Entrepreneurship, Second Edition

13.3. Trade Secrets

One benefit of trade secrets is they can cover everything patents cover—and much more. A trade secret is defined as knowledge, which may include business knowledge or technical knowledge, that is kept secret for the purpose of gaining an advantage in business over one's competitors. Customer lists, sources of supplies of scarce materials, or sources of supplies with faster delivery or lower prices may be trade secrets. Certainly, secret processes, formulas, recipes, techniques, manufacturing know-how, advertising schemes, marketing programs, and business plans are all protectable.

Another benefit of trade secrets is there is no standard of invention to meet, as there is with a patent. If the idea is new in this context and if it is secret with respect to this particular industry or product, then it can be protected as a trade secret. Also unlike the case for patents, trademarks, and copyrights, there is no formal government procedure for obtaining trade secret protection. Protection is established by the nature of the secret and the effort to keep it secret.

Finally, a trade secret can be protected eternally against disclosure by all those who have received it in confidence and from all who would obtain it by theft for as long as the knowledge or information is kept secret.

The key disadvantage of trade secrets is that, unlike the case with patents, there is no protection against discovery by fair means, such as accidental disclosure, independent inventions, ...