Trade secret (manufacturing secret, know-how)

Notion of trade secret. Strictly speaking, a secret as something unsolved, not cognized, concealed from other people, not known by everyone, and protected as such has its reflections exactly in all aspects of our virtual and real life. A secret in a religion is the God himself as well as his apostles and angels. A secret in the divine service means a confession secret, a wedding secret, a cure miracle secret. In the science these are universe secrets, nature secrets, scientific secrets. The common life and the state existence are also intertwined by a web of secrets including state, military, tax, bank, lawyer, family, medical, professional secrets, the secret of correspondence, the secret of voting, and many others. With regard to creative activities connected to confidential development of new equipment and technologies, it is a variety of intellectual property – a manufacturing secret (know-how) that forms a special kind of trade secrets. A distinguishing feature of any secrets is a lack of requirements to their official registration, a closed settlement of a dispute in a case of disclosure, different principles of law enforcement in different countries as well as the necessity of protecting them against any illegitimate encroachments. Ownership of a trade secret in the modern conditions is the instrument that enables the owner to get a competitive edge in the market and attract additional investments.

According to Article 3.2 of the Federal Law “On Trade Secrets” of 12.03.2014, No. 35-FZ, and Article 1465 of the RF Civil Code “Production Secret (Know-How)”, the wordings of the notions of “trade secret” and “production secret” coincide literally so they may be considered as synonyms to a certain degree. Also, it should be noted that “trade secret” is synonymous with “commercial secret”, and “production secret” is synonymous with explicit and implicit “know-how” (from English “I know how to do it”). Furthermore, such synonyms of “trade secret” as manufacturing, technological or commercial secret, craft secret, business secret, economic secret, professional secret, commercially valuable information, insider (undisclosed) information as well as  undisclosed, confidential or classified information.

In principle, disputes on what of the above synonyms is the most correct one, result in nothing but confusing readers. Consistency of terminology is the way that enables to avoid various delusions when describing various processes, actions, phenomena. As far as confidential information is concerned, it may be fit into two close notions, one of them is generic and is called “trade secret”, and the other one is specific and is known as “manufacturing secret” or, aka, “know-how”. In the Russian legal practice, according to the above-mentioned Articles of the Law “On Trade Secrets” (Article 3.2) and the RF Civil Code (Article 1465), the notions of “trade secret” and “production secret” are understood as information of any nature (production, technological, economic, organizational and others), including information on results of intellectual activities in the field of science and technology as well as information on methods of carrying out professional activities that has a commercial value due to its not being known to third parties, is not freely accessible to third parties, and that is covered by a trade secret regime  introduced by the owner of this information.

Speaking in a simple way, a trade secret is information that possesses novelty, is known to a limited number of persons, has a practical value, capable of yielding, due to its practical value,  economic benefits to its owner, and in respect of which its owner has taken certain measures to ensure its secrecy. The conditions of the trade secret existence is its protection against disclosure and, correspondingly, its limited knowledge, and its owner is not only the person who first proposed something new and advantageous, but also all other persons who have been given the right to use it in their labor activities subject to obtaining permission to do it from the first person. Hereinafter, in order to avoid confusion, only the terms “trade secret” and “production secret” will be used that are, as it is said above, synonyms to a certain degree.

As has been already said, “trade secret” is a generic notion, and “production secret” is a specific notion, i.e., “trade secret is a broader term, since it, apart from production secrets relating to an intellectual property object, may include information on the company’s management; on the measures taken in order to protect confidential information; on the procedure of working with confidential documents; on the cost of a manufactured product, etc. Some people think that “trade secret” is, in its turn, a specific notion in relation to the generic notion of confidential information. This opinion should be undoubtedly supported, since confidential information may include not only commercial information, but also information relating to other aspects of the life (personal letters, health condition of statepersons, marital infidelity, hobby, a circle of mutual acquaintances, friendly and hostile relations, manner of behavior in a critical situation, etc.).

Safe keeping of a trade secret enables its owner in existing or other possible circumstances to increase financial gains, avoid unjustified expenses, maintain a stable position on the market of goods, works, services, or obtain other commercial benefits. As far as production secrets are concerned, they, similarly to secret inventions, form closed information on the essence of developed and used intellectual activity results, on products, technologies and  processes of production, as well as on methods of implementing economic and organizational solutions aimed at promoting products and services in the market. But, unlike secret inventions that are classified according to three levels: confidential, secret and top secret, production secrets, irrespective of a confidential information importance level, are all marked as “trade secret”.

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