Trade secrets in the innovation process

Trade secrets in the innovation process

“Trade Secrets: Tools for Innovation and Collaboration” intends to inform policymakers about the contribution of trade secrets to knowledge transfer and collaborative innovation, with emphasis on technological know-how.

This paper aims to inform policymakers about certain shortcomings in existing frameworks for trade secret protection, which can undermine cross-border collaboration in particular.

The first part examines the notion of trade secrets, and explains their relationship to patents, demonstrating how businesses can deploy both approaches to efficiently manage their intellectual assets. The second part of this paper looks more closely at the practical challenges of managing trade secrets in the real economy. Finally, the last section suggests actions at the firm and legislative levels to ensure that confidential business information, a key source of competitive advantage for many firms, can be successfully protected and managed.

Introduction

Trade secrets include any protected business information – whether technical, financial, or strategic – that is not generally known and that provides a competitive advantage to the owner.

Innovative businesses use trade secrets throughout their operations, and they value them as a way to manage their proprietary knowledge. Trade secrets and patent protection are complementary, and businesses tend to use these tools in combination in order to most effectively manage their intellectual assets.

Today’s approaches to collaborative innovation require broad sharing of confidential business information. Trade secret protection can facilitate sharing among partners by enabling recovery should a third party misappropriate valuable information. Absent protection, 40 per cent of companies in the European Union (EU) report they would likely retain business information strictly internally, to avoid losing control over it (EU 2013).

From a practical point of view, existing trade secret regimes are ineffective due to low levels of legal protection, legal fragmentation across and within countries and regions, and inadequate enforcement. The resulting legal uncertainty is particularly problematic in light of today’s business environment, which is characterized by globally dispersed research and development (R&D), employee mobility, and reliance on information and communication technology (ICT). A case in point is the storing and processing of digital information on external servers, which allows trade secret theft to be initiated from anywhere in the world. This, in turn, obliges companies to recover where the misappropriation occurs – often in jurisdictions that offer little or no effective protection.

This paper available also in Chinese: 商业秘密 – 创新与协作的工具