Every business carries information it would not want a competitor to see: the recipe, the client list, the pricing formula, the code behind the product. Australian law protects that material through two very different mechanisms, and they pull in opposite directions. The first is the law of confidential information, which binds the people who receive a secret. The second is the patent system, which turns the secret into a registered right that is published for the world to read. Choosing between them is one of the most consequential decisions an innovating business makes, and the choice is effectively one-way. This article explains how each route works, what it protects, where it fails, and the point at which a lawyer or patent attorney needs to be involved.
What counts as a trade secret
Australian legislation does not define the term trade secret. Instead, the courts protect a broader category called confidential information, and a trade secret is the commercially valuable part of it. The classic test comes from the English decision in Coco v A N Clark (Engineers) Ltd [1969] RPC 41, which Australian courts have applied for decades. It has three limbs:
- Quality of confidence: the information must not be public property or public knowledge. It must be more than a simple application of published information or standard background knowledge.
- Circumstances of confidence: the information must have been disclosed in circumstances that import an obligation of confidence, such as a negotiation, an employment relationship, or an agreement.
- Unauthorised use: there must be unauthorised use or disclosure of the information to the detriment of the person who communicated it.
A trade secret sits inside that framework. It is a formula, recipe, process, customer list, source code, pricing model or business method that is not generally known, that has commercial value precisely because it is not known, and that the owner has made reasonable efforts to keep secret. The label does not matter as much as the underlying question: at the time of the alleged misuse, was the information confidential?
Who is involved
A handful of actors carry the whole scheme:
- The business: owns the secret and decides whether to keep it confidential or register it as a patent.
- Employees and contractors: the biggest leak risk in practice, because they see the secret daily and can take it to a competitor when they leave.
- Partners, suppliers and customers: see the secret under a confidentiality agreement, or simply because a working relationship requires it.
- Competitors: owe no general duty to respect a secret they did not receive in confidence. They can independently develop or reverse-engineer a product unless a patent stops them.
- IP Australia: the federal agency that examines and grants patents under the Patents Act 1990 (Cth) (the Act).
- The courts: enforce confidentiality obligations and patents when a dispute reaches litigation.
Route one: confidential information
For most trade secrets, the primary protection is the law of confidential information. It needs no registration, no fees and no government involvement. It can start the moment a secret is disclosed and can last indefinitely, but it only binds people who owed a duty of confidence.
How the duty of confidence arises
The duty comes from one of three sources. The most common is contract: a non-disclosure agreement, an employment agreement, or a clause in a supply or partnership deed that says the other party will not use or disclose specified information. The second is equity: even with no signed document, a court will imply an obligation of confidence where information is disclosed in a context that clearly marks it as secret, such as a commercial negotiation, a board discussion, or a pitch to an investor. The third is the law of employment: employees owe their employer an implied duty of fidelity while employed, and they remain bound not to use or disclose trade secrets after they leave. A departing employee may take their general skill and knowledge, but not the employer's trade secrets.
What happens when it is breached
If someone who owes a duty uses or discloses the secret without authority, the owner can sue. The courts can order an injunction to stop the use or disclosure continuing, damages to compensate for loss, an account of profits so the wrongdoer hands over what they gained, and delivery up or destruction of infringing materials. Australian courts also apply the springboard doctrine, which stops a former employee or business partner from using confidential information to get an unfair head start in the market, even after the information itself would no longer be secret.
The limitation is that enforcement is personal. A confidentiality obligation binds the people who received the information in confidence and those who took it from them knowing it was confidential. It does not bind a competitor who independently worked out the same idea, or who bought a product and reverse-engineered it.
Where confidentiality runs out
Confidentiality ends when the information stops being secret. Once information is in the public domain, the duty cannot hold it back. The High Court made this point in Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70. Maggbury had developed a foldaway ironing board and made Hafele sign a deed of confidentiality before showing it the prototypes. Maggbury then filed a patent application, and the invention was published in the patent specification. When Hafele later produced a similar product, Maggbury sued on the deed. The High Court held the confidentiality obligation could not protect information that had been made publicly available through the patent application, and that a perpetual restraint of that kind was unenforceable as a restraint of trade. The case is a standing warning: a confidentiality agreement cannot resurrect secrecy once information has been published.
Route two: a patent
The other way to protect a trade secret is to stop treating it as a secret and register it as a patent under the Patents Act 1990 (Cth).
What a patent actually gives you
A granted patent gives the owner the exclusive right to exploit the invention: to make, use, sell and licence it, and to stop anyone else from doing so, including someone who independently came up with the same idea. That is a real advantage over confidentiality, which only binds the people who received the information.
Not every trade secret can be patented. Under s 18 of the Act, an invention is only patentable if it is a manner of manufacture, is novel when compared with the prior art, involves an inventive step, is useful, and has not been secretly used before the priority date. A customer list or a pricing strategy will never qualify. A new process, device or chemical formula might. The term of a standard patent is 20 years from the date of the patent under s 67 of the Act.
The price of a patent: publication
The cost of a patent is that your secret becomes public. Under ss 54 and 55 of the Act, the complete specification is opened to public inspection, usually around 18 months after the priority date, or earlier if the applicant asks. Anyone can then read exactly what the invention is and how it works. Once that happens, the information is no longer confidential, and the protection of the law of confidential information is gone, as Maggbury demonstrated. When the patent expires after 20 years, competitors are free to use the invention.
Innovation patents are no longer available
Until recently there was a second-tier option. An innovation patent used a lower threshold, an innovative step rather than an inventive step, was granted quickly after a formalities check, and lasted eight years under s 68 of the Act. It was abolished by the Intellectual Property Laws Amendment (Productivity Commission Response Part 2 and Other Measures) Act 2020 (Cth). IP Australia's guidance confirms that new innovation patent applications could not be filed after 25 August 2021, and the remaining innovation patents will all have lapsed by 26 August 2029. A business filing for patent protection today is applying for a standard patent or nothing.
The window between filing and grant
A patent application is published long before the patent is granted, and that creates a vulnerable period. Once the specification is open to public inspection, s 57 of the Act gives the applicant the same rights as if the patent had been granted on the publication date, but with two qualifications: the applicant cannot start proceedings unless and until a patent is actually granted, and any claim for past use is limited to reasonable remuneration rather than the full remedies of an infringement action. IP Australia advises that the process takes at least six months, and examination commonly takes longer. In that window a competitor can read the published specification and copy the invention, a former employee with knowledge of the secret can walk out the door, and the owner's only practical response may be to wait for grant and then sue.
Choosing between secrecy and a patent
Because the two routes are mutually exclusive, the decision needs to be made deliberately, and before the first public disclosure. The factors a court would not weigh, but a business should, are:
- Reverse-engineering risk: if a competitor can work out the invention from the product on the shelf, confidentiality gives little real protection and a patent may be the only way to stop copying.
- How long the value lasts: confidentiality can last indefinitely while the secret holds. A patent is capped at 20 years, after which anyone can use the invention.
- Who needs to know: the more employees, partners and suppliers who see the secret, the higher the leak risk, and the more attractive a registered right becomes.
- Patentability: many trade secrets, such as client lists and pricing models, can never meet s 18, so confidentiality is the only route available for them.
- Timing: applying for a patent publishes the secret, so it ends the confidentiality option. Disclosing the invention publicly before filing can destroy novelty and end the patent option. Selling to customers, showing it to investors without an agreement, or letting an employee take it to a rival can each forfeit one or both routes before anyone has thought about it.
Where professional help fits
The point at which professional help matters most is before the first disclosure, not after a dispute starts. A lawyer should review or draft the confidentiality agreements, employment clauses and restraint provisions, because over-broad or perpetual restraints risk being unenforceable, as Maggbury showed. A patent attorney should assess whether the invention is patentable, search the prior art, and manage the filing if the patent route is chosen. If a secret has already leaked, a lawyer can advise on the strength of the breach of confidence claim, the remedies available, and whether urgent injunctive relief is worth pursuing. For a business weighing the two routes, a joint assessment by a lawyer and a patent attorney before commercialisation is the cheapest insurance available, because the alternatives are losing the right to patent, or watching a former employee hand the client list to a competitor.
The decision that can't be unmade
The irreversible moment in all of this is the first disclosure. Tell a partner, an employee, a customer, or the patent office, and one of the two routes is usually gone. Patenting publishes the secret permanently. Selling publicly before filing can destroy novelty and forfeit the patent option. Letting secrets circulate without agreements can forfeit the confidentiality option. Every protection in this article assumes the decision was made in time. A short consultation to map which secrets matter and which route fits them is far less expensive than discovering, after a leak, that both doors were already closed.