1. Introduction

In today’s digital and knowledge-driven economy, the most valuable assets of many businesses are often intangible — algorithms, software, customer data, product designs, manufacturing processes, and strategic plans. Unlike patents or trademarks, which are publicly registered and legally recognised forms of intellectual property, trade secrets derive their status from remaining confidential. Yet, despite their potential value, many businesses struggle to identify or manage their trade secrets effectively.

This guide provides a structured and practical approach for businesses seeking to identify trade secrets within their organisation. It combines legal insight, risk management, and operational strategies to help businesses understand what qualifies as a trade secret, why these assets are frequently neglected, and what systems and processes can help safeguard them.

2. What is the Legal Definition of a Trade Secret?

International Standards

Most jurisdictions define trade secrets in similar terms, albeit through varying legal instruments. Broadly, a trade secret is any information that:

• Is not generally known or readily accessible to the public;
• Has actual or potential economic value because it is secret; and
• Is subject to reasonable measures to maintain its secrecy.

The U.S. Defend Trade Secrets Act (DTSA) of 2016 codifies this at the federal level in the United States. Under the DTSA, a trade secret means "all forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing, whether tangible or intangible," so long as it meets the criteria above.

The EU Trade Secrets Directive (2016/943) harmonises trade secret protection across member states and defines a trade secret similarly, as information that:

1. Is secret in the sense that it is not generally known or readily accessible;
2. Has commercial value because it is secret; and
3. Has been subject to reasonable steps under the circumstances to keep it secret.

‍The Position in Australia

Australia does not have a statutory definition or dedicated trade secrets legislation akin to the DTSA or the EU Directive. Instead, trade secrets are protected under the common law doctrines of breach of confidence and equitable obligations. Australian courts typically distinguish trade secrets from general confidential information, recognising them as more sensitive or commercially significant.

In general, courts in Australia have turned to various factors in guiding determination of whether the information is a trade secret:

• The extent to which the information is known outside the business;
• The extent to which the information was known by employees and others involved in the business;
• The extent of measures taken to guard the secrecy of the information;
• The value of the information to the business and its competitors;
• The amount of effort or money expended in developing the information; and,
• The ease or difficulty with which others could independently acquire or duplicate the information.

3. What Type of Information Qualifies as a Trade Secret?

It should be understood that the range of information that may qualify as a trade secret is broader than many organisations realise. It includes both technical and commercial information such as:

• Product formulas and chemical compositions;
• Manufacturing methods or unique fabrication techniques;
• Software source code and proprietary algorithms;
• Technical drawings, CAD files, and engineering models;
• Data analytics models or AI training datasets;
• Business plans, market analyses, and pricing strategies;
• Customer databases and segmentation models;
• Supplier or customer lists; and,
• Internal process maps and operational manuals.

Importantly, the information does not need to be novel in the way a patent requires. Instead, its value lies in the secrecy and the difficulty of reverse engineering or independently discovering the information.

4. Why Are Trade Secrets Often Overlooked?

Despite their commercial value, trade secrets are commonly overlooked for several reasons:

• Lack of Awareness: Many businesses do not realise how much of their core value rests in information that is not formally protected by IP rights;
• Focus on Registered IP: The legal profession and IP strategy have traditionally focused on patents and trademarks, which are easier to account for and defend;
• Poor Documentation: Trade secrets often reside in the minds of employees, embedded in processes or undocumented workflows;
• Blurred Ownership: Collaborative environments, consultants, and joint ventures can muddy the ownership and control of secret know-how; and,
• No Inventory or Classification: Most organisations have no systematic way to tag or track valuable information that ought to be protected as a trade secret

Without a framework for identification, many trade secrets remain invisible until they are compromised, by a departing employee, cyberattack, or careless disclosure.

5. Framework to Identify Trade Secrets in an Organisation

A structured discovery process is essential to uncover what information your organisation should treat as a trade secret. This involves cross-functional input from multiple departments including finance, legal, operations, engineering, IT etc. The following framework may be useful as a guide in the identification or discovery process.

a) Information Mapping

Conduct an audit across departments to map:

• What information is created, used, or shared;
• Where it resides (systems, documents, individual know-how);
• Who has access to it; and,
• What protections are in place.

Useful questions to help guide this process may include:

• What information gives us a competitive advantage?;
• Would its disclosure harm our position in the market?; and,
• Is this information generally known or accessible elsewhere?

b) Stakeholder Interviews

Equally as important as determining what information is already documented is to discover trade secrets that are not written down or documented anyway. Organisations typically carry a tremendous amount of undocumented know-how or process knowledge that needs to be captured.

Interviewing relevant stakeholders in key departments such as engineering, operations, R&D, sales, and IT is therefore crucial to the assessment process.

c) Apply the Legal Criteria

After the initial information discover phase, the information must be analysed to determine what classification it should be given. It is important to remember that not all confidential information is a trade secret and over time the importance and commercial value of confidential information may change. Accordingly, trade secret identification is not a set and forget process and should be reviewed and updated regularly.

In determining whether information is a trade secret, it should be assessed against the legal framework of:

1. Is it secret?;
2. Does it have commercial value due to its secrecy?; and,
3. Are reasonable measures taken to maintain the secrecy?

These assessments often involve a degree of subjectivity, for example, determining the level of commercial value that confidential information must possess in order to qualify as a trade secret.

It’s also common during the discovery phase to uncover information that qualifies as a trade secret, but lacks the reasonable measures necessary to ensure its protection (so these must be implemented to ensure the information is actually regarded as a trade secret in the eyes of the law).

d) Document trade secrets

Once candidate secrets are identified, they should be documented. How this is done can vary from simple data classification and tagging to an actual trade secret register or inventory. There are arguments for and against both approaches, but the important thing they have in common is that highly valuable confidential information is documented and identified so that appropriate controls can be implemented to maintain the secrecy of the information.

6. Once Identified, What Steps Should Be Taken to Ensure They Remain Trade Secrets?

Identification alone is only the first step. Trade secrets only enjoy protection if reasonable steps are taken to maintain their secrecy. These steps should be both legal and technical, and proportionate to the value of the information.

Common measures to maintain secrecy may include:

a) Access Control & Information Security

• Implement “need to know” access policies;
• Restrict access via permissions management systems;
• Encrypt sensitive files and restrict download/export rights;, and,
• Monitor access logs and establish alerts for unusual activity.

b) Internal Policies and Culture

• Establish a trade secret policy and educate staff on what constitutes a trade secret;
• Embed confidentiality principles into onboarding and ongoing training; and,
• Use classification labels (e.g., "Confidential - Trade Secret") in documents.

c) Contractual Protections

• Use robust confidentiality clauses in employment and contractor agreements;
• Include post-employment non-disclosure obligations; and,
• For collaborations or joint ventures, include express provisions on ownership and permitted use of trade secrets.

d) Exit and Offboarding Procedures

• Conduct exit interviews to remind employees of continuing obligations;
• Disable system access immediately; and,
• Reclaim company devices and ensure no information is exported or retained.

e) Incident Response and Monitoring

• Maintain a procedure to investigate suspected breaches;
• Implement digital forensics tools to track exfiltration; and,
• Consider legal remedies (injunctions, breach of confidence claims, etc).

f) Review and Update Regularly

• Schedule periodic audits of confidential information and trade secrets;
• Reclassify or retire information that no longer holds commercial value or is no longer secret; and,
• Continuously evolve security practices with technology and regulatory change.

7. Conclusion

Trade secrets are a powerful, flexible, and often under-utilised form of intellectual property. Unlike patents, they require no registration, but this also means the burden falls entirely on the business to identify and protect them. Implementing a structured approach to discover, classify, and control trade secret information is not just a legal necessity, it is a strategic imperative for any organisation that values its competitive edge.

By fostering a culture of awareness, implementing strong technical and contractual safeguards, and actively managing confidential information, businesses can unlock the full strategic value of their trade secrets.

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