5 mins read

What Is a Trade Secret and How Do You Protect It in Partnerships

March 19, 2024
Safuan Zairi, Chief Ecosystem Officer
5 mins read

In the exciting world of technology, where collaboration and partnerships drive innovation and business growth, safeguarding trade secrets is paramount. A good example of this is when PepsiCo once received Coca-Cola's secret recipe but chose to inform Coca-Cola instead of using it for their benefit. This act underscores the significance of trade secrets in protecting crucial information, even among rival companies.

When tech companies team up, they share their unique expertise, ideas, and resources. But keeping their trade secrets is often a challenge faced. These secrets are critical in helping companies stay ahead of the game.

The power of trade secrets lies in their ability to provide a unique competitive edge. In the technology industry where things are rapidly changing, maintaining confidentiality can be as valuable as the innovation itself. This is particularly true in sectors like biotechnology, artificial intelligence (AI), and software development, where a single innovative approach can define a company’s future.

However, the challenge lies in balancing the need for secrecy with the necessity of collaboration. In an industry that is increasingly dependent on partnerships and collective innovation, protecting trade secrets while sharing enough information to foster productive collaborations is a delicate tightrope walk. 

Clear legal frameworks and confidentiality agreements are crucial for tech companies engaging in partnerships. They provide security for valuable trade secrets and intellectual capital to ensure collaborative ventures are mutually beneficial without compromising proprietary assets.

What is a Trade Secret?

For both technology providers and seekers, trade secrets, if not well protected, can significantly impact competitive edge.

For an information to be considered as a trade secret, it needs to be:

  • Not common knowledge: It’s not something you can find out about easily. It's kept under wraps, like a secret recipe.
  • Valuable because it's hidden and has commercial value: The fact that this information is secret and has commercial value is what makes it valuable. The information must give the business a financial or other competitive advantage.
  • Well-guarded: The company has to work hard to keep this information secret, by employing confidentiality agreements to make sure only certain people can access it.

The different types of trade secrets in tech

Trade secrets can be anything from a special development of tech to a unique way of doing things. Here are some trade secrets tech companies might have:

  • Proprietary algorithms: These are like secret recipes for technology, crucial for making products like search engines or data processors work better than their rivals.
  • Customer lists and data: This is like having a detailed book of who buys what, their preferences, and how to contact them.
  • Business strategies and plans: These are like a secret game plan for a company’s future moves, including how they’ll market themselves and what new products they plan to launch.
  • Manufacturing processes: These are unique ways of developing products at a cheaper cost or through a more efficient way. 
  • Formulas and recipes: In tech, this could mean specific codes or software setups that are key to a product's success.
  • Technical know-how and procedures: This covers the special techniques or processes companies develop with unique expertise, like troubleshooting measures. 

Why are trade secrets a big deal in tech partnerships?

Trade secrets do more for companies than simply giving a competitive edge. They also offer: 

  • Exclusivity in innovation: Having a trade secret means a company has something unique that nobody else does. It's like having a special talent that sets you apart in a talent show.
  • Longevity of protection: Unlike patents that expire, trade secrets can be kept forever, as long as they stay secret. This is a huge advantage in the long run for enduring competitive edge, continuous innovation, public disclosure, and many more.
  • Avoiding disclosure: When you patent something, you have to tell the world about it. Trade secrets let you keep your special tricks private, giving you a silent edge.
  • Cost-effectiveness: Securing trade secrets typically involves lower expenses compared to the process of obtaining a patent.
  • Immediate protection: The moment a trade secret is created and kept safe, it's protected. No waiting or paperwork needed.
  • Leverage in collaborations: When companies work together, having a trade secret can give them a stronger position in negotiations because they bring something unique to the table.

What happens if you don’t protect trade secrets in time?

Not protecting sensitive information can lead to significant issues. For instance, if critical information like Google’s search engine algorithm were to be leaked, it could drastically impact their dominant position in the search engine market. 

With global cybercrime costs expected to grow annually by 15% over the next five years, reaching US$10.5 trillion annually by 2025,  failing to protect trade secrets in time can be costly. This increase, up from US$3 trillion in 2015 is partly due to the theft of intellectual property (IP), including trade secrets. 

How to keep trade secrets safe?

According to NYC Bar, a significant number of employees have admitted to taking company data when leaving a job—highlighting the urgent need for robust trade secret protection. Regardless of investing in partnerships or developing tech in-house, trade secrets should still be safeguarded. Here are the top five strategies to ensure these valuable assets remain protected:

  • Make clear rules and train staff: Companies should have strict policies informing and educating employees how to handle trade secrets.
  • Use non-disclosure agreements (NDAs): These are legal promises people make to keep certain information secret. 
  • Implement strong security measures: Keeping paper files locked up, controlling access to important storage areas, and using tech security like firewalls and passwords are some key measures.
  • Limit who knows what: Only grant access to employees who really need to know about the secrets.
  • Monitor periodically to ensure rules are followed: Regularly check how trade secrets are being handled, interview employees who are leaving the company, and make sure rules are understood and respected.

How MATCH and MRANTI can help in enhancing successful, protected tech collaborations

Platforms like MATCH, curated by MRANTI, are pivotal in nurturing tech collaborations that are not only secure but also rich in innovation and diversity. As the global IT sector stands to reach US$5 trillion in 2024, the focus shifts from merely safeguarding trade secrets to fostering a more holistic environment where innovation can thrive through collaboration. 

MATCH is like a meeting point for different tech minds. It’s where people with different ideas and skills come together to create something new and exciting. This is especially important now, as the tech world is growing rapidly and values the sharing of ideas more than ever. 

Furthermore, MATCH makes sure that while people are sharing and working together, they’re also keeping their unique ideas safe. This sense of safety attracts all sorts of people and companies to join in, from small startups to big players. MATCH is not just helping people connect; it’s setting the stage for a new way of innovating in tech, and opening doors for new possibilities to drive Malaysia towards its goal of becoming a high-tech nation by 2030.

Ready to be partnered up? Find your MATCH with MRANTI!