In a business setting, secrets are confidential information that give a business a competitive edge in the market. These business secrets are also known as ‘trade secrets’. Trade secrets can be formulas, practices, designs, patterns, data compilations, devices or instruments, processes, physical devices or ideas. They can be marketing plans, product formulas, financial forecasts, employee rosters, logs of sales calls, and similar types of proprietary information.

Currently, Kenya does not have statutory protection for trade secrets, however, protection is granted locally under Articles 2(5) and 2(6) of the Constitution of Kenya, which recognize general rules of international law, treaties and conventions ratified by Kenya as part of the Laws of Kenya. The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) to which Kenya is a party, grants protection to trade secrets. Trade secret protection can also be inferred from common law protection of confidentiality.

Owners who safeguard their trade secrets have the right to stop others from using the information in a manner contrary to honest commercial practice or from being disclosed, obtained, or utilized without their permission. Owners of trade secrets have the right to sue those who violate these rights for damages as well as for the financial harm they have endured.

Trade secrets are considered a form of intellectual property and can be licensed or assigned to third parties. The right to grant access to and use of the trade secret information by a third party belongs to the trade secret’s owner. The potential licensor and licensee must execute a non-disclosure or confidentiality agreement. Additionally, non-disclosure and confidentiality agreements are generally employed to safeguard trade secrets.

Many SMES may be unaware that they hold IP Rights such as trade secrets or that these IP rights are valuable. This means, many are missing out on opportunities to improve their business and grow.

Requirements for Trade Secret protection

Three key requirements must be satisfied for secret/confidential information to qualify as a trade secret;

  1. Secrecy: the information must be secret in that it is not generally known to the public e.g., Coca-Cola’s secret formula, McDonald’s special sauce, Google’s search algorithm, KFC’s secret recipe etc.
  2. Commercial Value: the information provides the owner with a competitive advantage over his/her competitors in the marketplace.
  • Reasonable Measures: reasonable steps must have been taken to safeguard the information i.e., security measures or the use of confidentiality agreements for employees and business partners.

Advantages of Trade Secrets

  1. SMEs use trade secrets instead of a patent/utility model due to the high costs of obtaining a patent/utility model.
  2. Protection through trade secrets also helps in avoiding having to disclose the business technologies through the patent/utility model process.
  • Trade secrets allow you to protect your secrets longer than the period for protection of a patent/utility model.
  1. Trade secret protection lasts forever as long as the information remains secret e.g., the Coca-Cola formula

Disadvantages of Trade Secrets

  1. Trade secrets are weaker protection than patents/utility models and anyone with a similar trade secret developed independently can go ahead and use it and apply for a patent/utility model.
  2. A competitor can still independently develop your idea, secret or technology and can turn around and patent the same invention.

What SMEs should do to protect their Trade Secrets

It is needless to say that employees and business partners are the biggest culprits of trade secret loss to a business, therefore;

  1. Every employee and business partner should be made to sign restrictive agreements such as a non-disclosure agreement, confidentiality agreement, a non-compete and a non-solicit agreement at the point of entry. These kinds of agreements should be drafted by IP experts/lawyers specializing in Intellectual property.
  2. The employer should endeavour to share trade secrets or confidential information minimally and only with staff who necessarily need to know.
  • The employees’ welfare and bonus packages should be taken seriously, as it increases trust and gives the employee a sense of ownership in the business.
  1. All other ideas and inventions that are not necessarily protectable by trade secrets should be protected through other intellectual property regimes such as patents, industrial designs, utility models, and copyright among others.
  2. The employee’s contract should contain terms and penalties for breach, misuse or disclosures of confidential information outside the scope of their employment and;
  3. Employees should be constantly trained and reminded of the importance and benefits of trade secrets to the business and their welfare.
  • SMEs should identify and mark as confidential all confidential documents
  • SMEs should control and document everyone that has access to confidential documents
  1. SMEs should implement a document destruction policy
  2. SMEs should restrict access to the company’s premises by visitors; and
  3. Review all marketing materials, executive speeches and other communications to ensure there hasn’t been any inclusion of confidential information

SMEs ought to inventory their trade secrets and take all necessary precautions to protect them as trade secrets assume great significance in the corporate sector and society at large.