Trade secret, also called intellectual property or proprietary information, is the term used for any method, formula, device, process, or any information that gives the business a unique competitive advantage over its competition. Anything that gives you an advantage against a competitor is highly valuable and worth protecting.
Trade secrets come in an endless array of types, for example:
- R&D information
- Software algorithms
Here are some examples of famous trade secrets, many of them well-known in popular culture.
FAMOUS TRADE SECRETS
THE GOOGLE SEARCH ALGORITHM
Google developed a search algorithm and continues to refine it. Some changes are announced but many are not. Google continues to modify its top secret algorithm to keep businesses and people from gaming the system.
It is the top search engine today and shows no signs of giving up its place.
KENTUCKY FRIED CHICKEN
The secret ingredients for KFC's original recipe were originally kept in Colonel Sanders' head. He eventually wrote the recipe down, and the original handwritten copy is in a safe in Kentucky. Only a few select employees know the recipe, and they are bound by a confidentiality agreement.
For better protection, two separate companies blend a portion of the herb and spice mixture. Then it is automatically processed to standardize the blending before it is sent to the restaurants.
There are rumors of other requirements about the secret recipe. One says when KFC updates its security systems, the recipe is temporarily moved to secure location in an armored car escorted by a high-security motorcade.
Does your business have trade secrets that you want to protect? Not sure what to consider a trade secret? Contact an experienced intellectual property attorney today.
Coca-Cola made a choice to brand the recipe a trade secret instead of patenting it, which would have lead to the disclosure of the ingredients. Since one of those ingredients may have been cocaine, Coca-Cola decided to keep the recipe as confidential information.
This trade secret has spawned rumors of its own. One is that the recipe contains bugs or insects. Another is that two employees each know only half the recipe or that only two people know the combination to the safe where it is stored.
In case you doubt it, corporate espionage is real. In 2006, and employee and two accomplices stole the formula and tried to sell it to Pepsi. Pepsi blew the whistle and let Coke officials know what was happening. The employee and friends were arrested.
LENA BLACKBURN’S BASEBALL RUBBING MUD
Lest you think all trade secrets have to do with food, Blackburn’s Baseball Rubbing Mud is an example that does not.
The rubbing mud was developed to dull the surface of new baseballs, making them easier to grip. All the mud comes from the same place, but the business assures everyone it is on public land. It is a trade secret passed on to new generations to prevent people from walking on the source.
NEW YORK TIMES BESTSELLER LIST
The New York Times has the most influential book list in the country, and it will not divulge its definition of a best seller. It apparently is not merely the number of books sold since a book that has sold fewer copies than another can make the list while the better selling book does not.
It is known that the Times gets information from chain stores, independent book bookstores, and wholesalers about sales figures, but that is the extent of the knowledge. The Times refuses to release its system because it fears publishers would then use the information to manipulate sales data to their advantage.
Employees provide a non-answer when asked; they say there are “official” best sellers and “unofficial” best sellers.
Listerine is a popular example of a trade secret used in law schools.
The inventor licensed the secret formula to Lambert Pharmaceuticals. Lambert (now Pfizer) made royalty payments to the inventor’s family for over 70 years, even though the formula was revealed during that time.
Pfizer tried to stop payments after paying over $22 million for a formula that was no longer secret. It sued, saying it was no longer responsible for licensing fees. The court ruled that the contract did not stipulate that payments could be stopped if the trade secret was legitimately discovered by others, especially since Pfizer had acquired the formula when it was still secret and derived competitive advantage from it.
Originally WD-40 was developed to prevent corrosion. The chemist kept the formula secret and sold it a few years later. Even now, it is the company’s only product.
Like Coca-Cola, the secret formula has never been patented, so competitors could not discover what is in it. The company does reveal what is NOT in the formula, including a statement that there are no known cancer-causing agents.
The formula has been in a bank vault for years, only taken out to change banks, and, once, to be carried by the company’s CEO to celebrate its 50th anniversary. The CEO wore armor and rode on horseback.
The formula is mixed in three different cities around the globe before being given to the manufacturing partners. The formula has been reverse engineered, but the trade secret is kept for marketing purposes.
Rather than a marketing ploy, the recipe for Twinkies is kept as a trade secret because the company fears consumers will not understand what the ingredients really are and stop eating them or giving them to kids. Many of the constituents are harmless but have chemical names that sometimes sound hazardous to those outside the food industry.
KRISPY KREME DOUGHNUTS
While the recipe for the Krispy Kreme Doughnut has been a trade secret for 70 years, it is not really the source of competitive advantage. Still, only a few employees have access to the recipe, and it is locked in a safe at company headquarters.
The real secret of the taste of Krispy Kreme Doughnuts is the process by which it is made. The company designed a process where the fluffy doughnuts roll out of the kitchen on an assembly line, still warm, to be sold quickly after being made.
MCDONALD’S BIG MAC SPECIAL SAUCE
The special sauce recipe was a trade secret so secret it got lost in the 1980s during reformulation. Nobody noticed it missing until an executive wanted to bring the original back. Fortunately, McDonald’s was able to retrieve the recipe from the original person or company that originally produced the sauce, as the recipe was still in the records.
Trade secrets confer a competitive advantage in a free market. Some of those secrets are no longer secrets but still function as marketing devices. Other secrets would probably seem very mundane if revealed to the public. Occasionally, as with Twinkies, the trade secret is language that could be off-putting to the intended buyer.