Michael D. Moberly May 3, 2010
When I discuss trade secrets and trade secrecy, I am not necessarily talking about the Coca-Cola’s of the world that have literally built an incalculably valuable and global brand around its trade secret formula for ‘Coke’.
Instead, I focus on the literally millions of small and mid-size companies (SME’s) that have built their brand (reputation, image, and goodwill, etc.) albeit on a smaller scale, by utilizing information they have developed internally. Often times, that distinctive information provides SME’s with significant competitive and economic advantages that should be, but generally have yet to be formally recognized or treated as being either proprietary or a trade secret.
I am an advocate of openness and transparency under most circumstances. But, in today’s extraordinarily competitive, predatorial, and winner-take-all global business environment, declaring and treating certain information as proprietary or a trade secret is simply prudent and necessary, particularly when that information serves as an underlier and driver ro elevating a company’s market (brand) value, securing sources of revenue, contributing to its sustainability, and laying foundations for future growth and wealth creation.
Still, there remain misunderstandings among management teams, boards, and employees about trade secrets and trade secrecy which I see being manifested in various ways and on different levels in companies. For example, (a.) what are the costs of declaring certain information a trade secret, (b.) what are the legal requisites of trade secrecy and what resources must be committed and/or procedural changes executed, etc., to meet those requisites, (c.) how will shareholders and consumers react to having certain information being declared a trade secret, and (d.) are there downsides to declaring certain information a trade secret, etc.
These questions are legitimate and should be thoroughly vetted:
1. By anagement teams, boards, and include the internal contributors and partners that will ultimately have a direct role in execution.
2. In the context of a companies overall operational, brand building, and marketing strategy.
Make no mistake, there is business prudency, if not fiduciary responsibility, in taking affirmative steps to keep certain information, especially that which delivers economic returns and competitive advantages not merely out of the public domain, but out of the hands of and probable use by competitors and other (economic, competitive advantage seeking) adversaries.
In many instances, the challenge to companies to declare certain information proprietary or a trade secret lies in a commitment to devote the necessary time to quite literally conduct an inventory of their internally developed information-based (intangible) assets. In many instances, such an inventory reveals that those valuable assets have become embedded in operational processes, procedures, and practices that directly contribute to (underlie) efficiencies, competitive advantages, and customer/client goodwill, reputation, and image, etc., which, in turn, deliver value and revenue. That information, along with the knowledge how to use that information competitively, should at minimum, be declared and treated as being proprietary!
I look forward to learning your thoughts and perspectives.