The Challenge of Trade Secrets
On February 11, 2011, when the National Public Radio show This American Life produced and aired a segment entitled: “427: Original Recipe” (www.thisamericanlife.org/radio-archives/episode/427/original-recipe), about the closely guarded and mysterious secret recipe of Coca-Cola’s Coke product, the Intellectual Property community did a collective gasp.How did the unofficial archetype for a trade secret in United States, unknown by all for well over a hundred years and highly protected by the company, become public knowledge? Apparently it was published unbeknownst to newspaper readers 32 years ago.This American Life concluded in their research about The Coca-Cola Company that the Atlanta Journal Constitution published an article on February 18, 1979 along with photographs of handwritten notes resembling a recipe in a dusty old journal.The journal belonged to a pharmacist, Mr. Everett Beal, a friend of Mr. John Pemberton, also a pharmacist and the original creator of Coke, “the nerve tonic, stimulant and headache remedy”, as it was originally marketed in 1886. (For God, Country, and Coca Cola: The Definitive History of the Great American Soft Drink and the Company that Makes It, Mark Pendergrast, March, 2000).Many historians agreed after the radio show aired that the photographed recipe in the old journal may be, in fact, one of many variations of the soft drink, but surely could not be the “real thing”.The story caused shock waves online and with many international news agencies.If the published photograph was indeed of the original recipe for Coke, then the world and any corporate competitor of Coca-Cola Company would have access to reproduce and sell a product that, until now, no one had been able to duplicate. The risk of owning a trade secret is that there is little to protect it after the secret becomes public knowledge. Unlike patent protection of which the owner of the patent is protected for up to twenty years against any infringement, a trade secret relies on no protection other than severe withholding of public knowledge. However, it is protected against theft, in that the law allows prosecution of those who steal the secret willfully and those who willfully gain knowledge of the secret for their own financial benefit.This brings up a valid argument in the world of intellectual property.What are the risks of having a trade secret compared with patent protection? How long can you protect a patent? According to the United States Patent and Trademark Office: The term of the patent shall be generally 20 years from the date on which the application for the patent was filed in the United States or, if the application contains a specific reference to an earlier filed application under 35 U.S.C. 120, 121 or 365(c), from the date of the earliest such application was filed, and subject to the payment of maintenance fees as provided by law. A maintenance fee is due 3 1/2, 7 1/2 and 11 1/2 years after the original grant for all patents issuing from the applications filed on and after December 12, 1980. The maintenance fee must be paid at the stipulated times to maintain the patent in force. After the patent has expired anyone may make, use, offer for sale, or sell or import the invention without permission of the patentee, provided that matter covered by other unexpired patents is not used. The terms may be extended for certain pharmaceuticals and for certain circumstances as provided by law. http://www.uspto.gov/web/offices/pac/doc/general. Uniform Trade Secrets Act Trade secret law was substantially changed in 1985.The Uniform Trade Secrets Act (UTSA) was drafted by the National Conference of Commissioners on Uniform State Laws to clarify and be more definitive of what trade secrets were.In the U.S., this Act is recognized by 46 states.According to the Act, a trade secret is defined as such:information, including a formula, pattern, compilation, program, device, method, technique, or process, that: (i) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. In 1996, Congress had decided that the law needed to be further clarified to reflect how increasingly competitive and risky the loss of protected trade secrets on a national level had become and developed the Economic Espionage Act of 1996 (EEA). The EEA contains two distinct segments. The first segment pinpoints economic espionage directed by foreign governments or government-controlled entities. The other segment prohibits the theft of trade secrets carried out for economic or commercial advantage, whether the perpetrator is foreign or domestic. Further, The EEA states that a trade secret, as defined under 18 U.S.C. § 1839(A), (B) (1996), has three parts: (1) information; (2) reasonable measures taken to protect the information; and (3) the information derives independent economic value from not being publicly known. The Coca-Cola Company was rumored to have gone above and beyond to protect the recipe of their very successful soft drink Coke, with multitudes of non-disclosure agreements and reportedly bestowing only two employees with the knowledge of the exact recipe and method of making the soft drink. A spokesman for Coca-Cola revealed publicly a day after This American Life segment aired, that the photograph of the pharmacists’ journal entry was indeed NOT the actual Coke recipe. Now, the corporate giant once again succeeded in the preservation of their trade secret until at least another attempt would be made.To keep a trade secret a “secret”, companies typically enforce non-disclosure agreements to be executed by their employees, limit accessibility of the secret within the workplace, and protect the secret with high security measures.In the future, how will Coca Cola manage to keep the most highly successful trade secret, still a secret? The risk is there always, but Coca Cola as a company, has been successful as of yet, and we can only hope that they will continue to set the precedent of fierce protection of a trade secret.