IP Essentials: Trade Secrets

In the heart of Finland's vibrant SME ecosystem lies a hidden treasure trove of innovation - trade secrets. While patents, trademarks, and copyrights often steal the spotlight, trade secrets quietly underpin the success of countless businesses, providing a crucial avenue for safeguarding valuable know-how and confidential information. In this second installment of IP Essentials, we explore the significance of trade secrets, their unique advantages, and the strategies companies can employ to protect these invaluable assets.

THE ESSENCE OF TRADE SECRETS:

Trade secrets encompass a wide array of confidential information, including formulas, processes, techniques, and strategies that provide a competitive edge. Unlike patents or trademarks, trade secrets rely on confidentiality rather than registration for protection. This discretion allows companies to retain exclusivity over their innovations indefinitely, provided they take adequate measures to maintain secrecy.

In Finland, the Act on Trade Secrets (fin. liikesalaisuuslaki, 595/2018) defines trade secrets as information that is

-          Not generally known or easily accessible to persons who normally deal with such information as a whole or in its precise composition and combination;

-          Information that has economic value in business activities due to the characteristics referred to above; and

-          Information for which the lawful holder has taken reasonable steps to protect.

Trade secrets offer distinct advantages for companies operating in dynamic and competitive markets. For example, unlike patents, which require registration fees and public disclosure, trade secrets can be protected at minimal cost. This makes them an attractive option especially for cash-strapped SMEs seeking to safeguard proprietary information without breaking the bank. In addition, while patents have a finite lifespan, trade secrets can endure indefinitely, as long as the information remains confidential. This affords companies sustained protection for their most valuable assets, without the constraints of expiration dates or renewal fees.

Trade secrets provide companies with greater flexibility in commercializing their innovations. Unlike patents, which require disclosure of technical details, trade secrets allow companies to maintain control over their proprietary information while exploring various commercialization strategies.

PROTECTING TRADE SECRETS:

Ensuring the security and confidentiality of trade secrets is paramount – as defined in the Finnish Act on Trade Secrets, proprietary information can only be classified as a trade secret if the holder of that information has taken steps to protect that information. Therefore, it is crucial that companies recognize the information they have as a trade secret and that they take the necessary steps to protect it.

When companies wish to commercialize some confidential information they have, they can grant a business partner information on the trade secret in the form of a licensing agreement and an associated non-disclosure agreement (NDA). Companies usually require business partners to sign NDAs, outlining their obligations to maintain confidentiality and prohibiting the unauthorized disclosure or use of trade secrets, often enforced with a  contractual penalty. The use of NDA’s in commercial relationships as well as with employees and contractors is the main form of protecting trade secrets.

In addition to protecting the confidentiality of trade secrets, companies can protect their trade secrets by e.g. limiting access to sensitive information to a need-to-know basis by implementing robust security measures such as encryption, password protection, and secure storage systems. In addition to infrastructure security, companies can provide comprehensive training programs to educate employees about the importance of trade secret protection and their responsibilities in safeguarding confidential information in order to enhance the effect of the (probably) signed NDA.

One threat to the confidentiality of trade secrets is corporate espionage, which companies can mitigate by implementing physical security measures to prevent unauthorized access to trade secrets, such as secure facilities, surveillance systems, and visitor controls. Regular monitoring of internal and external threats to trade secrets and taking prompt action to enforce legal remedies against misappropriation or unauthorized disclosure can also be utilized.

TO END:

Trade secrets are an invaluable asset to companies that should be protected accordingly. As companies continue to navigate the complexities of the global marketplace, embracing the protection of trade secrets as an integral component of their IP strategy is not just a choice; it's a strategic imperative. By prioritizing the security and confidentiality of their proprietary information, companies and SMEs in particular can fortify their position as drivers of innovation and engines of economic growth.

Nordic Law assists its clients diversely in different questions regarding IPRs, including NDAs and the evaluation for other security measures for the protection of proprietary information. If you have any questions related to the protection of your intellectual property rights, we are more than happy to assist you.