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Confidential information and business secrets

  • 30 October 2012
  • Articles

Business secrets may be of different natures: industrial secrets and trade secrets. Industrial Secrets refer to the “nature, characteristics or purposes of the products or the production methods or processes” (Article 260 of Decision 486 of the Andean Community of Nations).

It is, therefore, confidential information related to the technical sector of the company, i.e. to the production of goods and the provision of services. The following, among others, may be mentioned as industrial secrets:

Manufacturing processes or methods, chemical processes, chemical formula, machines, devices or parts of equipments internally developed or modified, lists of ingredients, test techniques, inventions or discoveries.

The industrial secret tends to be identified with the concept of Know-How (technical knowledge, knowledge with industrial applicability).

National and international laws provide different types of contracts related to Know-How, namely: Know-How License Agreements, the object of which is the transmission of secret technical knowledge. Technical assistance agreements comprising not only providing technological services but training in relation to the application of the technical knowledge necessary for the completion of the activities constituting the object of the contract. Consultancy agreements (consulting engineering) in which the consultant undertakes to provide technical studies for which certain technical knowledge has been used.

Entrepreneurial knowledge is a legal asset of economic content which may be the object in itself of income-generation contracts. Therefore, knowledge is not just an instrument for the development of industrial activities of a company but also a source of independent wealth.

Trade secrets on the other hand, are those related with the means or ways of distribution or marketing of products or services. A good production without adequate promotion or marketing would be pointless as what it is really about is the company selling its products generating income and profits in a sustainable way.

Among others are considered trade secrets: Lists of clients (by far, the most recognized secret), lists of suppliers, marketing studies, lists of process, reports on visits to clients, business methods, salary structures, marketing plans, business plans and advertising campaigns.

There are secrets related to temporary or strategic aspects of companies which in themselves could not be the object of a legal business but whose disclosure would directly affect the competitiveness of the company, such as launching date of a new product, a merger operation being negotiated, the financial situation of the company, conditions of a contract, etc. The effects of this information being leaked implies that it be given the same legal treatment as a trade secret which could be negotiated.

Most companies have both types of secrets: industrial and trade secrets. However, there are marketing companies which only handle trade secrets.

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Confidential information and business secretsConfidential information and business secrets