In the world of intellectual property, there are four categories under which your Intellectual Property (IP) may fall. A trademark is any word, phrase, symbol and/or design that identifies and distinguishes the source of the goods of one party from those of others. A patent is a limited duration property right relating to an invention that is granted by the United States Patent and Trademark Office in exchange for public disclosure of the invention. Copyrights protect original works of authorship including literary, dramatic, musical and artistic works, including poetry, novels, movies, songs, computer software and architecture.
Lastly and most importantly, trade secrets in general can be comprised of any confidential business information that provides a company with a competitive edge. Trade secrets can include manufacturing or industrial secrets like recipes, formulas, processes or techniques, as well as commercial secrets, such as client lists or business plans that have commercial value because of their secrecy. Unauthorized use of this information by anyone other than its owner is an unfair practice and violation of the trade secret. The key to understanding trade secret law is that something is only regarded as a trade secret so long as it’s kept secret.
It is a widespread belief that patent protection is more valuable than trade secret protection, but that isn’t always the case. Where patent protection is available for a limited duration, trade secrets can provide their owners with protection so long as the secrets are not disclosed to anyone. In some cases, this can be a very long time. Perhaps the most famous example of a trade secret is the recipe to Coca-Cola. Coca-Cola claims this to be the “world’s most guarded secret,” as it is known to only a few key employees at any given time. The recipe is locked in a purpose-built vault in the company’s museum in Atlanta, Georgia.
If Coca-Cola had opted instead to patent its recipe, it would have been disclosed to the public, and the company would have had the ability to exclusively exploit the recipe for only 20 years. Protection under trade secret law, however, will benefit Coca-Cola for much longer, but the key is in taking adequate steps to prevent trade secrets from being revealed. In a case for misappropriation of trade secrets, one of the factors considered by the court is whether the owner of a purported trade secret implemented adequate measures to keep their secrets classified.
“It is a widespread belief that patent protection is more valuable than trade secret protection, but that isn’t always the case.”
Steps that can be taken to protect trade secrets include limiting the number of individuals who know the secret, implementing security protocols in the facility that holds the secret, and requiring employees and others with access to the trade secret to sign a thorough confidentiality and non-disclosure agreement (NDA).
Although trade secrets abound in the cannabis industry, information and techniques have also been shared quite freely for a very long time. And information that has been disclosed is not subject to trade secret protection under the Uniform Trade Secrets Act or the Defend Trade Secrets Act of 2016. However, even if you determine that your recipes, processes or other business information don’t qualify for trade secret protection, they may still have value as proprietary information, which can be licensed. For this reason, every business should have confidentiality and non-disclosure agreements in place with their employees and with other key individuals with whom they transact business. Even if you don’t have a claim for misappropriation of trade secrets under trade secret law, you can still go after someone in court to try to stop them from disclosing your confidential information or for damages for having disclosed such information pursuant to your NDA.
The necessity for keeping trade secrets secret is why it is important to consult with an IP attorney as early in your development process as possible to determine whether patent or trade secret protection makes the most sense. And regardless of whether your business materials meet the criteria for trade secret protection, every company should have a NDA signed by employees and others who are exposed to confidential information.