Part 6 of AudreyGrey’s Intellectual Property Series
Introduction
140 years on, and Coca-Cola is still one of the leading beverage producers in the world. Many attribute its success to great marketing and to keeping the world’s most famous secret – the formula of the Coca-Cola drink. In Part 5 of this series (on Patents), we discussed how to gain a monopoly by openly describing in detail what makes your inventions so special. In this piece, we look at the flip side: how to gain a competitive advantage by keeping your business methods, suppliers, client lists, manufacturing techniques, and other relevant business information secret. Welcome to Part 6 of Audrey Grey’s Intellectual Property Series on trade secrets.
What is a Trade Secret?
The World Intellectual Property Organization (WIPO) defines trade secrets as intellectual property rights on confidential information which may be sold or licensed.[1] The confidential information in question includes chemical formulas, recipes, production methods, pharmaceutical and other test data, designs and drawings of computer programs, distribution methods, client and/or supplier lists, marketing strategies, and any other information that has commercial value to business because it is not publicly known.
The test for whether a piece of information can be considered a trade secret is fairly straightforward:
What qualifies as a trade secret: A closer look
Is it a secret?
The first critical aspect of trade secrets is secrecy. If the information is readily accessible to the public, it cannot be a trade secret. The information meets the secrecy criteria if it is only known to the owner and people authorized by the owner.
Interestingly, trade secrets can also be made up of a combination of elements which are individually publicly known, but which, when combined in a particular way, provide a competitive edge over other businesses. A good example is KFC’s secret mix of 11 herbs and spices. These items are allegedly items that can be found in anyone’s kitchen. But the precise combination of them is the secret behind the franchise that had set up over 30,000 stores globally by March 2024[2].
Does it hold commercial value for the business?
The information must create an identifiable financial, economic, or other competitive advantage for the business over other businesses. For instance, a new process that allows your business to produce its goods or provide its services in a more cost-effective manner, or a secret that gives your goods or services a higher quality than your competitors’ products or services.
Have you taken reasonable steps to keep it a secret?
It is not enough that the information is not publicly known. It must be shown that the information is secret by design. Businesses use confidentiality clauses, non-disclosure agreements (NDAs), access controls which include physical restrictions and cybersecurity protocols, non-solicitation and exclusivity clauses, and a host of other arsenals to guard their trade secrets. In Part 7 of this series, we will dive deeper into how confidentiality, NDAs, exclusivity and non-solicitation clauses are used to protect IP rights.
Statutory Protections for Trade Secrets
The trouble with trade secrets is that they are secret. It is hard for a regulator to protect what they do not know about. So, the bulk of the work of protection falls to the holders of the secret. That notwithstanding, a few laws provide remedies when there is a breach or anticipated breach of the obligation of secrecy.
The Protection Against Unfair Competition Act, 2000 (Act 589) is one such law. Act 589 describes trade secrets as secret information[3]. And under Act 589, when secret information is obtained or shared without permission, the owner may apply for an injunction to prevent further disclosure, prohibit the exploitation of the information, or criminally prosecute the theft or unauthorized disclosure. You can also ask for damages as compensation for any loss or injury suffered as a result of the information leak.
Outside of Act 589 which has more general application, NDAs, confidentiality clauses in employment contracts and any other contracts entered to protect a trade secret can be enforced under the Contract Act, 1960 (Act 25). Cybersecurity protocols can be enforced under the Cybersecurity Act, 2020 (Act 1038). And labor violations can be prosecuted under the Labour Act, 2003 (Act 651) or as a criminal act where illegal acts are done.
Leveraging Trade Secrets for Additional Profit
Licensing
Trade secrets can be licensed to third parties. In a licensing arrangement, the owner maintains full ownership of the secret and only gives the third-party permission to use the trade secret under specific conditions for a fee or some other benefit.[4] These types of arrangements require very strict access controls and airtight contractual provisions, to be effective.
Franchising
Franchising scales up licensing into an organized business model. The franchise agreement gives the franchisee the right to use the owner’s trademark or brand and access confidential information. In return, like the licensor, the owner receives royalties from the franchisee. Franchise agreements are usually broader in scope as well. So, the owner may offer training and long-term support to franchisees as well. KFC is a typical example of a franchise built on a trade secret.
Keeping it to yourself
Trade secrets are like Humpty Dumpty. Once they fall off the wall, it is nearly impossible to put them back together again. The risk of exposure increases as the number of people with access increase. So, some businesses choose the safest route to maintain monopoly – don’t tell anyone.
A point to note also is that trade secrets do not have a limit to being a secret. They can exist as a secret for as long as the owner intends it to be.
Key Risks to Trade Secrets as a Business Strategy
Departing Employees
Employees present the biggest practical risk to trade secret protection. While logins can be disabled and access to physical locations can be denied, the information in an employees head cannot be removed. Any knowledge that an employee has of your business’s trade secrets will go with them when they leave. Non-compete clauses can be used to prevent them from setting up a rival business or working for competitors. But this is not a foolproof safeguard. Where trade secrets can be split into parts, some businesses ensure that no single employee has access to the full complement of the trade secrets. This is especially useful if all the components are needed in tandem for the secret to have commercial value. Others expose only the highest echelons of the company to the trade secrets because those employees usually would be less inclined to leave.
Third-Party/ Vendor leaks
Consultants, auditors, lawyers, distributors, suppliers, and every other person who interfaces with a business is a potential source of exposure for the business. This is why access controls are so important.
Cloud storage systems.
Cloud storage systems, while convenient, leave business secrets exposed to cyber attacks on the company’s servers, the host’s servers, and even through a careless employee’s device. This risk can be mitigated by implementing cybersecurity protocols, including firewalls and passwords on all devices.
AI and LLM usage
Most AI systems, especially the free versions, have default settings that prioritise learning from interactions over protecting user data. So, when employees feed client lists, confidential documents, images, and other sensitive corporate information into LLMs, and other AI tools, there is a risk of that information being regurgitated to other users, or sold to data brokers. Implementing robust technology usage policies can help minimize this risk.
Corporate Espionage
Sometimes competitors attack directly by using various means to steal a company’s trade secrets. They may not always break into the company’s building/ servers, ‘Mission Impossible’ style, but they may employ various tactics including bribery, planting employees (spies), hacking, social engineering (posing as a vendor, job candidate, or journalist to extract information), or surveillance.
Due diligence during Mergers and Acquisitions
Trade secrets present a unique dilemma during the due diligence checks and negotiations leading up to mergers and acquisitions. The buyer usually wants access to the trade secret to price it for the sale. On the other hand, if the sale falls through, that secret would have been exposed to third parties who may use it for their own commercial interests. This risk can be mitigated by implementing tiered disclosure practices (i.e. certain levels of access will only be permitted after the transaction has progressed beyond a certain stage and usually only to certain members of the M&A team, not the entire staff of the buyer). The business can also deploy stringent confidentiality, non-compete or no-use clauses to prevent unauthorized disclosure, and indemnity clauses to recover the losses that arise where the preventative measures fail.
Trade Secrets as a Business Strategy: Patents versus Trade Secrets
| Patents | Trade Secrets |
| Registration needed for protection | No registration needed |
| Can prevent anyone from using your patented asset without permission irrespective of how they developed it (including through independent R&D) | Remedies are only available when there is prohibited disclosure. Businesses who independently reverse engineer your product cannot be prevented from using it |
| Duration is a maximum of 20 years in most jurisdictions | Unlimited Protection as long as the information or methods remain hidden. |
| Requires public disclosure of how the invention works in the application | Requires secrecy to be maintained. There is no disclosure obligation |
| Costly to obtain (filing fees, cost of legal or IP experts to assist in drafting claims, and renewal fees) | Low upfront cost. However, the measures taken to maintain confidentiality (NDAs, access controls, and security features) can be costly in the longer term |
| Enforcement is comparatively easier because it is easy to demonstrate how the protected subject matter which is defined and publicly recorded has been infringed upon. | Infringement is harder to prosecute. The owner must demonstrate that the information was secret, had value from being secret, and has been misappropriated, all without inadvertently publicizing the secret. |
| Examiners must confirm novelty, non-obviousness and utility before granting | No requirement for originality or non-obviousness. |
| Risk: Competitors can study around the patent and design around it while it is still in force | Risk: There is no protection against competitors who independently reverse engineer products (unless there is a contractual obligation preventing it) |
| Ideal for inventions that are easy to reverse engineer once released | Ideal for products that are hard to reverse engineer or that only have value if they stay secret. |
It is important to note that even for products or inventions that are better protected as Patents or using other IP, there is a period in their life cycle, usually the R&D to pre-launch stages, where they still need protection as trade secrets. This prevents competitors from overtaking you to register your own invention and locking you out of the market for at least 20 years.
Conclusion
We live in a world where information is currency. We have been socialized in the last 20 or so years to believe that this only applies to online data. This article is a gentle reminder that your business information including manufacturing methods, client or supplier lists, formulae, can be a gold mine for you if leveraged properly. Their benefits can be enjoyed by entering franchise agreements, licensing, or by remaining exclusively with you, the owner, to create a monopoly. In Part 7 we go deeper into how to use NDAs, Non-solicitation, Exclusivity and Confidentiality clauses to protect your IP rights. The ball is in your court now. What will you do?
[1] WIPO, Trade Secrets https://www.wipo.int/en/web/trade-secrets Accessed 25th June 2026
[2] KFC Surpasses 30,000 Restaurants Worldwide https://global.kfc.com/press-releases/kfc-surpasses-30-000-restaurants-worldwide accessed on 17 August 2026.
[3] In Section 5(3) of Act 589 secret information is described as “information which is not, as a body or in the precise configuration and assembly of its components, generally known among or readily accessible to people within the circles that normally deal with the kind of information in question.” The Act further adds that the information must have commercial value because it is secret. Additionally, the rightful owner must have taken reasonable steps under the circumstances to keep it a secret.
[4] ILO, Trade Secret Licensing, https://www.theilo.org/license/trade-secret-licensing/ Accessed 26th June 2026
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Authors: Audrey Naa Dei Kotey, Clara Mettle-Nunoo & Queensca Pamela Asare