Trade secrets, know-how, and confidential information

Confidential information is any type of information that you regard as confidential. Confidential information has value because you know the information, and others do not. Trade secrets and know-how are subsets of confidential information.

Below are a few examples of confidential information in general, as well as examples of trade secrets and know-how. Each type of business will have its own unique trade secrets, know-how and confidential information.

Confidential informationBusiness informationMarketing information Business plans, marketing plans and steps, strategies, marketing forecasts including financial forecasts, etc.
Financial information Details of your revenue, expenses, salary payments, borrowings, profits, losses, cash flow forecasts, etc.
Customer lists Who your customers are, as well as their details, including contact person, address, phone numbers, email addresses, special terms of trade, etc.
Trade suppliers list Who your important suppliers are, particularly those that may not be so well known, including the contact person, address, phone numbers, email addresses, special terms of trade, etc.
Identity of certain people The identity of applicants for a position, for example.
Passwords, codes etc. Passwords to internet banking, a safe's combination, or any other type of code or password.
Trade secrets and know-howA product formulation The formula of ingredients for a particular product.
Software source code The source code of software that reveals the algorithms and uniqueness of the software application.
A manufacturing process Any secret manufacturing process or procedure that gives you some type of advantage (lower cost, more attractive product, greater efficiency, marketing competitiveness).
A raw material You may use a unique raw material in your product or process that gives your product a unique or desirable characteristic.
A business method You may have a particular process or system for doing things that makes you particularly efficient.
A tool that you have developed and use You may have developed a unique tool with a certain function that is advantageous that you do not wish your competitors to have.
Information about a new product, process or invention, before filing a patent application If you intend to file a patent application to protect your new product, process or invention, it must be new (or novel) at the time that you file the application for the patent, otherwise you will be disqualified from obtaining the patent. This means that you must protect it as confidential information before filing the patent application. (Refer to New products, processes and inventions.)

Confidential information is maintained as secret and confidential because it would lose its value if it was generally known.

Consider the implications of the following types of confidential information being generally known, or being known by your competitors.

Confidential informationBusiness informationMarketing information If your competitors knew of your marketing plans and strategies, they could employ those strategies to their own advantage.
Financial information The profitability of your business is normally information that you confine to people who 'need to know' that information (i.e. information that you would not share with your competitors).
Customer lists If your competitors knew who your customers were, your competitors could try to persuade your customers to give their business to them.
Trade suppliers list If your competitors knew who your trade suppliers were, they could attempt to also be supplied with unique products that you have.
Identity of people If your competitors were aware of people you might be considering hiring, they might hire them instead.
Passwords, codes, etc. You would not share with anyone other than those who 'need to know' such things as passwords to internet banking, a safe's combination, or any other type of code or password.
Trade secrets and know-howA product formulation Sometimes a formulation is kept as a trade secret so that competitors are not easily equipped to copy or reverse-engineer it.
Software source code The source code of software may be protected by copyright, but that will not protect the algorithms that could be observed from the source code. If the source code was known by your competitors, they might write their own competing code with the benefit of your algorithms and hard work. (Refer to Copyright.)
A manufacturing process You would normally want to keep from your competitors any manufacturing process, procedure or 'secret ingredient' that gives you any type of advantage (e.g. lower cost, more attractive product, greater efficiency, marketing competitiveness).
A raw material If your competitors were aware of the unique material, they could compete with you more effectively, and you would lose your competitive advantage.
A business method If your competitors were aware of your business method or system, they could duplicate your efficiency and compete with you more effectively.
A tool that you have developed and use If your competitors had access to this tool they could achieve the same advantage the tool gives you.
Information about a new product, process or invention, before filing a patent application If your new product, process or invention became known, it would no longer be new (or novel) and you would be disqualified from being granted a patent. (Refer to New products, processes, inventions and patents.)

There are at least 3 types of publicly known information that can be confidential information:

  1. Customer lists
    • A customer list contains customers' names, addresses, phone numbers and other contact information.
    • All that information is public information, and can be reproduced from any telephone directory.
    • However, it is confidential information when it is in the form of a list of your customers.
  2. Information not generally known
    • You may be aware of technical information that is commercially valuable.
    • You suspect that some of your competitors may also be aware of that technical information. Your competitors may have developed the solutions you have found, based on the same technical information, if they have faced and overcome the same technical problems and challenges that you have faced.
    • However, your technical information is still your confidential information. Not all your competitors may know it, and you may prefer to keep it that way. In addition, you may have developed a variation on that technical information that may make it more valuable than your competitors' technical information.
  3. Unique combination of public information
    • Another category is where you have recognised that you can combine public information from different sources, and when that information is used in that combination it has unique properties, or achieves a particular technical desirable result.
    • While pieces of technical information may be public information, your unique development of combining them makes the combined information confidential.

The contents of a patent application can be confidential information, if they have not yet become public knowledge.

It will become public knowledge when the patent application is published, which is a mandatory step in the patent application process. (Refer to New products, processes and inventions (patents).)

However, that step will not occur until approximately 18 months after the patent application is filed.

For the following reasons, you should treat a patent application as confidential until it is published:

  1. Your provisional application may lapse
    • You may file a provisional application.
    • You might decide to let that provisional application lapse, so that you can file another, more detailed provisional application.
    • Keep in mind that if you have made the contents of the first provisional application public, you will be precluded from proceeding with this option.
    • The effect of making the first provisional application public is that the later application will concern known public information. A patent cannot be granted for that.
  2. Confidentiality protects you against competitors
    • By making the patent application public, you may be prematurely making your competitors aware of your innovation.
    • The earlier they obtain that information, the earlier they may be able to reverse engineer your innovation, or even develop a 'work around', that is, a way of exploiting your innovation outside the scope of claims in the patent, and therefore without infringing your patent.
    • The later the patent application is published, the less inclined your competitors may be to take those steps, and the better your position will be to resist, deter, or prevent those steps.

The table below offers some practical steps to help you protect your intellectual property.

Practical step Description
Never disclose without first having a confidentiality agreement.

A confidentiality agreement is an agreement between you and the person you intend to disclose your confidential information to. Under this agreement that person promises to maintain your confidential information as secret, and not use it for purposes other than those that you have allowed.
(Refer to Confidentiality agreements.)

Implement a 'need to know' policy. Not all employees need to know all your confidential information to enable them to do their job. Some employees might need to know some types of information (e.g. financial information) but not other types of information (e.g. patentable inventions).
Keep your IP secure.

Keep your intellectual property and confidential information in secure locations, and in a secure manner.

Consider whether some things should be confined to a certain area, such as a lab or other working area.

Have a visitor policy for your business.

Have a register of visitors to your premises.

Always have your visitors accompanied so that they do not inadvertently stumble into restricted areas.

If visitors will be visiting restricted areas where your trade secrets, know-how or confidential information may be observed or deduced, have them sign a confidentiality agreement before the visit.
(Refer to Confidentiality agreements.)

Restrict access.

Restrict access to premises so that only employees who need access to a specific location are able to enter that location.

This applies not just to employees, but to visitors to your premises as well.

Restrict computer access. Restrict access to parts of your computer systems so that only those employees who need to access certain types of information are able to do so, to the exclusion of others.