Key takeaways:
- Trade secrets have an increasingly important role in IP strategies, protecting the datasets, know‑how and internal processes other IP rights might not reach.
- A mixed approach – patents where enforceable, trade secrets where secrecy adds more value – can be the best approach to IP security.
- Because trade secret protection requires active management, organisations need a system that is proportionate but structured. A simple framework of identification, protective measures, misappropriation action plans and iterative review can be sufficient if it is applied diligently and consistently.
As technological developments, as well as macro-political and economic trends, continue to shape research, product development and commercial strategy, many organisations are rethinking how they protect the information that makes innovations valuable.
Within this context, trade secrets have become one of the most practical tools available. They are effective at capturing the elements that patents often can’t reach: datasets, algorithms, iterative experimentation, commercial information, and general ‘know how’, amongst others.
In this article, we break down the different elements of modern-day innovation that can be protected, the role of patents and trade secrets for each, and practical steps to achieve trade‑secret protection through active management.
What qualifies as a trade secret?
The UK has afforded protection to ‘confidential information’ under the common law for many years. Trade secret protection is more recent, being brought into law with the Trade Secrets Regulations in 2018 (the “Regulations”), following implementation of the EU’s Trade Secrets Directive. The two types of rights continue to coexist in the UK, offering overlapping, yet distinct, protection.
To recap, the definition of a breach of confidence under the common law is: i) the information has the necessary quality of confidence; ii) it is disclosed in a situation imparting an obligation of confidence; and iii) there is unauthorised use or disclosure of the information to the detriment of the owner.
The definition of a trade secret is provided under the Regulations as any information that: i) is secret (which is to say, not generally known); ii) has commercial value because it is secret; and iii) has been subject to reasonable steps to keep is secret.
A look at these definitions reveals an immediate benefit of trade secret protection over confidential information: the mere acquisition of a trade secret can qualify as misappropriation and be actionable, whereas establishing a breach of confidence requires the owner to suffer loss through unauthorised use or disclosure.
There are two further points to note about the definition of a trade secret.
The first is the breadth of information capable of trade secret protection. No limitations are placed on the type of information that can be protected beyond that it has commercial value owing to its secrecy. This means that, unlike patents, there is no requirement for information to be ‘technical’ to be protectable – commercial and business information is equally legible, as is information such as datasets.
The second is the importance of the third strand of the definition: the requirement to take ‘reasonable steps’ to keep the information secret. It is important to state at the outset that there is no precise legal definition of what this means, and what constitutes ‘reasonable steps’ is going to differ from business to business depending on factors such as:
- The size and sophistication of the business
- Industry practices
- The value of the trade secret to the business
- The nature of the information itself.
Nevertheless, regardless of the business, without clear, documented measures to restrict access and manage risk, the information in question is unlikely to meet the legal definition.
In practice, the statutory definition of a trade secret can impart a more disciplined approach to identification and management than traditional confidential‑information protection under the common law. This in turn can bring benefits to the rights holder through more proactive IP asset management that drives business value.
Applying this to innovation-rich companies, from start-ups to SMEs
Modern day innovation creates many categories of information that can be protected as trade secrets. A few common ones include:
- Training datasets for AI models and the methods used to source, clean and structure them
- Model‑training processes, tuning decisions and evaluation frameworks
- Manufacturing steps, operational parameters or scientific processes
- Negative experimental results
- Customer insight, commercial strategy and market research generated during development
- Databases, whether for technical processes, AI training datasets, or customer or user information.
These are often the components that define competitive advantage, especially for research organisations and spin‑outs. Each element contains protectable information, and each demands a different approach.
Two points emerge here
The first is that trade secrets can be used to protect valuable information that would otherwise be difficult, if not impossible, to protect through other types of IP right. Negative experimental results, for example, allow a team to shortcut years of work that a competitor might otherwise have to repeat, yet would not be eligible for patent protection. Similarly, commercial information can be of real business value yet notoriously difficult to patent. The same is increasingly true for data and databases. It is in this sense that in an effective IP strategy trade secrets plug the gaps left by other IP rights.
The second is that certain types of information may be protectable by other types of IP right in addition to trade secrets. An algorithm, for example, could depending on its purpose be eligible for patent protection, whilst the software code used to implement the algorithm might be protectable by copyright. A manufacturing process is also often suitable for patent protection.
The latter scenarios require careful consideration, particularly when the choice is between trade secret or patent protection, owing to the conflicting requirements on publication. The optimal choice of which route to pursue for a given innovation or process will of course be business and context-specific; however, there are several factors that should be considered. These include:
- The likelihood of being able to secure a granted patent
- How long protection is likely to be required for (trade secrets can last indefinitely so long as the defining criteria continue to be specified)
- The ability of the information in question to be reverse engineered (patents can protect against such acts, trade secrets do not)
- The ability to detect infringement and enforce the right if protected by patent. There are certain types of innovation for which it is difficult to detect and provide infringement by a third party. This is particularly relevant to certain inventions in the AI space owing to their ‘black box’ nature, as well as things like manufacturing processes and methods, which are often carried out on private property.
It is also possible in some circumstances for a product to be protected by a combination of patents and trade secrets. For example, features that are inherently visible or capable of reverse engineering can be protected by patents, whereas those that are more commercial in nature or would present more difficulties in detecting infringement can be protected through trade secrets.
It is apparent from these considerations that a layered IP strategy is required, and one that embraces the use of both patents and trade secrets is likely to provide more robust protection and enhanced value capture.
What “reasonable steps” might look like for you
Because trade secret protection necessitates active management, organisations need a system to protect their trade secrets that is structured, yet not burdensome. It is of little benefit to the business if the steps taken to keep information secret impinge on effective operation.
An example framework for implementing ‘reasonable steps’ in a way that balances these requirements is set out below.
Identification is the starting point: determining what is considered a trade secret and reviewing that assessment as projects evolve.
From there, some type of register is typically the most practical tool. Although some fear that omissions from such a register could be used against them, a well‑maintained register is strong evidence of ownership and of a deliberate governance process. It also helps keep track of what the business’ trade secrets are, what area of the business they relate to and what measures are in place to keep them secret.
Access control then becomes the next question. The level of restriction should reflect both the nature and value of the information. For example, a high‑value model‑training pipeline may be limited to a senior engineering team, while a manufacturing process might be restricted to specific technical staff. Commercial teams might access market intelligence, but not scientific methods, while technical teams may not require access to customer pipelines.
Legal, technical and behavioural measures support this framework. NDAs and confidentiality clauses are expected, the former for communications with external parties and the latter for internal employee contracts, site visitors and the like. Behavioural measures include staff awareness and training, guided by an internal policy. Technical measures might include segmented storage, encryption, firewalls or limits on remote access.
This kind of structure is increasingly expected not only in litigation but also during due diligence. Investors and acquirers now routinely ask about trade‑secret governance when evaluating companies for investment.
Strong processes reduce risk and enhance asset value.
The direction of travel.
The evolving technological landscape means trade‑secret protection is becoming a more prominent IP asset class. Investors now look closely at how well a company manages its internal information, especially in deep‑tech spin‑outs, as part of an overall IP strategy.
Corporate acquirers routinely ask about trade‑secret registers during due diligence. And collaborations between universities and industry partners increasingly rely on clarity about who owns which information and how it is being protected.
For many organisations – whether in academia, spin‑outs, or established businesses – the strongest position for protecting your IP comes from a judicious combination of rights. Patents still have enormous value. But trade secrets capture the tacit knowledge, experimentation and data that underpin much modern progress.
In short, trade secrets now belong at the heart of a robust IP‑protection strategy. If you want help preparing a rigorous protection strategy for business, contact our team.
