Trade Secrets: Which Secrets are Worth Keeping?

Trying to understand the impact of intellectual property rights on an open source company can be intellectually challenging. We saw this quite clearly in the complicated discussion of patents in the last post. I think it's the right time to take a break and tackle a subject that is far less controversial and mentally demanding -- trade secrets.

The concept of trade secrets is straightforward... an intellectual property right designed to protect economically valuable information that a company attempts to keep confidential. It can be applied to all types of information from marketing strategies to manufacturing techniques. Trade secrets, like copyrights, trademarks and patents, can provide a valuable means of differentiation, but in different ways. While copyrights, trademarks and patents provide differentiation through unique product features and branding, trade secrets do so by preventing competitors from using a company's business operations to their own advantage.

Open source companies might be tempted to ignore trade secrets on the grounds that the term "secret" is the antithesis of "open," but this would be a mistake. Instead, open source companies should use trade secrets to their advantage as a core element of their business strategy in much the same way as their proprietary counterparts. Proprietary software companies protect virtually all information by treating it as secret unless the company specifically authorized for disclosure. This is consistent with the proprietary license strategies they employ, which withhold intellectual property rights until a customer purchases a license.

This blanket approach will not work for open source companies. Because the company's source code is publicly available and development ideas and techniques are freely discussed within the community, much (if not all) of the company's technical information is not even eligible for trade secret protection. As a result, open source companies must clearly distinguish between technical and business information. Business information worthy of trade secret protection might include the next vertical market to be targeted with a marketing campaign, the unannounced release date of a closed-source add-on to the open source software, or the fact the company expects to close a significant deal by the end of the quarter. As business information, these examples do not directly impact the community, and release could potentially put the company at a disadvantage with respect to its competitors.

This is not to say that all technical information should be open, or that all business information should be closed. Open source companies should use this as a guideline in determining which secrets are worth keeping. Once an open source company makes this determination, it should use non-disclosure agreements aggressively to protect that information.

This is the final of 4 posts in a series aimed at providing practical consideration for open source companies with respect to intellectual property rights. As alluded to in the post introducing this series on intellectual property rights, I will soon tackle other aspect of the open source business that touch on legal issues including relationships with customers, partners and employees, as well as deciding when to shift legal work from outside to inhouse counsel.