What is a Trade Secret vs a Patent? How can it Help my Business?

Are you a business owner who is wondering what a trade secret is and how it can protect your business assets? Most business owners are not well informed about intellectual properties. I know I wasn’t when I first started my company.

However, as a business owner, it is wise to be aware of your intellectual property because it is valuable, yet non-physical business assets.  Simply put, intellectual property is the intangible property that you own such as your business name, logo, copyrights and so on.

Now that we know what intellectual properties are, let’s focus on one special intellectual property that most businesses ignore. Have you ever heard about trade secrets? It’s very hard to run your business without a trade secret, and yet, most businesses do not know what a trade secret is, what trade secrets their business have, and how to protect them. Read my review of patent filing services

So, what are trade secrets?

Well, according to Wikipedia , by definition, a trade secret is confidential information that gives a business an economic advantage over its competitors. Simply put, it is any valuable information that is not known by anyone apart from the business owner and the employees. This information is well protected within the business and no outsider is allowed to access it. Trade secrets are also subject to protection by the law. Virtually all businesses have trade secrets and need draft all possible ways to protect their trade secrets.

Types of Trade Secrets

There are many ways in which trade secrets can be formed but according to Simplicable , these are the most common types of trade secrets.


Formulas are very common in the chemical and food companies. Most chemical companies hide their formulas so as to avoid exposing their trade secrets. The law requires all chemical manufacturing companies to list their ingredients, which they do, but they are not necessarily required to show the procedure on how they make their products.


Processes differ when it comes to making products. Most companies keep their processes hidden so as to avoid leaking information to their competitors.


Keeping a design from being leaked is very hard since its all visible to the public. The best way to keep your design from being used by other companies is by patenting it so that no one as can use it to compete with you.


Methods are ways in which a certain procedure is carried out. For example, search engines such as Google and Bing cannot show how they run their algorithms to the public. Scammers will obviously take advantage to exploit internet users.


Companies automate most of their processes so as to increase efficiency while saving costs and time, factors that have a direct influence on the cost of the end product as well as the profit margins. As a business owner, it’s wise to keep automation as a trade secret.


This is the most important trade secret that every company needs to observe. It has a marketing edge. It is what your business is better at than your competitors.

Examples of Trade Secrets

Trade secret come in many forms. Why? Because anything that gives your business a competitive advantage over its competitors is valuable and it’s worth protecting.

To better understand what trade secrets are, let’s look at some famous examples of trade secrets.

Kentucky Fried Chicken

Nobody knows the original recipe for preparing the Kentucky fried chicken. Only Colonel Sanders knew it. He eventually wrote it down and the original copy is hidden somewhere safe in Kentucky. Very few employees know the secret and have signed a confidentiality agreement that forbids them from giving it to the public.

Google Search Algorithm

Google is always updating its search algorithm for website owners to follow so that they can provide what people search on its engine. They do announce their improvements every now and then but they do not tell us everything in their updates, otherwise, Google would be full of scammers.


Back in the 19 century, Coca-Cola chose to brand their recipe instead of patenting it so as to avoid disclosing their ingredients. In 2006, an employee and two individuals committed a corporate espionage by stealing the recipe and attempted to sell it to Pepsi. Pepsi reported them to Coca-Cola. They were reported and got arrested.

Lena Blackburn Baseball Rubbing Mud

Just when you thought trade secrets have to do with food and formulas, the Lena Blackburn company has a different case when it comes to trade secrets. The company uses a special mad that improves the grip of a new baseball bat. The company claims that it’s just like any other mud out there but from other people trying and failing, its known that they source it from a special location that is only known by them. This trade secret has been passed on from generation to generation to keep people from walking onto the source.

Patent or Trade Secret? Which do I need to protect my business inventions?

Which one should you go for? Before we can determine the best way to protect your intellectual property, its vital to know the difference.

According to Harvard Business Review  :

Patents – When you decide to patent your product, you should be aware that you are supposed to disclose everything about it only that no one can directly compete with you. The patent will last for a limited time of 20 years after which any person can make a similar product. In fact, patents exist to better a product after the patent has expired.

Trade Secret – On the other hand, a trade secret remains secret in its nature and does not have to be disclosed. As a business owner, you have the right to sue anyone who attempts to access your trade secrets illegally. So, what would you want for your business? A patent or a trade secret? Well, you now know the difference. Anyway, it would be better to go for a trade secret. Your business will run for generations to come thus having a big competitive advantage. From our examples above, it’s clear that Coca-cola and Kentucky Fried Chicken are still killing it. No business can directly compare to them. They are always a step ahead.

How to Protect your Trade Secret

According to American Bar Association  you can protect your business by instituting these eight (8) policies in your business.

Records and Procedures – All records and procedures of your business must be well regulated and protected.

Information Protection – Identify some of your most trusted employees to protect the information of your business to ensure that all policies are adhered to and no trade secrets leave your business premises.

Risk Assessment – Assess all parts of your business and ensure that you have determined your most vital trade secrets, where they are, who can access them, and who might be interested in taking them to use them inappropriately.

Manage Third Parties – Ensure that you know your third parties and how they manage their employees.

Security and Confidentiality – Ensure that all your assets and buildings are safe from intruders. You should also ensure that your network is secure from hackers.

Training and Capacity building – Ensure that you clearly communicate to your new employees as well as your third parties about protecting your trade secrets.

Monitor and Measure – This is where most companies fail. Ensure that you keep a tab on how your policies are being followed. By monitoring and measuring, you will easily spot any information leakages before they happen.

Corrective and Improvement Actions – Be ready to have actionable steps to recover once you realize you have been robbed. You should also have a procedure to ensure that it does not happen again.

As you can see, trade secrets are very important. Once you have prepared your trade secrets, its advised you make policies. It is also important that you write down agreements that you and your employees have to sign so that all the people involved in your business are confined in your agreement.

Disclaimer: The content on this page is for informational purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.

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