March 9, 2023
By Xavier T. Romero
In the ongoing battle that every small, medium, and large business fights to maintain its commercial advantage, owners must make balanced choices to protect their trade information without incurring such great expense that the cost of maintaining protection outweighs the benefit. Enterprises have two common options to protect the lifeblood that is their proprietary information: (1) apply for a patent which guarantees exclusive use of a unique invention or process for a set number of years but requires public disclosure so that competitors will know it, too; or (2) put into place well-structured and disciplined internal measures to keep critical data, processes, or ingredients that provide a competitive edge as close to the vest as possible to protect them legally and potentially, forever.
The first official patent system originated in Venice and was codified in 1474. The idea was to foster invention in Venice by granting licenses to inventors for the exclusive rights to an “ingenious device” for 10 years, in exchange for the public disclosure of that invention for the benefit of Venetian society.¹ During the 10-year license, the Venetian Republic reserved the right to also use any invention without compensating the inventor.² Now, the U.S. government grants an inventor a 20-year license in a utility patent at the cost of publicly publishing the technology with the United States Patent and Trademark Office. That disclosure, however, may allow astute competitors in the industry to learn how to mimic the owner’s new invention or design, and possibly even improve upon it. A trade secret, on the other hand, may be less costly and may better protect an owner’s concept from the prying eyes of the public indefinitely. There are also certain things that patents cannot protect that trade secrets can, like using something found in nature in an instrumental manner.
Several examples of long-lasting trade secrets include the formulas for Coca-Cola, KFC’s 11 herbs and spices, and WD-40. A trade secret can even be the manufacturing process for wooden trains to make an authentic “clickity-clack” sound of an actual locomotive. The distilled definition of a trade secret is information that derives economic value from not being generally known to the public. The Georgia statute actually provides several more examples such as: “technical or nontechnical data, a formula, a pattern, a compilation, a program, a device, a method, a technique, a drawing, a process, financial data, inanceal plans, product plans, or a list of actual or potential customers.” Trade secret protection is not so broad, however, as to apply “to matters which are generally known in the trade,” or a person’s aptitude, skill, dexterity, manual, and mental ability, and such other subjective knowledge as one obtains in the course of employment. See, Thomas v. Best Mfg. Corp., Div. of Tillotson Corp., 234 Ga. 787 (1975).
To be enforceable as a trade secret, the owner must show it took reasonable steps to protect the information. This method of protection can be incredibly effective for a low cost. If a trade secret is misappropriated (stolen or learned by improper means) and put to use by a competitor, state and federal trade secret laws provide for damages in the amount of the profits lost, in addition to as much as two times that amount in punitive damages. Plus, trade secret protection can remain in perpetuity so long as the business takes “reasonable steps” to keep the information secret. O.C.G.A. § 10-1-761(4). While an aspiring business is already inclined not to share the secret of its success, what constitutes reasonable steps is not as formal or formulaic as a patent to guarantee that a trade secret is protected.
In some instances, sufficient protection for a trade secret might require as much as installing computer controls that limit access to important data to a specific group of people, on specific computer drives. See Diamond Power Int’l., Inc. v. Davidson, 540 F. Supp. 2d 1322 (N.D. Ga. 2007). Whereas in other circumstances, a non-disclosure agreement might be the only form of protection possible for proprietary information. See Equifax Servs. v. Examination Management Servs., 216 Ga. App. 35, 40, (1994). It is critical, then, that enterprises which rely on their creativity or inventiveness for their competitive edge understand the law and know that the measures they put in place impart the enforceability of a trade secret.
One caveat to relying on trade secret protection is that if an independent inventor happens to come up with the same idea, enforcement of the trade secret becomes less likely, as it becomes more readily known, whereas a patent will protect an inventor’s advantageous idea against anyone and everyone for the entire 20-year term of the patent. The trade-offs between patents and trade secrets are that patents guarantee exclusive use of an inventive thing or process for a limited period of time in exchange for disclosing that idea to the world, while trade secrets may be less costly to protect for (potentially) an indefinite amount of time with the risk that someone else might also independently invent and legally use the same idea.
Xavier T. Romero is an associate attorney with Flint, Connolly & Walker, LLP who represents clients in various civil litigation and intellectual property matters. If you would like to make sure your competitive advantage remains protected in as cost-effective manner as possible, contact Flint, Connolly & Walker, LLP for a consultation.
¹ Patent Law and Policy: Cases and Materials, Seventh Ed., Merges and Duffy (2017), 5-7.