Savory Cooking Sauces, Inc, a U.S. business firm, makes and sells distinctively flavored cooking sauces. Although the recipes are secret, the ingredients could be revealed and the sauces could be reconstructed with diligent efforts. What can Savory do to prevent its products from being "decoded" and pirated abroad?

Answer 1

One possibility is that Savory Cooking Sauces, or any U.S. firm, or any domestic firm in any nation, can license its recipe, formula, product, or process to a foreign company to avoid the theft of the trade secret. The foreign firm would obtain the right to make and sell the product according to the recipe (or formula, or right to use the process, or other trade secret) and agree to keep the information confidential and to pay royalties to the licensing firm. The royalties might be based on so many cents per unit made or a percentage of profits from units sold in a particular geographic territory. Licensing can benefit both parties to the deal. A firm that receives the license can take advantage of an established reputation. The firm that grants the license can receive income from the sale of the license or the sales of its products and may enhance its reputation through this marketing. Once a firm's products are more widely known globally, the firm may experience an increased demand for other products that it makes or sells.