Example. Importance Of Trade Secrets And Know-How In The Start-Up Ecosystem

“In this era of open collaboration, if you’re not able to share your trade secrets then you’re not going to get very far in your collaborations.” (Presentation of Dr Muthu De Silva, Birkbeck, University of London. The WIPO Trade Secrets and Innovation Symposium May 23 and 24, 2022 Geneva, Switzerland)

An early-stage start-up’s IP portfolio typically consists of trademarks, computer programs (protected by copyright), and may also include patents, utility models etc. In addition to developing technical solutions, the start-up also collects and develops other necessary skills and information, resulting from experience and testing, gradually building up a package of know-how and business information.

This knowledge package concerns all components of the business, such as product development (e.g. drawings, production formulas), production (e.g. data on the supply chain), marketing (e.g. cost calculation), and all other aspects of business activity. While a technical solution may eventually achieve patent or some other intellectual property protection, it has economic value earlier on. Furthermore, one intellectual property instrument typically cannot protect the entire business or production process, which is rapidly evolving. Similarly, the economic value lies in a company’s know-how, skills, business information and other data. The latters now account for a larger share of a company’s value and intellectual property portfolio than traditional intellectual property instruments.


What is a trade secret? A trade secret may not actually be a “secret” in the usual sense of the word. In the context of intellectual property, a trade secret is a legal instrument used to protect any information that gives a competitive advantage: a company’s know-how and business information, technical solutions without intellectual property protection, any data, etc. Sharing a trade secret with a business partner, for example, to expand production, does not disclose it or diminish its legal protection if appropriate technical and legal precautions are taken. In other words, the legal framework for trade secrets is not aimed at absolute secrecy of information, but rather at controlled sharing of it. Indeed, in the early stages of start-up activity, it is characteristic and a strength of the company that shareholders and/or business partners, employees work closely together, and that all team members have access to information, as well as sharing ideas, data, knowledge, etc. Information is often shared with suppliers/subcontractors, investors, and clients.


Example. Coca-Cola’s recipe is often given as an example of the use of trade secrets, but it is not suitable in the context of start-up development because it concerns a product that has already been developed. A more appropriate example is the development and production of the Covid-19 vaccine. Since speed was crucial, companies did not have time to deal with patent applications (a process that takes years). Similarly to early-stage start-up activity, product development was carried out in close cooperation. For example, BioNTech did not have production capabilities like Pfizer, but the application of trade secret regulation (with a corresponding agreement that also agreed on economic terms) allowed for the sharing of R&D data and ensured the economic interests of both. Pfizer, in turn, developed a vaccine with 286 components using a process involving over 50,000 steps, with over 86 suppliers in 19 countries and a total of 260 corresponding contracts. Data sharing and cooperation continued between different companies even in the final stages of production.


For example, Pfizer entered into an agreement with Thermo Fisher for the production of a certain amount of vaccines, during which more than 50 files, totaling 5000 pages of confidential documents, were shared. In addition, 24 Pfizer employees were sent to Thermo Fisher’s factory for 7 months to transfer the corresponding know-how. All of these collaborations became possible due to the legal framework of trade secrets. By protecting the shared knowledge with trade secrets, the preservation of competitive advantage was ensured, as well as the protection of investments made in product development and later expansion. In summary, trade secrets played a key role in enabling collaboration and ensuring investments in early-stage product development, supply chain formation, later production process development, and expansion (for more information, see: “Unprecedented: The Rapid Innovation Response to COVID-19 and the Role of Intellectual Property,” Mark F. Schultz, Jennifer Brant).


Based on the above example, the legal framework of trade secrets:


– Helps fostering and securing of investments made in startups;

– Creates the prerequisite for rapid development of startups, enabling collaboration and coordination between business partners, including direct competitors, in both product development and other business phases.