In today’s economy, intellectual property (IP) assets are central to business success. Traditionally, these assets are most commonly protected through patents. However, in recent years the patent process has grown more complex, with rising costs driving many businesses – especially SMEs – to shift toward a more flexible and discreet alternative: trade secrets.
However, while trade secrets offer agility and privacy, they also introduce new risks. With trade secrets, companies rely heavily on internal security controls to keep sensitive information confidential. This makes trade secrets more vulnerable to leaks, cyber threats and insider misuse – raising the stakes for how businesses manage and secure their most valuable knowledge and innovations.
Why trade secrets are on the rise
Different types of IP require different methods of protection. For example, logos are typically protected by trademarks, while algorithms are more suited to patent protection. However, businesses are rethinking how they safeguard their most valuable innovations. In fast-moving sectors like tech and AI, where speed and secrecy are critical, trade secrets offer a more agile alternative. Unlike patents – which can be expensive, time-consuming, and eventually expire – trade secrets can last indefinitely, provided they remain confidential.
This trend extends well beyond tech giants. Sectors from digital health and life science to construction and manufacturing are increasingly leaning on trade secrets as an effective method of entering new markets without disclosing their competitive edge. In this sense, trade secrets have become a vital tool for levelling the playing field and empowering businesses to compete, especially in technology-driven areas like AI development, data processing and software building.
But there are risks
While trade secrets offer flexibility and long-term protection, they also expose businesses to a range of vulnerabilities that can be underestimated:
- Employee mobility is a major threat: Around 60% of trade secret misappropriation cases in the US involve departing employees. Because trade secrets aren’t registered rights, confidential knowledge can walk out the door with staff, no matter how strong your contracts or risk controls are.
- Legal grey areas complicate enforcement: Trade secrets rely on confidentiality and breach of contract claims, not formal registration. This makes enforcement difficult, especially across borders where legal frameworks vary and proving a breach can be challenging.
- Cyber attacks can trigger IP loss: A single breach can lead to stolen data, which may then be reused in ways that infringe on IP rights – creating a domino effect of legal and reputational damage.
IP insurance: A vital, risk-mitigation tool
Given the growing reliance on trade secrets and the wide range of threats they face, having the right insurance policy is essential. A dedicated IP insurance policy can help mitigate the financial impact of misappropriation or theft, while also giving businesses the confidence to innovate without fear. It’s not just about protection; it’s about enabling growth with peace of mind.
But not all policies that advertise “IP cover” will respond to trade secret misappropriation. CFC’s IP policy is specifically designed to address this gap, offering breach of contract coverage – both defense and pursuit – tailored to the unique exposures that trade secrets present.
Whether you have questions on IP trends, trade secrets or the right insurance cover, our team would love to hear from you. Get in touch here.
