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How to Keep a Trade Secret Confidential

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Last revision: June 22, 2021
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Every organization possesses commercially valuable information that makes them unique and different from its competitors. This is called a trade secret. A trade secret is a confidential information that can enable a party to obtain an economic advantage over competitors. These are information about an organization that makes the business distinct and valuable. They include business formulas or methods and methods of operation.

Unlike other intellectual property such as copyright, invention, trademark, a trade secret can not be measured or registered. Therefore, business owners must take calculated steps to protect their business secrets by instituting proper legal and security procedures for handling them. This article will describe trade secret information and the steps a business owner should take in protecting or securing their trade secret.

Definition of Confidential Information and Trade Secret Information

Confidential information is a non-public information obtained in the course of a business relationship. These information may include, but not limited to organizational structure, management, strategies, policies, finances, trade secrets, and activities. It is expedient to have these information properly secured because disclosure of such information can become detrimental to the business.

Trade secret information are non-public information about the business operation of an entity. This includes information about process or methods products and services are being manufactured and provided, patterns, designs or other information by which a person or business entity can obtain economic advantage over other persons operating similar businesses. For example, Company A is a yogurt business. For Company A, the recipe for the yogurts they sell is a trade secret because this distinguishes Company A' s yogurt from yogurts sold by other businesses. Hence, Company A will need to take steps to ensure that this secret remains protected and undisclosed. Another example is the famous formula for Coca Cola which has remained a trade secret for decades now.

Note that trade secrets are also confidential information that are not accessible by the public.

Trade secret is an intellectual property that can licensed and transferred (by way of sale or assignment) from the originator to another and is governed by the Trade marks Act, 2004.

How to Protect your Business Secrets

1. Identify all important confidential information

Before a business secret can be protected, it is important to identify what needs to be protected. The mistake some business owners make is labeling every information "Confidential". Instead, one is required to go through all the information of the business to properly identify and separate trade secret information from other information.

For an information to be a trade secret, such information must be one that is:

  • not widely known by the public;
  • was developed by your organization; and
  • has some economic or commercial value.

2. Mark them as "Confidential"

After identifying what needs to be protected, the next step is to properly mark the confidential information as "Confidential". This can be done by simply writing the words that express the confidentiality of the information in the document, such as "Confidential" or "Do not copy" on the heading of the documents or it can be printed lightly on the body of the confidential documents.

For electronic files, it is ideal to mark the name of the file and the document itself as "Confidential".

It is impossible to protect a confidential document that has not been marked "Confidential". Hence, it is important to mark all information that the business does not wish to share with the public as "Confidential".

3. Secure all information properly

Documents relating to a business can be in paper or electronic form, hence the manner in which a paper file is protected is different from that of an electronic file. For confidential documents in paper form, the documents should be stored in places that can not be easily accessible to others. The storing facility will usually have a lock which can be manual or electronic lock requiring key or password. The password or keys to the storage should only be kept in the custody of the business owner(s) or employees who deal with such information.

For electronic files, it is important to know which computers, servers, online systems where the secret information is stored and ensure that the information is secure to the maximum extent possible by locking the files with codes or passwords and restricting peoples' access to the confidential information.

4. Restrict people's access to the information

After storing the information in a secure place, it is important to keep track of the people who have access to the information. It is important to limit people's access to the confidential information because the more people have access to the trade secret, the harder it becomes to keep it secret. To mitigate this problem, you can grant access to only employees who need the trade secret to perform their obligations for the organization. You can also train your employees on how to handle your organization's trade secret.

5. Draft and execute the requisite agreements

An agreement creates a legally binding obligation on a party to do or refrain from doing an act. In business transactions, confidential information may be disclosed to the parties involved in the transaction, hence, it is important that parties either draft a Non-Disclosure Agreement or incorporate confidentiality obligations in their agreement. For example, before entering into a joint venture or partnership, parties will usually sign a Joint Venture Agreement or Partnership Agreement, making it clear that confidential information should remain undisclosed.

Furthermore, in cases where a party is contracted to provide services, the employees or independent contractors who are providing the services may, in connection with their jobs, obtain access to confidential materials. In this case, employers or clients will clients will usually incorporate these confidentiality obligations in the Employment Agreement, Service Agreement or Retainer Agreement and make them sign the Non-Compete Agreement to ensure that their trade secret is protected.

6. Monitor the information continuously and devise more improved mechanisms to ensure maximum protection

Once you have proper security systems in place, the next step to take is to monitor the information to ensure that all confidential information remains secure and properly protected. Monitoring means constantly checking the confidential documents, making sure that no one steals or makes unauthorized copies of confidential materials and ensuring that the security systems are working perfectly. You can also take steps to improve the security of the confidential information by changing any security system that is outmoded or not working properly and replacing them with more sophisticated ones.


A trade secret is the engine of a business. It describes how goods and services are provided to customers and clients. Therefore, being a confidential information, it is essential for every business owner to take proactive steps to protect it. The basic steps to protecting trade secrets are as follows:

  • identifying and distinguishing all confidential information from ordination information;
  • ensuring that all confidential information are properly marked as "Confidential";
  • providing adequate storage facilities or security for the confidential information;
  • ensuring that persons who handle your confidential information (such employees, independent contractors, business partners, or other authorized agents) sign a Non-Disclosure agreement or or have the confidentiality obligations incorporated into any agreement that involves the disclosure of confidential information;
  • monitor the confidential information closely with a view to developing new and improved storage systems.

Sometimes, even after you have done all you can to protect your trade secret, your trade secret may be stolen or used inappropriately. In this case, the first step to take is to send a warning letter to the violator to cease and desist from the infringing act. If the violator fails to discontinue such infringing act, you can commence a legal action, seeking damages, injunctive reliefs and other equitable remedies.

About the Author

Vivian Umelue is an attorney and legal templates programmer at Wonder.Legal and is based in Nigeria.

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