Trade Secrets - how to not lose your vital business value
As companies grow, they often obsess over patents and trademarks but quietly - trade secrets end up being the real crown jewels. Your manufacturing know-how, algorithms, supplier deals, internal pricing logic – that’s often where your competitive edge really lies. And there are some major qualifications that you need to adhere to if you are to claim something as a trade secret. Here we give you the must-know details.
What is a trade secret?
In both the EU and the US, the basic definition is surprisingly similar. Information is considered a trade secret if it meets three tests:
It is not generally known or easily accessible in your industry.
It has commercial value because it is secret and if competitors had it, they’d gain an advantage.
You’ve taken reasonable steps to keep it secret. That means you have contracts, access control, security measures, policies, training all aiming to protect the secret in place.
The trade secret can cover things like:
manufacturing methods and process parameters
material combinations and layer configurations
source code, algorithms, risk or scoring models
customer lists and detailed pricing / margin structures
roadmaps, launch plans, and R&D directions
The big advantages compared to patents
Unlike patents, trade secrets don’t require registration and hence they don´t cost lawyer and registration fees, nor do they require the time and competence to file. Furthermore, patents have a limited timespan while trade secret protection can last indefinitely. BUT only as long as:
the information remains secret, and
you can show you really tried to protect it.
Trade secret limits
If someone independently develops the same thing or reverse-engineers your product from the outside, that’s usually allowed (the latter would typically not be allowed in relation to a patent).
The vital protection it gives
Trade secret laws give a solid and commercially relevant protection that mainly targets misappropriation: theft, hacking, breach of NDA, breach of duty, etc.
EU vs US – what’s different and what isn’t?
In the EU (and European countries)
The EU Trade Secrets Directive (2016/943) harmonised the basics across Member States. Countries like Sweden have implemented it in national law, but the core test is the same: secrecy, commercial value, reasonable protection measures, plus remedies like injunctions and damages.
Differences between EU countries are mostly about:
procedure (how easy it is to get evidence, interim injunctions, etc.)
how criminal vs civil enforcement works
how courts balance secrecy with rights of defence and whistleblowing
But the conceptual framework, that is what a trade secret is and the “reasonable steps” requirement, is now fairly uniform.
In the US
The US has:
state laws (mostly based on the Uniform Trade Secrets Act)
a federal law, the Defend Trade Secrets Act (DTSA), which lets you sue in federal court
The definition of a trade secret is very similar: information with economic value derived from not being generally known, where the owner has taken reasonable measures to keep it secret.
Practically important US features:
broader discovery in litigation (more intrusive document and email disclosure)
the possibility of ex parte seizure in extreme cases, to prevent dissemination of stolen secrets
explicit whistleblower protections for employees who disclose trade secrets to lawyers or authorities in confidence when reporting suspected violations of law
So the substance is aligned between EU and US; the big differences are how cases are run and enforced and the litigation culture around them.
What a scaling company should think about
As you scale, “everyone kind of knows what’s secret” stops being enough. You need something more deliberate.
1. Decide what your “crown jewels” are
Not everything deserves the same level of protection. Typical high-value trade secrets:
key manufacturing processes and parameters
non-obvious combinations of materials or components
algorithms, scoring models, internal tooling
pricing logic, supplier terms, true unit economics
product or market strategy that isn’t public yet
Write this down. Even a simple internal list like “Top 10 company secrets” is helpful. It proves you’ve identified and treated them as special.
2. Put basic governance in place
You don’t need a 60-page policy manual, but you do need structure:
classify information (public / internal / confidential / trade secret)
appoint “owners” for sensitive areas (CTO, Head of Ops, etc.)
link trade secret handling to HR (onboarding/offboarding), IT (access rights), and legal (contracts)
3. Fix your contracts
Your contracts should match your ambitions:
Employees & founders – ensure confidentiality obligations that survive termination of employment. In the broader sense also consider IP assignment, and to the extent legal and reasonable, limited non-competes or non-solicits.
Consultants & freelancers – strong NDAs, where legally relevant ensure explicit IP assignment to the company, limits on reuse for other clients.
Manufacturers, partners, licensees need NDAs and main agreements that:
define confidential information / trade secrets
limit what they may do with that information
regulate what happens to information, tooling and docs when the relationship ends
If you operate in both EU and US, tweak your templates so they work under both sets of rules (e.g. include DTSA whistleblower language in US-related contracts) as needed.
4. Make the security real
Courts don’t just read your contracts in a trade secret dispute; they look at what you actually did. Reasonable measures usually include some combination of:
access control (not everyone can see everything)
stronger controls and logging around your “crown jewels”
basic technical security (passwords, 2FA, encryption, no random Dropbox)
physical protections in factories/labs (locked rooms, visitor rules, now window look-ins)
clear labels (“Confidential – Trade Secret”) and basic staff training
The bar is “reasonable”, not perfect. But you do need enough to credibly say: yes, we treated this as a secret.
This is not legal advice - only general knowledge. If you are dealing with trade secrets you should always use qualified legal experts.
Contact: kat@stgcommerciallaw.com when you need to review, assess and implement solid trade secret protection.