Scottish brands to be protected by ‘Trade Secret’ legislation, which allows companies to keep their recipes for success under wraps, writes Murgitroyd's Gordon Stark
The recent introduction of the so-called “sugar tax” resulted in leading soft drinks manufacturers reformulating the recipes of their products to reduce sugar content. While the ingredients which make up a soft drink are openly disclosed, the recipe which is used in the manufacturing process is kept a closely guarded secret.
Now, for the first time, those closely guarded recipes have been given legal protection through the UK Trade Secrets Regulations, implemented on June 9.
Keeping proprietary recipes and manufacturing processes confidential and out of the hands of competitors is common place in the food and drinks industry, whether it be the unique blend of botanicals used in the rapidly expanding craft gin sector, the recipe used to produce sauces such as tomato ketchup, or the know how used when blending a whisky.
The process for protecting important know how and other business critical information has become clearer for companies following the introduction of new UK wide legislation focussed on defining and protecting so-called Trade Secrets.
The implementation of the UK Trade Secrets Regulations enshrines Trade Secrets in legislation for the first time and implements into the UK a 2016 EU-wide directive designed to provide consistent protection to Trade Secrets. This EU directive, which also follows the introduction of similar legislation in the United States, serves to more clearly define what a Trade Secret is and what repercussions can result from its unauthorised disclosure.
Shhhhhh … what is a secret?
A Trade Secret can be derived from a broad range of proprietary knowledge which a business creates or acquires. In the broadest sense, a Trade Secret is something which provides commercial value to a business, as long as it remains internally confidential and hence is not publicly disclosed or independently discovered by competitors.
Trade Secrets can embrace a wide range of business knowledge and know how, ranging from technical information such as manufacturing and production processes, formulations and product designs, through to commercial information such as client lists, proprietary market intelligence, business plans, internal manuals and policies, and pricing information.
Protecting your firm’s best assets
Trade Secrets form part of a company’s Intellectual Assets and while sometimes overlooked in favour of registered Intellectual Property (IP) rights such as Patents and Trade Marks, in certain sectors a trade secret could in fact be the most effective way to protect the innovation which a company creates. In other sectors Trade Secrets could be used to round out a broad and robust IP strategy in conjunction with registered IP rights.
Unlike IP rights such as patents and trade marks, a Trade Secret does not need to progress through a formal registration process to exist. The newly introduced UK legislation provides three key criteria which need to be met in order to for something to be defined as a Trade Secret. These criteria are that the information, process or know-how must not be generally known, that there is commercial value attributable to it remaining secret, and lastly that there are reasonable steps in place to keep it secret.
Once these criteria are met, the Trade Secret status will be maintained until such a time as these criteria are no longer met and the idea is no longer a secret.
What action should businesses take?
Given that Trade Secrets can be critical to differentiating a company’s product in the marketplace, businesses can adopt best practice in this area by being clear on what confidential and proprietary information the business holds. Structured internal processes to audit and identify what information should be considered sensitive and proprietary should be in place.
It is also important to have clear controls around how that information is managed. Being clear on the use of confidentiality and non-disclosure agreements with suppliers and business partners is important, as is ensuring employees have clear guidance and restrictions around disclosing Trade Secrets outside of the business, either deliberately or unwittingly.
With clearer legislative guidance now in place defining what Trade Secrets are, this greatly adds to their attractiveness and will allow more value to be attributed to them. Indeed many business are already reviewing how Trade Secrets can add value as a business asset. So, the message is clear; when it comes to this area of Intellectual Property, this is one secret that needs to get out.
For more information on Trade Secrets speak to the team at Murgitroyd. murgitroyd.com/contact-us
Gordon Stark is chief operations officer of Murgitroyd, the intellectual property specialists. He is a qualified UK and European patent attorney, and is an active member of the Scottish innovation community, including recently chairing the judging panel for the Converge Challenge Elevator Pitch competition.