Definition:

Location of Confidential Information within a Company’s Asset Base

Confidential Information will be taken to mean (1) information that is not known to the public, but (2) does not meet the requirements of a trade secret.

Useful model for visualizing Confidential Information is shown in the Intellectual Capital figure. In this figure Confidential Information is the (1) Intellectual Assets outside of Intellectual Property that is being considered, and (2) they are a subset of these assets that are not known outside of the entity holding them.

Business use of Confidential Information:

Tangible-Intangible Model of a Company

A useful model developed by a group called the Gathering is helpful to use when incorporating into strategic business plans a better utilization of the business’ Complementary Assets, Intellectual Assets or Intellectual Capital. In the “Tangible-Intangible Model of a Company” figure we see a model of a company as viewed from an intellectual property viewpoint.

Models of business entities come in many sizes and shapes. Sometimes we think that a corporation is its corporate headquarters and buildings that it owns around the world. Other times we look at a company in view of its organization chart with the CEO at the top of a tree. Other times we look at corporation through an accountant’s eyes and look at the corporation from a cash flow and balance sheet standpoint. The model of “Tangible-Intangible Model of a Company” figure is no different. It is just one other view of a corporation.

In this model we see that the structural capital comprises the generic assets of the company which are non-distinctive compared to other competitor companies. These are typically plants, property, and equipment, and access to investment that any and all companies have. It is not something that makes one company different from another. Resting on the base of structural capital we see to the right Complementary Business Assets. These are the differentiated assets that make one company and industry different from one another. It might be the quality of the sales force. It might be how the sales force was trained and the type of relationships they build. Differentiation can also be based on the distribution capabilities of a company. One company may be using direct sales, another company internet sales, and a third going through large wholesalers. Factory facilities are another common point of differentiation. One company may be opening its own plant and putting together its own processes in a unique way to deliver value to customers. Another company may be outsourcing its manufacturing entirely. Another form of differentiation has to do with the type of standards that exist within an industry. To the extent a company can influence government or industry standards, i.e. the FAA in the case U.S. airplane regulations or Underwriters Laboratories in the case of electrical components, these standards and having the standards closely aligned to a company’s product design becomes another source of differentiation and competitiveness.

The third asset class of a company, and the one that is most unique and hardest to copy, is Intellectual Capital. Sub-classes of Intellectual Capital are Human Capital and Intellectual Assets. These assets are comprised of patents, copyrights, trade secrets, trademarks, and know-how (undisclosed confidential information).  Thus Confidential Information, which although it is not legally protected as an asset itself, is an Intellectual Asset that is nonetheless unique and very difficult to transfer from one corporation to another.

From a business perspective, what’s important is that when a company is successful, it has taken the unique Intellectual Capital Assets that it has, and created a business model, or way of doing business, that takes maximum advantage of the differentiated business assets it possesses. For example, the way it employs its Human Capital matches the way in which the sales force is trained and operates. The patents that it has supports the way in which manufacturing is done. Trademarks support the branding that the sales force is known for. The Confidential Information is the glue (the work processes) which hold the business model together.  Without this largely unseen and often undocumented knowledge a corporation is rarely profitable.