What is a Trade Secret in the UK?

You may have heard of the term trade secret but are unsure what it means. Until 2018, the UK had no legal definition of a trade secret. Therefore, ‘confidential information’ describes the information we now call a trade secret. However, trade secrets are important to your business, as you likely have information you do not want competitors to know. This article will explain a trade secret and how to protect your business’ trade secrets and other commercially sensitive information.

What is a Trade Secret?

In UK law, a piece of legislation called The Trade Secrets (Enforcement, etc.) Regulations 2018 regulates trade secrets. 

A trade secret is information held by a business which:

• is secret;
• is likely to have commercial value (i.e. your competitors would be willing to pay for that information); and
• has been kept secret because reasonable steps have been taken to ensure the information remains secret.

Most businesses are likely to have trade secrets. For example, information about how you run your business, who your customers are, and specific secret formulae or procedures used to create your products or services are all your business’ trade secrets. 

Examples

In the UK, the definition of a trade secret is very broad. Most businesses will have trade secrets, such as:

• Technical Information: Manufacturing processes, chemical formulas, algorithms, software source code;
• Business Information: Customer lists, pricing strategies, marketing plans, financial projections;
• Strategic Information: Expansion plans, research and development projects, acquisition targets; and
• Operational Information: Quality control methods, supply chain details, cost structures.

Some well-known examples of trade secrets include the exact recipe for Lea & Perrins Worcestershire Sauce, the recipe for the Scottish drink Irn Bru, and the formula for WD-40.

What Does it Mean to “Take Reasonable Steps”?

There are court cases that give us guidance on this term. In these cases, non-disclosure agreements with employees were considered evidence of a ‘reasonable step’ in ensuring confidentiality. 

This is because it ensured that one could only access confidential information:

• through the company’s IT system;
• on company premises; or
• by people authorised to access that IT system.

Therefore, you should implement non-disclosure agreements to protect trade secrets.

Confidential Information

Suppose the information about your company does not meet the requirements of a trade secret. In this case, it could still constitute confidential business information. UK law protects confidential information as well. 

Protecting Trade Secrets and Confidential Information

The easiest way to keep your trade secrets and confidential information secret is to include confidentiality clauses in your employment contracts. For example, you should include a clause that prevents employees from sharing certain information with those outside the business.

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Suppose you work with contractors or other agencies that need to know confidential information about your company or business processes. In that case, you can require that any such contractors sign a non-disclosure agreement (NDA). You can also require employees to sign an NDA as well. These documents mean that you will have the right to take legal action if your employee or contractor shares your confidential information with anyone else. You can also bring an action if an employee uses the data to set up a business that directly competes with yours.

IT System and Safeguards

You should also determine what confidential information and trade secrets you have in your business. Then, create a record of who has access to this information. You should also ensure that your company’s IT systems have appropriate security. Then, if any third party unlawfully tries to access your IT systems, the information they can access is limited.

Another step you could take is to ensure that confidential information is compartmentalised where possible and disclosed only on a need-to-know basis. In addition, you should ensure appropriate digital and physical safeguards are in place, such as keeping sensitive documents in a safe or implementing multi-factor authentication to access systems containing confidential information.

What if Somebody Shares My Information?

If you bring a legal action for trade secret theft or unauthorised use of confidential business information, there are various remedies that the Court may provide if you are successful. These include:

• ordering the infringer to stop using or disclosing the trade secret/confidential information;
• destruction or delivery of any products using the trade secret/confidential information;
• an order prohibiting any future sale of such goods; and
• damages or compensation. 

If awarded, compensation will generally constitute the amount a licence for the trade secret would have cost. Damages are calculated based on the foreseeable economic consequences to your business resulting from the infringer’s actions.

Key Takeaways 

Your business’ trade secrets give you a competitive advantage. To protect your trade secrets and confidential business information, you must keep such information confidential and share it only with individuals who need to know. You should ensure that all your employees know the need for confidentiality. Additionally, you can use legal documents such as employment agreements and non-disclosure agreements. This will oblige your employees and contractors to keep such information confidential.  

If you need help protecting your business’ trade secrets and confidential information, our experienced intellectual property lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.

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