Examining the Thin Line Between Obtaining Patents vs Protecting Trade Secrets

Organisations generally develop commercially viable inventions while developing new products and services. An important consideration is how to protect those inventions for their use. To protect such inventions, there are two ideal options available for an applicant: patents and trade secrets. Each of these options has its own specific requirements and advantages.

Although patents and trade secrets are generally considered alternative means of protecting inventions, they can work in tandem with each other in earlier stages of the innovation process. Thus, the best solution to protect an invention may rely on multiple forms of intellectual property protection. While a patent can protect inventions or innovations, a trade secret can also protect information like data, client lists, software, and other things that can be kept as a trade secret. Patents and trade secrets differ from each other primarily due to the nature of intellectual property rights protection each of them offers.

Patents

A patent protects inventions that include new and useful processes, machines, manufacturers, compositions of matter, and improvements. A patent entitles a patentee to exploit his invention and authorise other persons to exploit it for a limited period. The rights include the right to exclude others from making, selling, using, or importing the patented invention. However, in exchange for exclusive rights, the patentee must disclose their invention publicly.

Trade Secret

A trade secret is an information such as a formula, pattern, compilation, program, device, method, technique, or process that has an economic value due to its secret nature. The trade secret generally holds value to others who cannot obtain it legally and requires reasonable efforts to maintain its secrecy. The protection provided by a trade secret is very different from that provided by a patent. Some examples of trade secrets include recipes for Coca-Cola, Google’s search algorithm, KFC’s chicken recipe, among others.

Patents vs. Trade Secrets

As patents and trade secrets provide different types of protection, deciding between the two generally depends on the type of innovation a patentee is trying to protect. Several factors should be considered while choosing between the two and deciding to use them in combination. Some of the important factors are discussed here.

1. Nature of the Invention

To be eligible for patent protection, the invention must meet all legal requirements set by the country where the patentee plans to file the patent application. In most jurisdictions, novel, non-obvious/inventive, and useful processes, machines, articles of manufacture, and compositions of matter are patentable. If the invention does not meet any of these requirements, i.e., it cannot be protected by a patent, trade secret protection may be preferred.

2. Public Disclosure

If the workings of the invention need to be publicly discussed or shown, e.g., at a conference or for marketing purposes, a patent is the most appropriate way to protect the invention. On the other hand, if the invention or any information related to the invention needs to be kept confidential, a trade secret may be the best way to protect the invention or the information.

3. Can the Invention be reverse engineered?

One of the important factors in deciding whether an invention shall be protected through a patent or a trade secret is whether the invention is reverse-engineerable. Being reverse-engineerable means that someone having legal possession of the invention can develop the invention independently. In such a case, protecting the invention through a patent is always advisable. If a patent does not protect the invention but rather a trade secret, the other party may develop the invention and get it patented in such a scenario. Once patented, the other party may stop the original developer of the invention from practising, selling, or using the invention by filing an infringement suit.

4. Duration of Protection

Typically, the duration of protection through a patent is twenty years from the date of filing a patent application. After this, the patented technology becomes available in the public domain. Thus, if the invention to be protected has applicability that lasts longer than twenty years or if the invention may be sustainable in the market for only a short time, e.g. if the rate of technological change in the concerned industry is very high, trade secret protection may be preferred.

5. Cost Considerations

Another important factor to consider while deciding to protect an invention through a patent or a trade secret is the difference in costs involved in obtaining the two forms of protection. As is known, patent protection is more expensive than trade secret protection. Therefore, it is pertinent for a patentee to evaluate the financial resources available to them for intellectual property (IP) protection. For example, a startup may need to deliberate on IP protection options available against cash-flow considerations.

As seen above, patents and trade secrets are mutually exclusive in many aspects. However, a comprehensive IP strategy combining patents and trade secrets can be commercially beneficial for a business and bring greater value to a patentee or an organisation. The most successful IP strategies generally use a blend of both patents and trade secrets. For example, a patentee or an organisation can protect their ideas through trade secrets and keep working on them until they become a patentable invention. Thus, it is pertinent to carefully assess the advantages and limitations of each approach to decide the most effective strategy for safeguarding valuable innovations.