What Most Businesses Get Wrong: 10 Trade Secret Myths

Trade secrets can be the most valuable assets a business owns, and the threats against them are growing in both number and sophistication. As covered in my articles on insider threats and the damage that trade secret misappropriation can inflict, the stakes for every business are abundantly clear. 

Yet many businesses remain dangerously exposed. Misconceptions about trade secrets are remarkably common, even in the ranks of seasoned executives. These misconceptions shape key decisions about what to protect, how to do it, and whether to bother at all. 

This article outlines ten widespread myths about trade secrets and shows how reality often looks much different than business leaders expect.

Myth #1: "We don't have any trade secrets." 

Reality: Every successful business has information its competitors would love to obtain. The question isn't whether you have insights that add unique value to your business, but whether you're treating the insights you have like the precious assets they are. 

Myth #2: "Only tech companies need to worry about trade secrets." 

Reality: Every kind of business has trade secrets. From pricing strategies and customer information to engineering specs and software code, the business knowledge embedded in your organization is probably far more valuable and far more vulnerable than you know.

Myth #3: "We can deal with it when something bad happens." 

Reality: By the time something bad happens, it's often too late. Trade secrets lose their value the moment they're disclosed, and there's no way to restore their secrecy once it is lost. Prevention through proactive safeguards is the only effective strategy to identify, maximize, and protect these assets.

Myth #4: "We have NDAs, so we're protected." 

Reality: Nondisclosure agreements are a good start, but a policy document alone won't hold the line. You need a broad-based strategy to prevent devastating loss before it occurs. Insiders like employees, executives, contractors, and vendors are consistently identified as the primary source of trade secret loss, even in organizations with carefully drafted NDAs. 

Myth #5: "Our employees know what they can and cannot share." 

Reality: Most employees, even senior ones, have little idea what qualifies as a trade secret. Some assume that they "own" whatever they work on, while others think sharing internal information is harmless. Mistakes like these can be devastating.

Myth #6: "Our IT security team keeps our secrets safe." Reality: Firewalls and encryption can't solve the biggest vulnerability, which is insiders with access. Employees, contractors, and vendors often hold the keys to your information, and they can expose it through negligence or intentional misuse.

Myth #7: "Competitors would never steal our information." Reality: If only this were true. Sure, most competitors aren't likely to break into your offices, but many of them will gladly hire departing employees who may not think twice about taking your trade secrets with them, whether carelessly or deliberately.

Myth #8: "Patents offer better protection than trade secrets." 

Reality: Patents offer solid protection but come with tradeoffs. They require public disclosure, have a limited life, have gotten harder to enforce, and are inapplicable to many types of information. Trade secrecy will be your best bet in many circumstances. 

Myth #9: "Trade secrets don't have real value." 

Reality: Trade secrets are legitimate business assets that can be bought, sold, licensed, and leveraged. They can streamline operations, create new revenue streams, and multiply enterprise value. The advantages they deliver are real and quantifiable.

Myth #10: "We can't afford to worry about trade secrets." 

Reality: You can't afford not to worry about trade secrets. Once a trade secret becomes known to others, it's gone for good. The good news is you have a wide array of safeguards that are straightforward, impactful, and cost-effective. Modest investments in training and controls cost far less than what a single loss event can wipe out.

Shifting Your Mindset

The ten myths covered above share a common thread: they make trade secret protection feel like someone else's problem. 

In reality, every business has valuable information that faces threats from within and outside the organization.

In the articles ahead, you'll find practical, right-sized safeguards you can implement without slowing your business down. We’ll cover everything from how to identify what's worth protecting to the policies, practices, and controls that keep it secure. And later articles will talk about how to harness the full power of your trade secrets to position your business for enduring success.