Finding the right manufacturing partner can be a major milestone for a growing business, but sharing proprietary formulas, production processes and customer information without adequate safeguards can put valuable trade secrets at risk.

John Baranello explores these challenges in a Q&A with Intellectual Asset Management (IAM), titled “The Trade Secret ‘Landmine’ in the Rush to Scale Production.”

Baranello examines the risks associated with co-packaging and third-party manufacturing, where businesses must often share their proprietary information to meet growing demand. Using the example of a company outsourcing production of its signature chocolate chip cookie, he illustrates how easily a business can expose not only its secret recipe, but also its customer information and other commercially sensitive data.

“One of the biggest landmines is excitement,” Baranello cautions. He explains that companies eager to bring a successful product to market may overlook the need to establish clear confidentiality protections before sharing information with prospective manufacturing partners. As he emphasizes, “A handshake and telling somebody, ‘This is secret, please be careful with it,’ is not what you want to be relying on later.”

The discussion also addresses how artificial intelligence is changing the landscape of trade secret protection. AI tools can increasingly compile and analyze publicly available information that once required significant time, money and resources to assemble. As a result, businesses may face greater challenges demonstrating that their proprietary information is not readily ascertainable through lawful means.

Baranello offers practical guidance on protecting trade secrets before information changes hands, including limiting access to sensitive materials, using specifically tailored nondisclosure agreements, clearly identifying confidential information and documenting how it is shared and protected. He also discusses the importance of taking prompt action when proprietary information is being used to develop a competing product and how proactive safeguards can strengthen a company's position in litigation.