Most startup founders think about patents and trademarks. But trade secrets can be just as valuable - and easier to protect. Unlike patents, trade secrets don’t require registration. But they do require vigilance.
Here’s what startup founders need to know about keeping their secret sauce, secret.
What Is a Trade Secret?
A trade secret is confidential business information that gives your company a competitive edge.
It can be:
- A proprietary algorithm
- A customer list
- A sales strategy
- A formula (hello, Coca-Cola)
- Internal processes or know-how
To qualify, the info must:
- Not be generally known
- Provide economic value from being secret
- Be subject to reasonable efforts to maintain secrecy
Examples in the Startup World
- An AI model trained on a unique dataset
- Your go-to-market strategy
- Backend code that isn’t visible to users
- Supplier relationships or terms
Startups often overlook these assets - but investors won’t.
How to Protect Trade Secrets
1. Limit access: Only share on a need-to-know basis. Use role-based permissions in your systems.
2. Use contracts:
- NDAs (Non-Disclosure Agreements) with partners, vendors, and employees
- CIIAs (Confidential Information and Invention Assignment Agreements) for employees
3. Label and track confidential information: Use watermarks, password protection, and internal protocols.
4. Train your team: Make confidentiality part of your onboarding and culture.
5. Have an exit plan: Revoke access when employees or contractors leave.
What Happens If a Trade Secret Leaks?
If someone misappropriates a trade secret (e.g., a former employee uses it at a competitor), you can sue under state or federal law (like the Defend Trade Secrets Act). But only if you took reasonable steps to protect it.
Final Thoughts
Trade secrets are often the easiest - and most overlooked - IP protection for early-stage companies. Protecting them isn’t about paperwork. It’s about building smart, secure processes that scale with your business.
Frequently Asked Questions
FAQs on Trade Secrets for Startups
Do trade secrets need to be registered?
No. Unlike patents or trademarks, trade secrets are protected automatically if they meet legal requirements and you take reasonable steps to safeguard them.
What’s the difference between a trade secret and a patent?
Patents require public disclosure and registration, granting exclusive rights for a limited time. Trade secrets remain private and last indefinitely - as long as secrecy is maintained.
Can employees take knowledge from one startup to another?
General skills and experience can move with an employee. But specific confidential information, such as code, strategies, or customer lists, is protected and cannot legally be taken.
What’s the most common mistake startups make with trade secrets?
Failing to use written agreements. Without NDAs and IP assignments, contractors or employees may legally claim ownership of information you thought was protected.
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