Most companies know their patents. Few know their trade secrets.

Why the know-how that never appears in a patent may be your most valuable IP asset

Patents remain one of the most powerful tools available for protecting innovation. However, businesses often focus so heavily on patents that they overlook the assets that ultimately create and sustain commercial advantage.

When working with technology companies, universities and research-driven businesses, we frequently see sophisticated patent portfolios sitting alongside valuable know-how, technical processes and proprietary data that have never been formally identified, classified or protected.

This is particularly apparent in university spinouts and emerging technology companies. Founders understandably focus on protecting the core invention, but the manufacturing knowledge, scale-up expertise and operational know-how required to commercialise that invention can be equally important. In some cases, these assets prove more difficult for competitors to replicate than the patented technology itself.

For research-intensive organisations, commercial success depends not only on the invention, but also on the ability to reproduce it consistently, scale it economically and transfer it effectively. Those capabilities frequently reside in know-how rather than patents.

As businesses become increasingly dependent on data, software implementation, manufacturing expertise and proprietary processes, their IP strategies must evolve. The question is no longer simply whether an invention can be patented. It is how best to protect the assets that create commercial value.

The most successful organisations rarely think about patents in isolation. They focus on protecting the elements that make an innovation commercially valuable.

What makes a trade secret?

The terms know-how, confidential information and trade secret are often used interchangeably, but they are not the same.

• Know-how is the practical knowledge, skill and experience developed through research, development and operational activity. It may be commercially valuable without necessarily being confidential.
• Confidential information is information that is not publicly available and is shared only in controlled circumstances. It may include technical data, research results, customer information or commercial plans.
• A trade secret is confidential information that derives commercial value from not being generally known and is subject to reasonable measures designed to preserve its secrecy.

While trade secret laws vary between jurisdictions, the common elements generally include secrecy, commercial value arising from that secrecy and reasonable steps to maintain confidentiality.^{1, 2}

Not all confidential information is therefore a trade secret, and not all know-how qualifies for trade secret protection. In practice, an organisation should be able to:

• identify the protected information with sufficient precision
• explain its actual or potential commercial value
• demonstrate the measures taken to keep it confidential

Those measures might include need-to-know access, confidentiality agreements, information classification, cybersecurity controls, employee training, trade secret registers and procedures for collaborations and employee departures.

What is reasonable will depend on the value and sensitivity of the information, how it is used and the risks surrounding its disclosure. Simply labelling information as “confidential” is not enough.

In many organisations, commercially important knowledge is dispersed across teams, systems and individuals. Unless it is identified and managed, it can be difficult to protect, transfer or leverage commercially.

Trade secrets as an enterprise value issue

The growing importance of trade secrets reflects a broader shift in how value is created.

Investors, acquirers and commercial partners are interested not only in what a business has patented, but also in what it knows, whether it controls that knowledge and whether the resulting commercial advantage can be sustained.

We increasingly see trade secrets discussed in the context of investment, transactions and commercialisation strategy rather than purely as a legal risk. Investors are asking how businesses protect the innovation and know-how they have chosen not to patent.

The question is no longer simply whether trade secrets exist. It is whether they are being actively managed as business assets.

Trade secrets require no registration or public disclosure and can remain protected for as long as the relevant information remains secret. They can therefore be particularly valuable where information is difficult to reverse engineer and likely to remain commercially useful beyond the term of a patent.³

There are important limitations. Trade secret protection generally does not prevent a competitor from developing the same information independently or obtaining it through lawful reverse engineering. Once secrecy is lost, the legal and commercial position may also be difficult, and sometimes impossible, to recover.

The decision to use patent or trade secret protection must therefore take account of the technology, the likelihood of independent development, the feasibility of maintaining secrecy and the commercial consequences of disclosure.

In many cases, the right answer is to use both.

AI is changing the disclosure equation

Artificial intelligence is making published technical information easier to search, analyse, compare and apply.

This does not diminish the importance of patents. It does, however, make the decision to disclose more consequential. A patent publication may give competitors access not only to the claimed invention, but also to technical information that helps them understand the broader innovation or develop alternative approaches.

Businesses should therefore be deliberate about what enters a patent specification. For technologies involving proprietary processes, algorithms, manufacturing expertise, training methods or data-driven optimisation, retaining selected elements as trade secrets may provide a more durable source of advantage.

In an AI-enabled world, the question is not simply whether an invention can be patented. It is which elements should be patented and which should remain secret.

Building protection around commercial value

The most effective IP strategies do not begin by selecting an IP right, they begin by identifying where value resides.

Consider a cell therapy company. Patents may protect the cell construct, platform technology or therapeutic application. However, substantial commercial value may reside in the manufacturing process, quality-control parameters, analytical methods and scale-up expertise required to produce the therapy reliably.

Those elements may be difficult for competitors to reverse engineer and may be better protected as trade secrets. Copyright may protect software and technical materials, trade marks may protect the brand, and contractual controls may govern access by employees, manufacturers, research collaborators and commercial partners.

The same principle applies in other industries. The objective is not to accumulate as many IP rights as possible. It is to apply the right protection to each commercially important element of the offering.

A coordinated approach can make a technology harder to replicate, strengthen negotiating positions and preserve advantages beyond the scope or term of an individual patent. It also shifts IP from a downstream protection exercise to an upstream commercial capability that informs assessment, investment, licensing and other routes to market.

Making trade secrets a governance priority

Trade secrets are not simply a matter for the legal or IP team. They are an enterprise governance issue.

Patent portfolios are visible, documented and routinely reported. Trade secrets are different. Their value may be substantial, but they can remain invisible unless an organisation has deliberately identified and documented them.

This creates a potential governance gap in which some of the business’s most valuable assets receive relatively little oversight.

Organisations that manage trade secrets well understand three things:

• what information creates value
• who has access to it
• what measures are necessary to preserve its confidentiality

Trade secret registers can help document this information, but protection requires more than administration. It requires coordination across IP strategy, cybersecurity, information governance, employment practices and commercial operations. It must also extend to relationships with research collaborators, manufacturers, contractors, investors and licensees.

For boards and executives, the key question is not whether the organisation possesses confidential information, it is whether the organisation knows which information derives value from secrecy and can demonstrate that proportionate protections are in place.

Trade secrets deserve the same strategic attention, governance and management as any other critical IP asset.

Key take aways

Organisations rarely suffer because they lack trade secrets. More often, they are exposed because they do not know what their trade secrets are, where they are located or how easily they could leave the business.

The organisations best positioned to build durable competitive advantage will not necessarily be those with the largest patent portfolios. They will be those that understand how patents, trade secrets and know-how work together to create value, and that have the discipline to manage all three.