Trade Secret Protection in the Digital Era Explained
Trade secrets form an integral asset of many businesses and preserving their confidentiality is essential for maintaining a competitive advantage.
A particular trade secret will normally form the foundation of the business owning it, for example, the formula for ‘Coca Cola’ or the recipe for the chicken prepared and sold by KFC. If the details were made public, the market success of these companies would probably be destroyed. Despite its potential importance, a trade secret does not have to be documented in order to gain protection.
In order to protect their trade secrets, businesses are able to adopt a wide range of varying strategies including stringent internal policies, restrictions set out in detailed contracts and digital security measures.
In the ever developing business landscape marked by constant technological changes, innovative tools, such as blockchains and multi-factor authentication tools have become standard features.
Stuart Southall of KANGS considers various aspects of trade secrets protection.
Defining Trade Secrets
The Trade Secrets (Enforcement etc.) Regulations 201:
Defines a trade secret as information which:
- is not generally known or readily accessible to persons within the circles that normally deal with the kind of information in question,
- has commercial value due to its secrecy,
- has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret.
- Provides that the acquisition, use or disclosure of a trade secret is unlawful where the acquisition, use or disclosure constitutes a breach of confidence in confidential information.
Examples of trade secrets include proprietary algorithms, customer databases, marketing strategies and manufacturing processes. Trade secrets do not require registration on any public register. Unlike other forms of intellectual property, a trade secret’s protection depends entirely on the owner’s steps taken to keep it undisclosed.
Emerging Risks in the Digital Landscape
The digital era introduces several challenges to the protection of trade secrets:
- Artificial Intelligence (AI): AI presents technical issues of a nature that has barely started to be addressed. Trade secret protection is not limited to human inventors and the scope of protection for AI generated trade secrets, is only beginning to be considered.
- Cybersecurity Threats: Increasing incidents of data breaches and cyberattacks pose significant risks to the confidentiality of business information.
- Remote Working: The shift towards remote and hybrid working models can lead to inadvertent disclosures if employees access sensitive information from unsecured networks or devices.
- Insider Threats: Employees, consultants or business partners may misuse access to confidential information for personal gain or to benefit competitors.
- Third-Party Vulnerabilities: Collaborations with external vendors or partners can inadvertently expose trade secrets if adequate safeguards are not in place.
Legal Protections and Enforcement
The only form of protection for trade secrets is to keep them secret which may be achieved in a number of ways such as:
- Limiting access to the information through physical and technological restrictions,
- Employment Agreements with staff containing confidentiality clauses or
- Implementation of separate Confidentiality Agreements,
- Imposition of robust internal measures,
- Ensuring that all commercial contracts include non-disclosure clauses,
- Imposition of a ‘need to know’ policy and regular security checks.
In the UK, businesses may turn to the courts to protect and enforce their trade secrets in a number of ways, including:
- Breach of Confidence: This common law action allows businesses to seek remedies where confidential information has been disclosed without authority. The claimant must demonstrate that the information in question was confidential, was imparted in circumstances giving rise to a duty of confidence, and the unauthorised use of the information has caused measurable harm.
- Injunctions: Courts can grant interim or permanent injunctions to prevent further misuse or disclosure of trade secrets.
- Damages and Account of Profits: Victims of trade secret misappropriation may be entitled to claim damages for losses suffered or an account of profits made by the wrongdoer.
Courts, when approached for any form of remedy, will require to see that the trade secret has been pro-actively protected and will examine the safeguarding steps which have been taken.
Criminal sanctions may also apply in cases involving unauthorised access to computer systems, under the Computer Misuse Act 1990.
How Can We Assist?
While UK law provides both statutory and common law protection for trade secrets, these protections are only effective where a business has taken reasonable and active steps to preserve the confidentiality of its information.
At KANGS, we work closely with business clients to identify trade secrets, design robust protection strategies, and take prompt legal action when those rights are threatened. For assistance with safeguarding confidential information or addressing potential breaches of confidence, please do not hesitate to contact our experienced team of lawyers at KANGS who will be delighted to assist and guide you.
Tel: 0333 370 4333
Email: info@kangssolicitors.co.uk
We provide initial no obligation discussion at our three offices in London, Birmingham, and Manchester. Alternatively, discussions can be held through video conferencing or telephone.
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