Last month, KFC Corp. filed suit after a couple reported finding a fried chicken recipe in a Shelby County home formerly occupied by Col. Harland Sanders. The suit was dropped when KFC said the document did not contain the "11 herbs and spices" recipe it uses.
In addition to bringing some nationwide publicity to KFC and the Shelby County couple who found the document, the controversy raises questions about trade secrets law.
How does KFC protect its fried chicken recipe? Why did it choose protection as a trade secret as opposed to a patented invention or other form of intellectual property? Why would KFC have acted so aggressively in the matter?
The answers have lessons for all business owners, even those without highly touted secrets such as the 11 herbs and spices.
In fact, nearly every business has items that could be protected as trade secrets if the proper steps are followed.
A trade secret is any information that can be used in the operation of a business or other enterprise and that is sufficiently valuable and secret to afford economic advantage over others.
As in the case of the recipe, a trade secret can relate to technical matters, such as the composition or design of a product, software algorithms, a method of manufacture or the know-how necessary to perform a particular operation or service.
A trade secret also can relate to more generally applicable aspects of business operations, such as pricing and marketing techniques or lists of customers and their requirements. Nonprofit organizations can claim lists of prospective members or donors as trade secrets.
Information that is generally known or readily ascertainable is not protectable as a trade secret.
Even hard-to-learn information can lose its protected status if its owner does not take proper precautions to maintain its secrecy.
The law requires secrecy efforts that are reasonable under the circumstances.
KFC's position that its recipe is locked in a company safe and known to only a handful of sworn-to-secrecy employees is useful in marketing the uniqueness of its chicken, but it also is a helpful legal step to protect the recipe's trade secret status.
Owners of trade secrets should limit access to physical facilities where the secrets can be seen, limit disclosure based upon a "need to know" basis and take other actions to make recipients of the secrets aware of their confidential nature, including confidentiality agreements and restrictive documentary legends such as "Confidential" and "Do Not Copy."
Even if trade secrets are properly protected, their owners may only prevent others from improperly acquiring, disclosing or using them. Some means of acquiring secrets -- theft, fraud, interception of communications or inducing or participating in someone else's breach of confidence -- are obviously improper.
Using or disclosing a secret obtained in confidence (including from an employer), or from someone known to have acquired or possessed it improperly or confidentially, also is actionable.
KFC's theory in the Shelby County case may have been that the 11 herbs and spices recipe shouldn't have been in the house because Col. Sanders had sold the recipe to KFC.
You can even be successfully sued for using or disclosing a trade secret that you acquired through an accident or mistake, unless the acquisition was due to the owner's failure to take reasonable secrecy precautions.
Conspicuously absent from the list of improper means of acquiring a secret is independently discovering it, including by reverse engineering. Trade secret law will not prevent you from buying a bucket of chicken and testing it in an attempt to determine the 11 herbs and spices and their exact ratios.
In contrast to the owner of a trade secret, the holder of a patent enjoys a general right to exclude others from making, using or selling the patented invention, enforceable even against persons relying on independent discovery.
Why then would a company choose to protect information under trade secret law instead of a patent filing?
Some trade secrets, such as business plans and information, are simply not patentable. Others are better suited to trade secret protection, because a trade secret can be protected in perpetuity, or for as long as the owner is able to maintain the secrecy.
A patent, on the other hand, expires 20 years after the patent application is filed.
Trade secret protection has real advantages, particularly for information such as the KFC recipe, which is difficult or impossible to independently discover.
But it all depends on secrecy -- and that explains why KFC went to court quickly in Shelby County last month.
Bill Hollander is a partner at Wyatt, Tarrant & Combs LLP, chairman of Wyatt's Intellectual Property and Technology Licensing Group and a member of its Technology and Venture Capital Team. He can be contacted at whollander@wyattfirm.com.