United States: Don't Spill Your Trade Secrets: Protecting Your Competitive Advantage In The Food And Beverage Industry (Part 1 Of 2)

In the race to get new products to market, food and beverage businesses sometimes neglect their critically important intangible assets — their valuable trade secrets. Through advance planning and diligence, businesses in that industry can avoid losing the competitive advantage afforded to them by this proprietary information.

Famous Food & Beverage Trade Secrets. Some food and beverage companies have been very successful in protecting their trade secrets and capitalizing on them. One of the most valuable trade secrets in history is the formula for Coca-Cola. The drink was invented in 1886 and the recipe was passed down by word of mouth until 1919, when it was first written down. At that time, a group of investors took out a loan to purchase the company and the formula was provided as collateral. The written formula was locked in a bank until it was moved into a purpose-built vault, with a palm scanner, a numerical code pad and enormous steel door. According to Coca-Cola, only two senior executives, bound by non-disclosure agreements (NDAs), know the formula at any given time. Neither these executives' names nor positions have ever been released. Over the years, some have claimed to have cracked the original formula. However, none have been confirmed as the official formula and Coca-Cola's formula remains a well-guarded and valued trade secret.

Another example is Kentucky Fried Chicken's (KFC's) original recipe, developed by its founder Colonel Harlan Sanders. KFC's original recipe is locked in a 770-pound high-tech safe, within a vault with two feet thick concrete walls. Additionally, portions of the recipe are locked away in safe deposit boxes at undisclosed locations as backup. Further, KFC outsources production of the seasoning to two different suppliers, subject to NDAs, with each supplier only having access to and producing half of the recipe. The two halves are then combined together by KFC to create the recipe. Its contents are so well guarded that only a few undisclosed employees actually know the ingredients. In other words, the recipe is not disclosed in its entirety to anyone not employed by KFC. KFC acknowledges that it periodically hears from people who claim they have a copy of the original recipe. Most famously, Sanders' nephew, Joe Ledington, claimed he was in possession of an old scrapbook that had belonged to Ledington's aunt Claudia, the Colonel's second wife. Ledington initially claimed the scrapbook contained the recipe. Later, when he was contacted to confirm the story, Ledington said he couldn't say "for sure" whether this was the recipe. However, the secret was out, and multiple outlets, who had cooked the recipe, declared it to be the real thing. Thus, the original recipe may have lost its status as a trade secret.

McDonald's famous special sauce is an example of a recipe that no longer enjoys trade secret status. Originally, McDonald's protected its special sauce recipe so vigorously that McDonald's actually ended up losing track of the original recipe. This forced McDonald's to change the recipe for the special sauce for a few years. McDonald's eventually recovered the recipe from an outside company that had produced the special sauce for McDonald's years earlier. However, when McDonald's posted a tutorial video on YouTube showing consumers how McDonald's makes its hamburgers (including how to make the special sauce), the special sauce lost its trade secret protection. Once a trade secret is lost, you cannot get it back. It is akin to the notion of trying to "get a cat back in the bag" or "unringing a bell".

Trade Secret: Yes or No? Businesses in the food and beverage industry should be vigilant in protecting their trade secrets. The first step in that process is understanding what a trade secret is. Although trade secret law varies across jurisdictions, generally a trade secret is (1) information (2) that derives economic value from being kept secret and (3) is the subject of reasonable efforts to maintains its secrecy. In other words, it is secret information that gives a business a competitive advantage, which competitors would love to get their hands on.

If the public has access to the information, it is not a trade secret. Examples of such non-trade secret information include: specially packaging a beverage in a way that customers will always recognize that a particular business is the product's source; or ingredients identified on packaging.

Also, information that is readily ascertainable is not trade secret (e.g., your product's ingredients are not a trade secret if your competitor can take your product to a lab and easily determine the ingredients). On the other hand, when information is theoretically, but not readily ascertainable, it may potentially constitute a trade secret. For example, if a formula could be discovered in theory, but it would take years and be very expensive, or require improper means (such as industrial espionage or inducing breach of a NDA), that formula still may be protectible as a trade secret.

Just because some portion of the information is readily ascertainable, other related information may be protectible as a trade secret. For example, while a formula may be composed of ingredients that are readily ascertainable, the ingredients proportions and the manufacturing process could still be trade secrets.

Although there are no categories of information that are automatically considered trade secrets, there are categories that could potentially be trade secrets (if their secrecy gives the holder a competitive advantage and the holder protects their secrecy). For the Food and Beverage Industry the following categories are particularly important areas in potentially gaining a competitive advantage:

  1. Product formulas/recipes to the extent that the information is not readily ascertainable. See the above discussion of famous trade secret recipes in the food and beverage industry.
  2. Manufacturing/processing methods and techniques. Some hypothetical examples include: the process to make a food product have a particular texture; the method to reflect photographic images on a cake; the technique to produce a new color pigment that is digestible; or the process for making a chemically produced flavor that simulates a natural flavor or lasts longer; or a method to de-bone fish more quickly and accurately.
  3. Technology used in a business even it does not relate to the preparation of the food or beverage (e.g., hypothetical examples include: technology for processing credit cards; technology underlying a food delivery app). This category is especially important given that the Food and Beverage industry (like other industries) has been become increasingly driven by technology. Even if an invention is not subject to patent protection, it may be protectible as a trade secret and the company may be benefit by protecting it as a trade secret.
  4. Advertising/marketing/business plans and strategies and research. Strategies and plans may not be trade secrets once publicly implemented (e.g., a marketing campaign becomes public upon implementation). However, related behind-the-scenes plans, strategies, and research can be trade secrets (e.g., although a competitor may steal your marketing campaign once it is implemented, the "head start" you obtain by keeping it under wraps until it is launched may give you a competitive advantage).
  5. Concepts and designs (e.g., a future design for your packaging, store or restaurant or comparable great ideas such as serving art-inspired desserts in a café in an art museum). While concepts and designs lose trade secret status once made public, they can enjoy trade secret status before then – giving their holders a "head start" competitive advantage in the marketplace.
  6. Vendors/Suppliers and Customer Lists. Many businesses compile information about their important vendors or suppliers and customers. This data may take many years and a significant amount of effort and expense to create.
  7. Pricing/cost/profit information and payment terms (financial data). Businesses often jealously guard their financial data for a variety of reasons. For example, if a competitor knew what price you were commanding from an important customer, the competitor might use knowledge of your price to cut its own price to lure the customer away.

Additionally, keep in mind that even negative research (i.e., what does not work) can be an important trade secret. Failing to protect the secrecy of your failed efforts could allow competitors to piggy-back off your hard work (over years and at tremendous expense), and avoid going down the same wrong path based on your experience. Those savings could permit your competitor to charge less and, in turn, draw your customers away.

In our next post, we'll discuss how to protect your secrets.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
22 Oct 2019, Roundtable, Los Angeles, United States

Please join us for Sheppard Mullin's Ethics and Eggs: A Breakfast Roundtable to Discuss Ethics Issues in IP Matters.

23 Oct 2019, Other, Dallas, United States

Marketing Wants To Do What? Sweepstakes, Influencers, Loyalty, and Other Advertising and Promotional Fun

25 Oct 2019, Webinar, Los Angeles, United States

Matthew Bonovich will be a speaker at this webinar.

State and local governments continue to incentivize renewable energy and battery storage, causing an increase in mergers and acquisitions among producers and specialized renewables.

Similar Articles
Relevancy Powered by MondaqAI
Lewis Brisbois Bisgaard & Smith LLP
In association with
Practice Guides
by Mondaq Advice Centers
Relevancy Powered by MondaqAI
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Lewis Brisbois Bisgaard & Smith LLP
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions