Trade Secrets & Confidential Information

Protecting trade secrets is crucial for SMEs in the UK for several reasons: 

1. Competitive Advantage: Trade secrets often represent unique knowledge, processes, or techniques that give SMEs a competitive edge in the market. Protecting these secrets helps maintain their advantage over competitors. 

2. Innovation Protection: SMEs often rely on innovation to drive growth and stay ahead of the competition. Trade secrets can include proprietary technologies, formulas, or strategies that underpin their innovative products or services. By safeguarding these secrets, SMEs can continue to innovate without fear of theft or imitation. 

3. Business Sustainability: Trade secrets are valuable assets that contribute to the long-term sustainability of SMEs. If these secrets were to be disclosed or stolen, it could have a detrimental impact on the company's ability to compete effectively and sustain its operations. 

4. Preserving Market Position: Trade secrets can be key to maintaining a strong market position, especially in industries where competition is fierce. By protecting these secrets, SMEs can preserve their position in the market and avoid being overtaken by rivals who may attempt to capitalize on stolen or leaked information. 

5. Intellectual Property Protection: While trade secrets may not be formally registered like patents or trademarks, they still represent a form of intellectual property (IP). Protecting trade secrets helps SMEs safeguard their intellectual assets and prevent unauthorized use or disclosure, which could lead to loss of revenue or reputation damage. 

6. Cost-Effectiveness: Compared to other forms of IP protection, such as patents or trademarks, protecting trade secrets can be more cost-effective for SMEs. Trade secret protection does not require formal registration or ongoing maintenance fees, making it a more accessible option for smaller businesses with limited resources. 

Overall, protecting trade secrets is essential for SMEs in the UK to maintain their competitive advantage, foster innovation, ensure business sustainability, preserve market position, safeguard intellectual property, and operate cost-effectively in the marketplace. 

Understanding Trade Secrets and Confidential Information  

Do you know the difference between a trade secret and confidential information? 

Let's break it down and explore the tests used to identify each one. 

Trade Secrets:  In essence, a trade secret is a piece of information, treated as confidential by its owner, which has commercial value because it is secret. 

UK law protects trade secrets against unjustified use and disclosure. 

In the UK, protection for trade secrets is provided by two parallel regimes: by common law (the law of confidence) and by legislation: the Trade Secret Regulations 2018 or parallel provisions such as the Computer Misuse Act 1990. 

The Trade Secret Regulations define trade secrets as any information that:

(i) is secret, being not generally known, (ii) has commercial value because it is secret, and (iii) has been subject to reasonable steps to keep it secret.

In practice, trade secrets are very often protected by contract. 

This protection recognises the value of secret information in supporting business competitiveness. Many types of confidential information can be protected as a trade secret. This includes technical know-how, product information, commercial data, or product names.

There is no time limit to trade secret protection for as long as information remains secret and commercially valuable. 

Trade secret owners are not required to make public information such as required by the patent process. So, there may be a good business case for protecting information with trade secrets rather than with other intellectual property rights. There may be, however, no option other than using trade secrets if information cannot be protected by formal intellectual property rights.

Tests used in common law to identify trade secrets include:  

• Nature of employment: How closely an employee works with highly confidential information.
• Nature of the information: The level of secrecy and commercial value of the information.
• Treatment by the employer: Steps taken to protect and limit access to the information.
• Separability of the information: Whether the information can be separated from general knowledge or an employee's own skills.
• Harm test: The potential damage to the business if the information is disclosed to competitors.

There is a significant overlap between the test for a trade secret under the Regulations and the existing test in the UK for what amounts to confidential information.  

Confidential Information:  Confidential information is sensitive data that a business wants to keep private.  It may include customer lists, financial information, business plans, or internal processes. 

Tests used to identify confidential information include:  

• Reasonable expectation of privacy: Whether the information is generally considered confidential.
• Precision in definition: Clearly defining what information is considered confidential.
• Duration of protection: How long the information should remain confidential.
• Exceptions to protection: Situations where disclosure may be necessary, such as legal requirements or public interest.

Protecting trade secrets and confidential information is crucial for businesses to maintain their competitive edge.

Remedies:

There are a range of possible remedies where confidential information or trade secrets have been unlawfully obtained, used or disclosed. A wronged party may apply to the court for:

• Court injunction – an injunction may be granted preventing a party from using the confidential or secret information, and it may also require the recall or destruction of the information or any products created by using the information;
• Compensation - compensation may be awarded by reference to the amount of royalties or fees that would otherwise have needed to be paid for the proper use of the confidential or secret information;
• Damages – damages may be awarded to cover any reasonably foreseeable negative economic impact of the use of the confidential or secret information; or
• Account of profits – instead of damages the owner of the information that has been taken unlawfully may seek to claim the profits generated by the infringer's use of it.

To help unwanted disclosure of trade secrets and confidential information that are the subject of court proceedinsg, the court file may be sealed or the hearings can be held in private. 

Legal Notice:

Publisher: Atkins-Shield Ltd: Company No. 11638521
Registered Office: 71-75, Shelton Street, Covent Garden, London, WC2H 9JQ

Note: This publication does not necessarily deal with every important topic nor cover every aspect of the topics with which it deals. It is not designed to provide legal or other advice. The information contained in this document is intended to be for informational purposes and general interest only.

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