In an increasingly competitive and globalized market, protecting strategic information and a company’s know-how is essential. In this context, trade secrets have become a key tool for safeguarding companies’ competitive advantage.
In this article, we explain what trade secrets are, their close relationship with patents, how they are protected, and where they are regulated.
What is a trade secret?
A trade secret is any type of information, knowledge, or know-how of any nature (financial, strategic, R&D, marketing, organizational, among others) that meets the requirements established in the Trade Secrets Act (Law 1/2019, of February 20), which are:
- Confidentiality: The information must not be known or easily accessible.
- Business value: It must provide a competitive or economic advantage over third parties, whether current or potential.
- Reasonable protective measures: The data controller must implement appropriate and reasonable measures to safeguard confidentiality, taking into account the specific circumstances of each case.
Trade Secrets and Patents: Alternative and Complementary Forms of Protection.
The protection of an invention can be addressed through various legal mechanisms, the most notable of which are patents and trade secrets. These forms of protection can be used as alternatives or in a complementary manner, depending on the protection strategy adopted by the company.
In many cases, it may be advisable to protect an invention through both means. For example, before filing a patent application, it is essential to keep the technical information related to the invention confidential, since its disclosure could compromise the novelty requirement necessary to obtain the patent. To avoid this risk, one can resort to protection through trade secrets.
Once a patent application has been filed, there may be additional information that, while not part of the patent, constitutes valuable know-how, such as methods of use, improvement processes, or recommendations for achieving optimal results. This information can also be protected as a trade secret, thereby expanding the scope of protection.
In other cases, trade secrets and patents may be considered alternatives, which makes it necessary to analyze their main characteristics before choosing one over the other.
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Registration and Cost
There is no official registration process for the protection of trade secrets, so there are no associated official fees. However, it is essential to produce evidence proving their existence and to demonstrate that reasonable measures have been taken to maintain their confidentiality, in accordance with Law 1/2019 on Trade Secrets.
Patent protection requires a formal registration process, which must be completed in each jurisdiction where protection is sought.
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Advertising and Confidentiality
A trade secret is protected only as long as it remains confidential. It has no defined time limit, so it can remain protected indefinitely, provided it is not disclosed. If it is disclosed—whether intentionally or accidentally—it loses its status as a trade secret and, with it, its legal protection.
A patent grants an exclusive right to exploit the invention for a period of twenty years, in exchange for its public disclosure. This information may be accessed by third parties, and once the term of protection has expired, it may be used freely.
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Protection Class and Testing
A trade secret does not confer a right to prohibit. Protection is limited to cases of unlawful acquisition, use, or disclosure. To establish its existence and protection, it is necessary to comply with legal requirements and provide evidence demonstrating these facts.
A patent does grant an exclusive right that prevents third parties from exploiting the invention during its term. Its existence and content are supported by the corresponding official registration, which facilitates its proof and legal defense.
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Transmissibility
Both trade secrets and patents are intangible assets that can be transferred or licensed to third parties.
The decision to protect an invention through a trade secret, a patent, or a combination of both forms of protection will depend on multiple factors, such as the nature of the invention, its life cycle, the ease of maintaining confidentiality, business strategy, and the competitive environment. An appropriate combination can provide stronger and more lasting protection, maximizing the strategic value of the company’s intangible assets.
How to Protect a Trade Secret
Proper management of intangible assets is essential, especially when it comes to trade secrets. To protect them, the owner must take a proactive and committed approach. This approach manifests itself in two key areas: the protection of information or knowledge and the development of a clear internal strategy.
Protecting trade secrets requires that the rights holder carefully identify and document all information or knowledge that could constitute a trade secret, classify it, and take reasonable measures to ensure that the information remains confidential.
And finally, it is necessary to avoid infringing on third parties’ trade secret rights by conducting proper due diligence.
Regulation of Trade Secrets
At the European level, trade secrets are primarily regulated by Directive (EU) 2016/943 of the European Parliament and of the Council of June 8 on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use, and disclosure(hereinafter “the Directive”). In addition to harmonizing the various laws across the EU, the Directive aims to act as a deterrent against all conduct constituting unfair competition, provided that the trade secret holder has properly protected their trade secret and can prove it.
In addition, the Directive defines trade secrets very broadly, encompassing both commercial and technical information, and defines the concepts of acquisition, use, and disclosure of trade secrets, devoting a chapter to exceptions and establishing a set of rules to ensure the availability of civil remedies for infringements.
At the national level, following the transposition of the Directive into Spanish law, trade secrets in Spain are governed by Law 1/2019, dated February 20, 2019, on Trade Secrets.
At Elzaburu, we offer specialized services for implementing plans to identify, protect, manage, and maximize the value of trade secrets.
We conduct due diligence on trade secrets, perform valuations, and provide advice on licenses and agreements related to these intangible assets. In addition, we assist our clients with pre-litigation and litigation matters related to the defense and protection of their trade secrets, ensuring comprehensive and strategic protection of their confidential information.
Cristina Espín, Senior Associate in the Legal, Business, and Contracts Department at Elzaburu.