Process for Managing Trade Secrets

Process:

A process is an interrelated set of activities designed to transform inputs into outputs, which should accomplish your pre-defined business objectives. Processes should produce an output of value, they very often span across organisational and functional boundaries and they exist whether you choose to document them or not. 

A process can be seen as an agreement to do certain things in a certain way and the larger your organisation, the greater the need for agreements on ways of working. Your processes are the memory of your organisation, and without them a lot of effort can be wasted and the same mistakes can be repeated.

First class processes facilitate good communication between the information originator and the information receiver, because they help to set and manage expectations and the consistency of the information being given.

Processes must never be allowed to become static, because they are there to serve the organisation and not vice versa. Ways and means to take identified improvements systematically into use should exist within your organisation and well-established processes can be used as a tool to accomplish this aim.

Your processes define what and how tasks are done and by whom, to ensure repeatability. This is especially important as more in-house functions collaborate more with external entities, intermediaries, service providers, solution providers, etc. sometimes off-shore.

Processes also enable you to set performance criteria and measurement, which can be utilized when identifying the source or root-cause of any problems or excessive variation. 

IP processes:

Intellectual Property (IP) rights are valuable assets for any business, possibly among the most important that it possesses. It is therefore imperative that whatever IP processes are in use are fit for purpose, and add some value to those using these processes.

IP processes perform many useful functions within an organisation. They act as agreements and become part of the organisation’s memory, ultimately ensuring the facilitation of good communication. IP processes can be an implementation tool, enabling improvements to take place and ensuring repeatability. The IP processes you put in place can also support a learning and developing organisation. 

Examples of IP processes include:

·        IP creation

·        IP portfolio management

·        IP enforcement

·        IP exploitation

·        IP risk management

If your organisation and/or IP function is organised and operates in such a manner that it has very strong functional dimensions, there is a danger that the focus will be centred on internal functions to improve their function performance and not on the overall performance of the organisation or on the IP function. This may lead to interfaces or check points being established, based on functional borders and requiring extra hand-offs and approvals. This in turn can limit your ability to manage the whole value chain and lead to sub-optimization of the overall organisation.

An organisation or IP function with a strong process focus will almost certainly have to be concentrated on business targets and the customer. It will also be one with good understanding of how IP adds value to the business. 

IP process descriptions:

An IP process description is basically a formal representation of the structure, activities, information flow, resources, behaviours, goals, and constraints of your IP function. This formal modelling of the IP function should facilitate the creation of enhanced understanding of the core activities, as well as the relations that extend across the boundaries of the function. Flow charts are easy-to-understand diagrams showing how steps in a process fit together and this makes them useful tools for communicating on how IP processes work and for clearly documenting how a particular task is done. 

Furthermore, the act of mapping a process out, in flow chart format, helps you clarify your understanding of the IP process and assists you in identifying aspects of the process that can be improved. A flow chart can therefore be used to define and analyse processes, build a step-by-step picture of the process for analysis, aid discussion and communication and identify areas for improvement.

Trade Secrets:

Trade secrets constitute an important part of a company’s intellectual property portfolio and they are generally any practice or process not known outside of the company. Specifically, for a practice or process of a company to be considered a trade secret it must fulfill three criteria:

• it must be secret (i.e. not public information),
• it must provide an actual or potential economic advantage for the company,
• it must be actively protected (i.e. the company exercises reasonable measures to maintain it as a secret).

Some examples of trade-secret include scientific processes, formulas, product blueprints, algorithms, raw or processed data, software, manufacturing processes, customer lists, financial information, market research studies, internal costing and pricing information, etc.

Although trade secrets have been the neglected step-child of IP, this is slowly but surely changing for a variety of reasons:

• Law changes (DTSA in USA; EU Directive on Trade Secret in Europe; Anti Unfair Competition Law in China, etc.)
• Increased trade secret litigation particularly involving US companies but not exclusively so
• Growing interest in trade secrets by the tax authorities (e.g. OECD BEPS Guidelines, Patent Box Tax Regimes including trade secrets as qualifying IP)
• Cyber criminals trying to steal trade secrets
• Companies embracing Open Innovation and sharing trade secrets with one another
• The changing nature of employment
• Pending trade wars which some link to trade secret theft
• IP reform weakening some other forms of IP

Trade secrets are a very important part of any IP portfolio. It is no exaggeration to say that virtually every business possesses trade secrets, regardless of whether the business is small, medium or large.

Trade secrets are an important, but oftentimes an invisible component of a company’s IP portfolio of assets. However, trade secrets can also be the crown jewels within the portfolio.

The top level process for managing trade secrets:

Processes are not just reserved for registered forms of IP like patents and trademarks. I would argue that process thinking is even more critical when it comes to unregistered forms of IP like trade secrets, as there is no external entity like the Patent & Trademark Office holding the hand of the organisation and keeping it on the straight and narrow.

I suggest that the trade secret asset management process at the very top level consists of the following key blocks or steps – context; identification; analysis; review; protection; and monitoring.

The key steps in that process:

Context: Understanding the environment in which you are operating from an secrecy perspective.

Identification: Working to identify information within the organisation which may warrant being treated as a trade secret, since the definition of a trade secret is very broad indeed.

Analysis: Evaluating the information, classifying it, determining who has access and who needs access going forward, etc.

Review: Deciding whether to go ahead and treat this information as a trade secret or not as the case may be. This as such is a business decision.

Protection: Putting the appropriate administrative, legal and technical protection mechanisms in place to ensure that the information has 'reasonable' protection in place going forward.

Monitoring: Sanity checking on a regular basis going forward that the information still warrants being treated as a trade secrets, that it is indeed being protected and if any other factors have changed as far as this trade secret is concerned.

Some other processes:

There are some other processes to consider when dealing with trade secrets.

These include the sharing of trade secrets with others; the protection of trade secrets when a new employee joins the organisation as well as when an existing employees leaves the organisation; the handling of trade secrets when major corporate events take place (e.g. some M&A activity, an investment round); the logging and tracking of the costs associated with trade secrets; the valuation of the trade secrets across the organisation; the management of the accidental or deliberate disclosure of a trade secret; and the handling of trade secret disputes and court cases.

The foundations:

The strength of any process however lies in its foundations.

The trade secret asset management process requires some good foundations, including ...

• trade secret education of employees to help raise awareness, understanding and appreciation of this rather unique form of intellectual property
• a fit for purpose trade secret policy, i.e. a deliberate system of principles to guide decisions and achieve rational outcomes with respect to these valuable assets in the organisation.
• a robust trade secret system or tool that underpins the process, and thus help to improve efficiency and effectiveness

• good quality trade secret metadata (as without data, an organisation has no information, and without information, an organisation has no knowledge)

• trade secret asset management governance, i.e. the way rules, norms and actions are structured, sustained, regulated and held accountable in the organisation

Final thoughts:

In response to competitive pressures and ever-changing conditions, many IP function are fundamentally rethinking the way they do business. It is most important to be able to clearly link your IP function’s processes and organisational services to your business goals and objectives.

As IP functions strive to keep up with ever-changing customer demands and market needs, there is a growing demand for modelling and analysis of the IP function’s core processes, in order to capture the strategic relationships within the IP function itself and with external partners and players as well, so as to identify areas for improvement. 

Given the growing importance of trade secrets, it is imperative that IP functions give some serious thought to their process for managing such assets.

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Donal O'Connell is the Managing Director of Chawton Innovation Services Ltd.

His company offers trade secret management tools to companies as well as to Legal & IP Firms to help with the management of these important but fragile assets.