“Shark Tank” Shouldn’t Forget About Trade Secrets

I recently started watching Shark Tank on CNBC. For those who haven’t seen it, the concept is simple: entrepreneurs pitch “sharks”—prominent wealthy investors like Mark Cuban—in an effort to win funding, usually in exchange for equity in the company.

In the episodes I’ve seen thus far, many of the entrepreneurs are pitching companies that sell a single product. Inevitably, the sharks ask whether the company holds a patent. For those products that can be reverse engineered, that’s obviously a critical question. But I’ve noticed that the sharks don’t ask about trade secrets.

For example, I watched one episode where the entrepreneurs sold a disposable, single-use wipe that was designed to clean heavy grease. It was similar to the wet naps you get at a BBQ restaurant. They pitched it as a product to keep in your car. One of the sharks, “Mr. Wonderful,” wanted to know if they had a patent. When they said they did not, Mr. Wonderful decided not to invest.

Even without a patent, this company could have valuable trade secrets. For example, the wipes used concentrated citrus oil. It’s entirely possible that the company’s oil formula could be protected as a trade secret.

Companies need to be aware whether their proprietary information can qualify as a trade secret. That way, the company can take the actions necessary to protect that information. And when trying to raise funding, those trade secrets can be featured, alongside (or in lieu of) the company’s patents. Of course, make sure that the potential investors sign a nondisclosure agreement before providing them with nonpublic details about the trade secrets.

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