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VOL. 128 | NO. 135 | Friday, July 12, 2013




Trade Secrets: Important Assets

By H. Roy Berkenstock

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H. ROY BERKENSTOCK

Just as patents and trademarks are important assets for a company, so are trade secrets. But trade secrets seldom generate much attention, mostly because there isn’t a federal registration system that formalizes and protects them. Yet, a trade secret is a valuable part of the manufacturing process since it is part of a product’s signature and, as such, can distinguish a company’s product from its competitors, as would a trademark or patented feature.

Simply put, a trade secret is information unknown to others that has economic value, since it relates to a product’s formula, pattern compilation, program, device, method, technique or process. The value of a trade secret is distinct from a product’s intrinsic value, yet protecting a trade secret lies in a company’s ability to protect the information and keep it secret and to prove how a trade secret applies independently to a product.

Protection of a trade secret poses the difficult tasks of identification and management. The process requires the producer, marketer or manager to identify this special aspect of the product or services that results from the assimilation of the trade secret. While the provider of the product or service wants to promote the effectiveness of the “secret ingredient,” to publicly disclose what it is would destroy the secrecy and any ability to retain it as a trade secret. Therefore, management must have a thorough understanding of the special ingredient and must ensure that everyone who communicates with the public regarding the secret ingredient follows an explicit program not to disclose of the secret.

The secret aspects of the product or service must be recorded, retained and internally handled with continuing control of the trade secret. Conventionally, the secrets are detailed in written documents, computer programs, and manufacturing or business plans. The documents need to carry a legend denoting the confidential character of the material and it must be stored in a secured location.

A log of individuals having access to the secrets is advisable. Concurrently, an internal company policy must exist that clearly informs all exposed employees of the company’s ownership of the secrets and the obligations for use and control.

Typical examples of trade secrets include special seasonings in food and beverage products, such as Coca-Cola’s formula, trading schemes for property or investments, chemicals or procedures for an optimized procedure such as a fracturing operation, and product promotion.

The principle function of a trade secret program is the protection of the assets from conversion by former employees and business associates. Unless the assets are retained as secrets, legal recourse is ineffective. Legal enforcement of ownership rights depends on the proof that the trade secrets were made available to a third party from a confidential inventory of the secrets under a written contract.

H. Roy Berkenstock is a member of Wyatt, Tarrant & Combs’ Intellectual Property Protection & Litigation Service Team. This column is part of an occasional series on intellectual property issues for businesses and institutions.

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