Nurturing trade secrets crucial factor in success

By Abhai Pandey, Lex Orbis IP Practice

Every business has some unique selling propositions (USP) as the foundation stone to start, operate and compete in the market.

Abhai Pandey Lawyer Lex Orbis IP Practice
Abhai Pandey
Lex Orbis IP Practice

When that USP is analogous to a pattern, formula compilation, programme, device, method, technique, or process having independent economic value, it is termed as a trade secret.

The above is a conjecture and not a definition.

A trade secret can take any form with the essential parameter of having a commercial value in the eyes of the business competitors.

As the trade secret or confidential information continuously drives the business, therefore a policy formulation to safeguard it becomes imperative to prevent misuse, loss or theft.

First step: Framework

The first step in developing such a policy framework asks for identifying and prioritizing the business information categorized as trade secret. A regular update on that front is necessary due to constantly changing business environments.

A business secret today may not be one tomorrow if it loses the commercial value attached to it.

This leads to the obvious question of how can an enterprise mark something as a trade secret.

What is the objective benchmark to abide by?

Generally the yardstick is the competitive advantage available to an enterprise over others in the market due to the possession and use of the relevant business “secret”.

Second step: Clauses

There is no government registration process that enables enterprises to obtain trade secret rights therefore the second step towards a policy framework is to put in place confidentiality or disclosure and non-compete clauses in employment contracts.

The contracts could be umbrella contracts, covering all aspects of the business.

They could also be customized contracts that focus on the specific needs of a single project or a single assignment.

A good confidentiality agreement is detailed and direct and limits post employment restrictions in time and geographical scope.

Final step: Systems

This being done then as a final step an adaptation of an information security and protection system within the organization can go a long way towards identifying, protecting and managing trade secrets.

This is vital because it helps with a number of functions which include monitoring and surveillance, auditing and taking legal measures against those who breach or try to breach the security systems from within or without the enterprise.

An enterprise may take legal measures to redress the misappropriation of their information of competitive value if reasonable efforts have been made to preserve the secrecy.

Acquiring a trade secret through improper means is illegal.

However, reverse engineering or independent derivations are not considered improper means.


Thus, a trade secret suit will not succeed if an aspect of a product’s design or construction has been obtained by examination of an item purchased in the marketplace.

Nor will a suit be useful against those who independently discover a secret process or make a compilation of commercially valuable information.

A trade secret policy underpins an effective intellectual property policy within an enterprise.

This statement is self-explanatory due to the inherent characteristic of the matter up for protection as a trade secret and also as the present economy has come to be known as knowledge based rather than physical assets based.

A knowledge economy

Enterprises in this economy rely increasingly on intangible or knowledge-based assets to create and maintain their competitiveness in the marketplace rather than on tangible or physical assets.

The ability of an enterprise to create, deploy and strategically manage such proprietary assets is becoming a crucial factor of business success.

Sharing secrets

Revealing a trade secret to a third party must accompany an underlying agreement stating as to what constitutes a trade secret and who is the proprietor.

Adequate and effective creation, protection, uses and management of trade secrets is the starting point on the road to successfully developing and managing intellectual property strategy and integrating it in the business strategy of an enterprise.

Abhai Pandey is a lawyer with Lex Orbis IP Practice, a firm specializing in intellectual property with offices in New Delhi.

Lex Orbis logo

709/710, Tolstoy House, 15-17, Tolstoy Marg

New Delhi – 110 001


Tel: +91 11 2371 6565

Fax: +91 11 2371 6556