What Is Proprietary Data? Trade Secrets Explained

micheael estrada

The rise of corporate and industrial espionage in the last decade has driven the term "proprietary data" to the forefront of public consciousness. While the vast majority of people have heard of and understand that the theft of proprietary data is harmful to the victim, very few people understand what constitutes proprietary data.

Proprietary data/information owned and or held by an organization or an individual and accords the owner of the data/information a competitive advantage or is used to derive a profit or has the potential to generate a profit.

What Does Proprietary Mean?

Propriety refers to ownership and describes all the rights the owner of the item or property can exercise. With regards to information, proprietary data is information that the ownership entity restricts its distribution.

The term proprietary denotes data created by organizations or individuals for confidential use within the organization or shared or sold with a third-party organization under a contractual agreement. The information could take numerous forms, including general information, formulas, statistics, documentation, etc.

How Does The Law Define Proprietary?

In law, The Economic Espionage Act of 1996 (EEA) protects proprietary information in Section 1838, paragraph (3), which deals with trade secrets. This section not only describes and defines what a trade secret is, but it also defines elements that go into making information proprietary. Under the EEA, information is considered trade secrets (proprietary data) if:

  • the owners had taken reasons steps and measures to keep the data secret, and,
  • when the information derives actual or potential value from being known to the public but not readily ascertainable through proper means.

When information meets this critetia, it is considered a trade secret and, therefore, protected under the Economic Espionage Act.

What Makes Something Proprietary?

In the legal realm, proprietary describes an entity's ownership of exclusive title to an item in their own right. The term proprietary indicates that the entity that owns the thing has the right to exercise control and dominion over a product. Proprietary products are produced, used, marketed, or sold under exclusive legal rights of the maker/producer or inventor.

In this regard, proprietary data is data created, used, and/ or sold under exclusive rights. More often, such information is often sensitive information that a company owns. Crucially, this information is essential to the entity as it gives the company a competitive advantage over its competition. While many companies do not conduct appraisals of such information to attach a monetary value to the data, proprietary data is nonetheless valuable to the rights holder.

Proprietary data can be any financial, scientific, business, technical, engineering, or economic information. Moreover, the data can take any form, including designs, plans, patterns, formulas, methods, prototypes, program devices, techniques, procedures, processes, codes, or compilations that can be in tangible or intangible forms.

Just as copywriters protect both published and unpublished works of authorship, and patents secure the patent owner's rights exclusive rights to use the invention in question, the EEA provides individuals and companies with the framework to protect their secret data.

Examples of Proprietary Data

There is a wide range of proprietary data that comes in different forms. Examples of proprietary data include:

  1. Any data subject to copyrights such as music, movies, etc.
  2. Data sold or given subjected to a licensing agreement that restricts or prohibits the distribution.
  3. Data sealed by court orders.
  4. Data considered crucial and relevant to national security.
  5. Data collected as a collaborative effort with an entity that limits the distribution of the information and much more.
  6. In a nutshell, any data whose proprietary owner restricts its distribution is considered proprietary data.

Is Proprietary Data Sensitive Information?

Sensitive data is any data that can yield adverse effects on the economy or have enormous economic implications when released to outside parties or the public. Examples of sensitive data include personal data that a company holds. Another example of sensitive data is mineral resources tests and test results that can have significant economic implications. When the information is only available to the data holder, this data can be classified as sensitive data.

Proprietary Data Strategies

With the increased importance attached to data in the modern world, companies have been developing data strategies. The strategies define how companies acquire the data, how they curate the data, how they add value to the data, and, crucially, how they generate value from the proprietary data.

Final Thoughts

As industries become more data-intensive and data-centric, the value of proprietary data has increased. Equally, more and more data will be classified as proprietary data due to the network effect whereby generating and using proprietary data will naturally lead to more data generation.

In many regards, the success of many companies today depends on deriving proprietary data and using the information therein to attain a competitive advantage. Consequently, businesses of all sizes must understand what proprietary data is and appreciate the value of such information.

Michael Estrada
Michael is a retired IT professional with 25 years of experience. He created Ruby Testing in order to serve readers with actionable, informed answers to their computer questions.
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