Trade Secrets

Trade secrets are an important element of intellectual property protection and can provide businesses and individuals with effective safeguarding of information that is not suitable for registration or patenting. They may serve as an alternative to patents, or be used alongside them, when the goal is to protect knowledge and sensitive information in a competitive market.

What qualifies as a trade secret?

A trade secret is information that:

• is not generally known or readily accessible within the relevant industry,
• has commercial value because it is kept secret, and
• has been subject to reasonable measures by its holder to maintain its secrecy.

Examples of such information may include manufacturing processes, recipes, marketing strategies, business relationships, software specifications, and other specialised solutions or data that provide a competitive advantage.

How are trade secrets protected?

Act No. 13/2020 on Trade Secrets provides legal protection against the unlawful acquisition, use, and disclosure of trade secrets. The legislation gives trade secret holders the right to take legal action before the courts if the protection is violated.

Unlike patents, trade secrets are not registered with public authorities. Protection relies on fulfilling the legal requirements and maintaining confidentiality through appropriate measures, such as non-disclosure agreements, access controls, and internal procedures.

Trade secret or patent – or both?

In many cases, it is more appropriate to apply for a patent, especially for a technical invention that meets the requirements of novelty and industrial applicability. However, it may be more advantageous to keep an invention secret as a trade secret, for example, if it is difficult to reverse-engineer from a finished product, or if the limited duration of patent protection would be a disadvantage.

In practice, these forms of protection often complement each other. A company may choose to patent part of a product while keeping other aspects confidential, such as production methods, operational know-how, or algorithms.

International protection

Trade secrets are protected under international agreements to which Iceland is a party, including the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement). Icelandic legislation on trade secrets is aligned with these commitments. Most countries apply similar core principles, though the enforcement mechanisms and legal procedures may differ.

What information is not considered a trade secret?

Skills and knowledge acquired by employees in the ordinary course of their work are not considered trade secrets. The same applies to information that is publicly known or easily accessible.

How can trade secrets be safeguarded?

Measures that businesses can implement to protect trade secrets include incorporating confidentiality clauses in employment contracts, entering into non-disclosure agreements with contractors and other collaborators, and limiting access to sensitive information so that only individuals with a legitimate need can view it.