Trade Secrets and Organisational Knowledge and Know-how, oh my!

We all know the old maxim: “knowledge is power.” Here at Metis Partners, we utilise our expertise in the field of intellectual property (“IP”) strategy and monetisation to provide companies with the knowledge and skills they need to maximise the commercial exploitation of their IP assets. But knowledge comes in various forms, some of which can benefit your company and some of which can put your company at risk.

The first and oft-forgotten step in IP management and exploitation is seemingly innocuous but critical: companies must identify all of the critical IP assets created, owned and utilised for revenue generation in order to produce a cohesive IP strategy. Using our proprietary methodology, Metis Partners identifies and analyses ten IP asset areas within a commercially sensitive framework. Within this methodology are three asset areas which are closely related but nonetheless present their own set of risks and requirements for proper management and exploitation. While the proper identification of know-how, organisational knowledge and trade secrets may prove tricky, it is a crucial process which has the potential to enhance a company’s return on its IP assets and maintain its competitive advantage. With this in mind, we hope this blog will serve as a brief introduction on how to differentiate between know-how, organisational knowledge and trade secrets, as well as how to convert know-how into organisational knowledge and determine which of these IP assets is critical to your company’s competitive advantage and should therefore be protected as a trade secret.

Know-how is knowledge and expertise which exists in the minds of a few key people in the organisation, and is not captured in written form or widely shared across the entirety of the company. While human capital and expertise is undoubtedly of paramount importance to a company’s success, know-how in and of itself cannot be classified as a company asset, as a company doesn’t own the people within which the knowledge exists. Not only does know-how pose risks in the short term – losing the benefit of an employee’s know-how during bouts of illness, for example – but it can create even greater problems in the long-run, undermining investment or monetisation opportunities in future. Should an employee leave the company, any uncodified critical information related to a process, recipe or operation of key software or technology which is stored in that individual’s head will leave the company right along with them. By codifying know-how, it becomes an asset of the business which is capable of being shared across the breadth of the company and utilised by any number of employees. The importance of codifying key know-how cannot be overstated, and it is why Metis Partners always advises companies to capture as much know-how as possible in written form, via Standards of Practice (“SOPs”) documents and Frequently Asked Questions (“FAQs”), for example.

Organisational knowledge, as can probably be surmised from the previous section, is captured know-how. In addition to SOPs and FAQs, organisational knowledge can take the form of designs, technical specifications, best known methods, software code or any other form of codified, captured information. The benefit of organisational knowledge, as opposed to know-how, is that all relevant current and future employees will be able to refer back to the information at any time, allowing for smoother and more consistent business operations. By writing down essential company procedures and know-how, and making it easily accessible across the business, the company will be better able to facilitate knowledge transfer and scale up its business operations. This will not only enhance the quality and extent of your company’s IP assets, but will make the company more attractive to potential buyers or investors as this know-how has been transformed into a company asset capable of being transferred and valued.

But not all know-how or organisational knowledge is created equal. When considering the various pieces of organisational knowledge and know-how within your company, you need to think about what makes your business great. What gives you your advantage over competitors? What makes your company different? And critically, what information – if it were to get into the hands of your competitors – would seriously undermine your company’s USP? Once that critical information has been delineated, you need to consider whether it warrants protection as a trade secret.

A trade secret can be comprised of any type of information which is not generally known or reasonably ascertainable by others, and which provides a company with an economic advantage over its competitors or customers. In some jurisdictions, trade secrets are interchangeable with the term “confidential information.” We’ve worked with numerous companies in differing sectors who possess a variety of trade secrets, from vast invention disclosure forms, chemical formulae and secret ingredients to perhaps more “mundane” forms of IP assets such as pricing structures and databases. Once a trade secret is identified, it is important to make sure that it is protected as such – after all, you’d be hard pressed to prove that something is a trade secret when it’s been made accessible to multiple parties and/or the public. Creating and implementing a trade secrets policy, incorporating a trade secrets clause into employee contracts, encrypting databases, adding password protection, limiting access on a need-to-know basis and instilling a culture of trade secret protection in your company are good steps in ensuring that your most valuable assets don’t leak out of your company, either intentionally or accidentally.

Though seemingly similar at first glance, the interrelated concepts of know-how, organisational knowledge and trade secrets merit recognition and appropriate protection and exploitation measures which are individual to the IP asset in question. It is not always easy to separate the various forms of knowledge floating around in your company, though it is a step which should be taken.  After all, if knowledge is power, you better well know what it is you have.

If you have any questions or would like help auditing your company’s various IP assets, please don’t hesitate to contact Metis Partners on 0141 353 3011 or Michelle at michelle@metispartners.com.

Click here to book your Trade Secrets workshop.

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