TRADE SECRETS

1. What is a trade secret?

- Any valuable business information that is not generally known and is subject to
reasonable efforts to preserve confidentiality.
- Subject matter -- includes sales methods, distribution methods, consumer profiles,
advertising strategies, lists of suppliers and clients, source code for computer programs,
formulas, industrial and manufacturing processes.

2. Requirements for Trade Secret Protection

In order to be legally considered a trade secret, the information must:
i. be a secret (i.e. it is not generally known among, or readily accessible to, circles that
normally deal with the kind of information in question);
ii. have commercial value because it is a secret; and
iii. have been subject to reasonable steps by the rightful holder of the information to keep it
secret (e.g., through confidentiality agreements).
Protection is lost if and when the secret becomes publicly known.

3. Precautionary measures to protect trade secrets

- Considering whether the secret is patentable and, if so, whether it would not be better
protected by a patent;
- Making sure that a limited number of people know the secret and that all those who do
are well aware that it is confidential information.
- Including confidentiality agreements within employees' contracts.
- Signing confidentiality agreements with business partners whenever disclosing
confidential information.

4. Famous Trade Secrets

 The Google Search Algorithm  WD-40

 Kentucky Fried Chicken
 Coca-Cola
 Lena Blackburn's Baseball Rubbing Mud
 New York Times Bestseller List
 Listerine
 Twinkies
 Krispy Kreme Doughnuts
 McDonald’s Big Mac Special Sauce
5. What Philippine laws protect trade secrets?

While Section 4.1 of the IP Code includes in the enumeration of intellectual property the
“protection of undisclosed information”, the IP Code does not define trade secrets. In the case of
Air Philippines Corporation v. Penswell, Inc.1, the Supreme Court defined a trade secret as: “(1)
a plan or process, tool, mechanism or compound known only to its owner and those of his
employees to whom it is necessary to confide it. (2) The definition also extends to a secret
formula or process not patented, but known only to certain individuals using it in compounding
some article of trade having a commercial value. (3) A trade secret may consist of any formula,
pattern, device, or compilation of information that: (a) is used in one's business; and (b) gives the
employer an opportunity to obtain an advantage over competitors who do not possess the
information. (4) Generally, a trade secret is a process or device intended for continuous use in the
operation of the business, for example, a machine or formula, but can be a price list or catalogue
or specialized customer list. It is indubitable that trade secrets constitute proprietary rights. The
inventor, discoverer, or possessor of a trade secret or similar innovation has rights therein which
may be treated as property, and ordinarily an injunction will be granted to prevent the disclosure
of the trade secret by one who obtained the information "in confidence" or through a
"confidential relationship."2
There are several laws that prohibit revelation of trade secrets such as Section 40(f) of the
Consumer Act, which prohibits any person from using to his own advantage, or revealing (other
than to the Department of Trade & Industry or to the courts when relevant in any judicial
proceeding under the Act), any information concerning any method or process which as a trade
secret is entitled to protection. The Revised Penal Code also penalizes any manager, employee
or servant who, in such capacity, shall learn the secrets of his principal or master and shall reveal
such secrets (Article 291) and upon the person in charge, employee or workman of any
manufacturing or industrial establishment who, to the prejudice of the owner thereof, shall reveal
the secrets of the industry of the latter (Article 292).
In this regard, Section 5 (c) of the Cybercrime Prevention Act includes among other cyber-
crimes all crimes defined and penalized by the Revised Penal Code and special laws, if
committed by, through and with the use of information and communications technologies.
Section 4(6) further mandates that the penalty to be imposed shall be one (1) degree higher than
that provided for by the Revised Penal Code and special laws, as the case may be.
Section 33(a) of the Electronic Commerce Act prohibits hacking or cracking which refers to
unauthorized access into or interference in a computer system/server or information and
communication system; or any access in order to corrupt, alter, steal, or destroy using a computer
or other similar information and communication devices, without the knowledge and consent of
the owner of the computer or information and communication system, including the introduction
of computer viruses and the like, resulting in the corruption, destruction, alteration, theft or loss
of electronic data messages or electronic documents.
Section 33(c) of the Electronic Commerce Act penalizes the violation of the Consumer Act or
Republic Act No. 7394 and other relevant or pertinent laws through transactions covered by or
using electronic data messages or electronic documents with the same penalties as provided in
those laws.

1
G.R. No. 172835, December 13, 2007
2
Ibid.