What is Proprietary Information?

Definition: Propriety information is highly sensitive information owned by an institution or individual that must not be disclosed to the public. Due to its importance this information is considered a property.

What Does Proprietary Information Mean?

Proprietary information refers to highly valuable information produced by an individual or a company that, given its nature, can’t be transferred or displayed publicly. This information is considered to be an asset and from a business perspective it includes trade secrets, details about manufacturing processes, product formulas, business models, technologies, research and development updates, or any other business-related information that has value for the company.

The way this information is managed is crucial and there are legal consequences for handling it with negligence. Most companies employ proper safeguards to reduce the number of people exposed to certain information and they also draft non-disclosure agreements that must be signed by individuals that come in contact with this type of information to establish a legal obligation to protect the sensitive material. Unauthorized disclosure of proprietary information will have negative consequences like lawsuits and fines but it will, nevertheless, cause an economic loss for the owner.

Example

A software company called Smart Apps LLC is currently designing a mobile app that helps women pick their daily outfit. The company has been developing this idea for more than 2 years and they’ve worked hard to gather all data required and to write the necessary algorithm for the app to pick the outfit properly.

All its employees signed a non-disclosure agreement that prohibits any exchange of information with third parties about the project details.

The company considers the app idea, the business model and the algorithm highly sensitive and valuable information that must not be released to the public. This information constitutes one of the main assets the company possesses and from a legal standpoint it is considered proprietary information.