any company property or documents in their possession.
- Non-Disclosure Agreements (NDAs) - Use NDAs when sharing confidential information with third parties, such as contractors, partners, or potential investors. These legal agreements can help protect your secrets and provide legal recourse in case of breaches.
- Practical steps - think about and take steps in relation to data security, passwords, physical security and disposal of confidential information.
If you need advice on how to protect your business critical company information amd assets or need experienced lawyers to draft, review or advise on contracts and policies to protect your key trade secrets, please do get in contact.