Trade secrets and collaboration
Updated: Dec 11, 2019
Who are the true renaissance people of today? The degree of specialization in society does not make the distances between the different fields of knowledge that apparent as when looking at Lenoardo (da Vinci not de Caprio) and Benjamin Franklin. We are impressed by the leap from painting to armory to architechture. From innovation to publishing to founding father to diplomacy. These leaps are perhaps performed by many more today, but these leaps are also hidden as the knowledge silos are much deeper. Our expertise is deeper and the “Leonardo contrasts” are not that visible.
Benjamin Franklin is known to have said “three may keep a secret when two of them are dead”. Regretfully it may seem it has become more and more rare for an individual to carry an idea all the way to a commercial success story. The reason being we are more and more heavily dependent on the collaboration and cooperation with different individuals. These individuals are today also to a greater extent “residents” to different entities or even their own organization, such as members of the – a term borrowed from the music industry describing employment for a specific time. Even more so do these organizations exist without attachments to traditional demographic attributes such as country, but more so to regions, markets, the internet, knowledge and risk.
Innovation and Competitive Advantage
We advocate a broader perspective on what is because it is necessary to capture the value of an enterprise. Innovation is not the domain of technology alone, but also occurs in customer experience, organizational development, solutions, platforms, value chains, brands, segmentation, and other areas that are often beyond the concept of invention. These innovations are often the ones that give companies a competitive advantage over other market players. Much innovation is taking place today due to changes in key industries. True innovation are novel activities which effect the companies speed, quality, flexibility, dependability or cost in their capability to deliver value to their customers. We call them value drivers. These value drivers can also be described in terms of revenue and cost. For example increased speed will give us this benefit over competitors. So will flexibility, cost and perhaps quality.
It is thus in a company's interest to have control over these competitive advantages. It is in the company's interest to know, monitor and protect important competitive advantages. Having control over important competitive advantages means that we really want authority or influence in our relationships with competitors and partners. We want to control our relationship with competitors and partners to the greatest possible extent. Therefore, we wish to build positions against competitors and partners in relation to these competitive advantages. Hence, we refer to the control of this relationship – the control position.
Today's business environment, where a products or services road to the market, goes through a much more complex value chain. Several markets actors are often involved, organized under different conditions, operating in new ways. This has a deep impact on the manner on how competitive advantages are controlled. From previously existing in one place they make now exist in different places, in different entities, held by people who may not even be employees on various media.
Control of Trade Secrets of Collaborative Environments
Control of competitive advantages implies that the competitive advantages have to be identified. We did above suggest that these can reside in all kinds of innovation in the entity. These competitive advantages do not only have to be identified as they are present today, but they should also be mapped as they will change in the future. The scarce resources that any entity has today motivates that expensive control should initially be created for sustainable competitive advantages and probably not all competitive advantages. After the sustainable competitive advantages have been identified and how that advantage will change in time we then have a qualified opportunity to address what type of control we should build through what control position. Control can exist in many variations such as intellectual property, controlling a relationship trough contract, trade secrets or sheer capability which no-one else has.
In the case of trade secrets it is difficult to collaborate with a third party if there is no transfer of information. Nobody wants to buy a pig in a poke. Information simply has to be transferred providing that we want to continue a discussion. A method of deciding on what information to transfer is the layering of information in different layer. Each layer is attributed a sense of value and perhaps a description of what type of data we attribute to each layer. This gives the information owner the opportunity to categorize what data potentially is a give away and what is absolutely not. Core trade secrets are perhaps technical “cause effect” relationships which do not come to the immediate awareness of the entity while focus is too much on technical solution which may not be as important. Having done this exercise will also aid in potential IP-decisions where third party protection, which IP provides, will override the disadvantage of being in the public domain, but giving bargaining power. Layering creates opportunities to prioritize, structure and attach commercial value to know-how. Layering also gives us a more structured possibility to foresee the nature of the terms for the result, foreground, sideground, etc. based upon the background. All because the value of the know-how is more apparent.
Define Categorize and Implement
“Three may keep a secret when two of them are dead”. To maintain and develop a competitive advantage does, however, demand many intelligent brains in an even more converging market in the future. The major challenge in building a system where competitive advantages are identified, where they in their turn are explored for knowledge and know-how, which can be transformed into trade secrets are not about identification and layering. Other factors become essential – the organization and the manner in which it is organized and led.
The legal consultants will normally be good at structuring the trade secrets when they are identified. They will, however, most probably not excel in the structures necessary to build the system necessary to ensure that competitive advantages are identified assessed from a value perspective now and in the future. The reason for this is the lawyer’s lack of awareness in the organizational structure in entities. As the competitive advantages can reside almost everywhere in the organization it is necessary for the entity the ensure that the organization is supported by cross functional processes. These must be effective and efficient and have a defined output. A capable organization itself where all the competencies reside and work in harmony is not likely today in the complex world.
Obviously, the processes have to be supported with well-defined crispy roles for the people operating in them and the tools to secure the efficient handling of the trade secrets. As legal consultants often operate in process free partnership and lack cross functional process training there is a high risk of lost value if the entity itself does not have this awareness.