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Erin Austin: Hello ladies,
welcome to this episode.

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Just a quick note to let you know that
this episode was originally recorded as

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a LinkedIn Live, where I had some nice
slides to go with the conversation.

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So if you'd like to check those out,
you can see the recording on my LinkedIn

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page or on my YouTube page, and we'll
have links to those in the show notes.

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Thanks.

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Hello everyone.

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Thank you for joining me for another last
Wednesday of the month for a LinkedIn

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Live where we talk about different
things For hourly to exit journey for

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experts who are interested in turning
their expertise into intellectual

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property, decoupling their income from
their time, and creating saleable and

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scalable assets in their business.

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So this month we're going
to talk about trade secrets.

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And I call it the hidden intellectual
property because it's one that

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most people aren't familiar with.

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I mean, we think of trade secrets
as being confidential information,

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but we don't think about them
as being intellectual property.

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so I.

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Think one of the reasons is, unlike the
other types of intellectual property,

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trade secrets are not registered.

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The value in a trade secret
is that it stays secret.

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you think about our copyrights, we
register them in the copyright office.

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Same with trademarks, patents.

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And so we get our protection
through intellectual property

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laws, by registering.

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. Unlike trade secrets, we
get that protection by

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keeping them secret, so just.

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Talk about a couple of
famous trade secrets here.

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of course, we are all familiar
with K F C and their secret recipe

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for their Kentucky Fried Chicken.

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Coca-Cola, another famous trade
secret for this secret ingredient in

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their Coca-Cola formula Google has
an algorithm that is a trade secret.

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So each of these companies have
decided to use trade secrets

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to protect their intellectual
property instead of using patent.

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because patents are registered
and all patent registrations are

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public information like, copyrights
and trade secrets, and trademarks.

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patents also are registered
and are publicly available, to

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anyone who knows how to use and,
and search those registries.

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That way no one can, come and find
that secret ingredient that happens

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to be in Coca-Cola and reproduce
it so long as they keep it secret.

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Of course.

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what is a trade secret?

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So a trade secret is information, and I'm
going to say confidential information.

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It has an independent material economic
value, and the value is because it

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is a secret that it's not easily
ascertainable, without some sort of

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theft, that you can't easily reproduce it.

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And that the second major element
is that it is subject to reasonable

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efforts to maintain its secrecy.

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So we're gonna take all of.

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Elements in turn as we go through.

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But first, a couple of possible
trade secrets that we may have

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in our businesses as professional
services providers as experts.

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databases, you have a collection
of information that you've

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gathered over the course of.

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term as building your expertise
that you use to inform the work

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that you do for your clients.

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You have proprietary business
models or methodologies.

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Maybe you have client lists
that other people would die for.

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internal market analyses and forecast,
r and d information, algorithms,

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formulas, methods, you get it.

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things that we are using in our
businesses that we keep confidential

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cuz it's part of how we, build
our businesses and provide our e.

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And so why do I have possible in italics?

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Because while these may be
confidential information, they may

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not necessarily be trade secrets.

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there are key differences between
confidential information and trade secret.

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what is confidential information?

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confidential information is the broad
category of non-public information.

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So anything that you keep in
your business that's not public

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is confidential information.

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examples of that are your financial
statements and your employee records.

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these are things that obviously, you
would not wanna have anyone to have

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access to it without protections in place.

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So we know that we use.

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NDAs non-disclosure agreements, maybe
call 'em confidentiality agreements, to

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protect our confidential information.

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let's say, someone's looking at
your business cuz they wanna buy it.

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So they're looking at your
financials, they're looking

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at all your internal records.

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you would make sure that you have an
n d a in place before you share any

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of that confidential information in
it that N D A will say that they can.

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Only use it for the purposes
of, evaluating your business for

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acquisition and that they cannot
disclose it to any third parties.

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that's how you get contractual
protection when you're disclosing your

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confidential information to third parties.

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but that is different than a trade secret.

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So a trade secret, yes, it's
confidential information, but

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it also has these elements.

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So I have, underlined some of the key,
parts that elevate a trade secret from a

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confidential information, and then we will
go through each of these in turn, it has

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that independent material economic value.

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It is not readily ascertainable
by proper means, and it is

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subject to reasonable efforts.

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independent material economic value.

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I like to look at this is does it provide
some competitive advantage for you?

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let's talk about those
financial statements.

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You absolutely wanna keep your
financial statements private, right?

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does it provide economic value to.

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. Yeah.

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You wanna know your numbers.

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It's an important part of running a
business and being the c e o of your

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business is knowing your numbers.

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But does it provide a
competitive advantage?

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there a value in the
market for your financials?

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the answer to that is no.

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I'm gonna say no matter how
impressive they are, I'm pretty

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sure that answer is gonna be.

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it fails the first, element of
whether or not something would

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qualify as a trade secret.

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remember, when I'm making this
decision between trade secrets

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and confidential information, it's
because trade secret is intellectual

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property under intellectual property
law, whereas confidential information

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is just a contractual protection.

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so your financial statements would
fail that first test of whether or not

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something would qualify as a trade secret.

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the next element is it that
it's not readily ascertainable.

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would it be extremely difficult for
it to be discovered independently?

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So let's think about K ffc.

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Or, Coca-Cola.

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I imagine  that for the last a hundred
years, however long Coca-Cola's

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been around, people have been trying
to figure out what that secret

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ingredient is, but they have not
been able to hard as they try So, is.

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Independent economic value in that secret.

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Yeah.

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is it readily ascertainable, obviously,
cuz nobody can figure out what it is.

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Coca-Cola's, formula

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ingredients

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Erin Austin: have met those first
two elements of economic value

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and not readily ascertainable.

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and then the third element
is that you use reasonable

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efforts to maintain its secrecy.

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So as we talked about, when we have
confidential information, we do

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not disclose it without having some
version of confidentiality agreement.

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in place.

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and, considering the number of NDAs I
review pretty much every day, almost

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every day, one crosses my desk for review.

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I know that people are using NDAs.

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but isn't NDA enough.

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and the answer to that, it's enough
to get that contractual protection.

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It is not enough to create a trade secret.

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And so, Elevate your confidentiality,
your confidential information

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into a trade seeker protected
by intellectual property law.

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There are some additional
things you want to do.

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those extra steps.

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you need to put physical
restrictions in place.

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So that would mean putting
things under lock and key.

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I think, famously  the formulas,
the KFC formulas and the Coca-Cola

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formulas are in some sort of safe,
so you have physical restrictions.

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also physical restrictions may be,
you You have, a formula that is

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in writing that you have stamped
on it, you put a classified

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stamp on it, hopefully it works.

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or, you confidential information
watermark, maybe you've seen

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those or you've received something
that has a footer that says

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confidential information on it.

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you'll also might even see it in
emails, where you'll say like, this

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is considered, confidential as.

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you will have technical restrictions, so
you will require passwords or you may have

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it set up so that it cannot be accessed
outside of a company owned environment.

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so they're technical restrictions.

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You would share it on a
need to know basis only.

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let's say you have your, proprietary
database of, you research that

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you've done, and you use that to
provide services to your client.

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. Well, the client does not need to have
access to the research that you're

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using to provide the services You
provide that only on a need to know

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basis, and if you do need to know it,
then you make sure that if you do need

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to share it, then you also need to
make sure that that third party that

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gets access to it, Has restrictions
on who they can share it with.

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So a common provision in an NDA would
be that you can only share it, you with

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your lawyers or with your auditors,
and that you can't otherwise share it.

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And then limiting printing and
copying, that's another version of

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technical and physical restrictions.

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the other is, you wanna make sure
that you retrieve that confidential

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information when the use is over.

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let's say there is, something that
you do need to share, there's some

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part of your methodology that you
need to share with your client,

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in order to provide the service.

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When you are done, make sure you
get all those materials back.

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it's more likely that it's going
to be shared with someone who's

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providing services for you.

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So let's say, you have hired someone to
do an analysis for you and you've shared,

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your confidential information with them.

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In order for them to do the
analysis, the analysis is done.

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They send you the report, then
they should return to you.

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All of the confidential information
that you shared with them.

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And then a final element would be
that you received verification that

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they had either returned all those
copies or they have destroyed them.

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there a lot of extra steps in
order to get that elevated.

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protect.

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but the reason that you need to do that
is that you cannot unring the bell.

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If for whatever reason a trade
secret becomes public, it loses

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trade secret protection, under.

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intellectual property laws.

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even if it happens accidentally, you're
at a WeWork office and you leave your,

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business plans at the WeWork, including,
you your prototype for your next product.

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You leave it in the office and the
next person comes along and finds

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it, and puts it on the internet.

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Poof.

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your trade secret is,  or if, an employee
has access to it and they take it

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with them when they leave, that would
obviously be an illegal disclosure.

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but still the bell cannot be on
rung, which is why you wanna make

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sure that there are restrictions
about how someone can access it.

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Why if it is a trade secret,
how could they walk out with it?

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Right?

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So you wanna make sure you
have those protections in.

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and if it is independently,
discovered, like so for instance

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that Coca-Cola recipe, if someone
independently discovers what it is, then

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Coca-Cola is trade secret goes away.

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that is not illegal to
independently, discover.

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I just wanna say that the amount of
resources that you use to protect

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your trade secrets should be in line
with the value of that trade secret.

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what you do to protect your trade
secrets is not gonna be the same

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thing that Coca-Cola does to.

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fair trade secrets, but that's
where that term reasonable comes in.

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What's reasonable to protect a
trade secret worth billions of

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dollars is different than what's
reasonable to protect a trade secret

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that's worth a million dollars.

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Right.

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you might be thinking, well, there's no
registration process in place, so why

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do I need to do all this extra stuff?

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I've got my NDAs.

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I get my contractual,
protections through my NDAs.

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Why do I need to do all this other stuff?

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Well, because when it is a trade secret
and therefore protected by intellectual

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property laws, , then there are
additional protections that you have,

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additional remedies that you have.

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in addition to getting injunctive relief.

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So injunctive relief would mean a court
orders someone to stop using your IP or

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to force them to prevent the disclosure
of something that's confidential.

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and that you could also get damages,
meaning you could get compensated

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for your losses, based on their,
appropriation of your trade secret.

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but the other main, issue is that
trade secret misappropriation is.

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A crime.

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that is a pretty nice deterrent.

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the idea that you are going
to be federally prosecuted if

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you steal my trade secrets.

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So being able to say, okay, this
is a trade secret, and therefore

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it receives the protection of
federal law, is an extra layer of

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incentive to, not steal your trade.

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there you go.

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thank you so much for joining me today.

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as I mentioned, I, am always happy
to, tackle, these intellectual

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property issues, issues
regarding turning expertise.

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Into IP based, revenue streams.

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If you have any questions, do
feel free to, reach out to me.

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You can find me@thinkbeyondip.com
or on LinkedIn.

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I'm Erin Austin And so we also have a
newsletter where we talk about all these

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things and a free resource library that
I'm pretty proud of that has digestible,

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easy to understand explanations
of all these concepts and more.

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And of course, also, please join me at
my podcast, which is Hourly to Exit.

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Thanks.