Choosing Between Patent and Trade Secret Protection
When you become familiar with the laws surrounding patents and trade secrets, the question soon arises, “Which is better – patent protection or trade secret protection?” The answer depends not just on what you’re trying to safeguard, but can also hinge on its economic value and longevity, your financial objectives and the marketplace you’re in. Here’s how to take these issues into account as you evaluate your situation.
Differences Between Patents and Trade Secrets
What Can Be Protected
The first issue to consider is whether the intellectual property (”IP”) you want to protect qualifies for either patent or trade secret protection, or both or neither.
To qualify for utility patent protection, your IP must be legally patentable. The law allows patents for machines, methods, processes and compositions of matter, among other things. Specifically ruled out are ideas, concepts and scientific truths. Your IP must also be new, useful and non-obvious. Failing any of those requirements, you can’t obtain a utility patent. It may be possible to qualify for a design patent, though, if your IP is a new and non-obvious ornamental design applied to an article of manufacture.
For trade secret protection, your IP must be information that is valuable because it is not generally known, and you must take reasonable actions to prevent it from being revealed.
In general, if your IP is patentable it is also likely eligible for trade secret protection as an alternative. But if you choose to patent your discovery, you give up the ability to maintain it as a trade secret. When the patent is issued it becomes public information and the invention is no longer secret.
On the other hand, anything that cannot be legally patented may be protectable under trade secret laws if keeping it secret creates an economic advantage for its owner.
Term of Protection
A utility patent gives its owner the exclusive right to benefit from the invention for 20 years. Thereafter, anyone can make, sell or use it. Protection for a design patent issues for 14 years. During the protected period, the patent owner can legally enjoin anyone from using the invention without permission. Even someone who invents or discovers it completely on their own cannot legally use it once it’s been patented.
A trade secret, though, has no expiration date. The most famous trade secret example is Coca Cola, which has managed to keep its soft drink formula a trade secret for more than 120 years. Had they patented the formula, it would have entered the public domain 100 years ago, and perhaps ended their business.
A trade secret does lose its protected status, however, when it becomes generally or publicly known. A company whose trade secret is illegally disclosed may be able to claim damages from the offending party, but once out of the bag, the cat can never be put back in.
Trade secret protection also does not prevent anyone from developing the identical information completely on their own, and using it to their benefit or making it public.
Example
Einstein Corp. developed a mathematical formula for converting matter to energy, but it was not patentable because it is a scientific truth. Instead Einstein Corp. kept the formula as a trade secret and used it in the manufacture of nuclear power plants. No other company was able to manufacture such plants because they did not have the secret formula. Einstein Corp. enjoyed a decided economic advantage because of it, and took extraordinary efforts to keep the formula secret.
One day, Fermi Inc.’s engineers discovered Einstein’s secret formula working strictly in their own laboratories and without any contact with Einstein or its staff. Therefore, Fermi Inc. had every right to use the information for its own benefit. They elected to publish the formula. Once the formula became public, Einstein lost its rights to protect the formula as a trade secret, and consequently lost its economic advantage in the nuclear power plant industry.
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