Choosing Between Patent and Trade Secret Protection
(Cont’d)
Cost to Acquire and Defend
Obtaining a utility patent can be a time consuming and expensive proposition requiring one to three years and $5,000 to $30,000 or more. Utility patents must also be periodically renewed at additional cost.
A patent lawsuit can also be extremely expensive. If you sue an infringer who wants to attack your patent’s validity, expenses can get into six figures.
Maintaining a trade secret, on the other hand, involves some marginal added operating expenses for creating, disseminating, and enforcing confidentiality policies and for managing non-disclosure agreements. Trade secret litigations proceed in state court and are much less complex and typically much less expensive than patent cases.
Considerations for Deciding
How Easy Is Your IP to Replicate?
If you’ve invented something in a very active and competitive industry, the likelihood is high that someone else is going to come up with the same invention soon. If you try to protect your invention as a trade secret, you have no protection against others later inventing the same thing on their own.
If your invention is something you sell and it can be reverse engineered easily, trade secret protection won’t prevent others from taking it apart to figure out your secret and use it in their products.
In either of these cases, a patent provides protection from subsequent discovery or use under any circumstances.
As a counter example, assume you’ve created a machine and process for manufacturing artificial foam for beer. Consider these points:
- What you sell is the suds, and no one can discover from the suds how they’re made so it can’t be reverse engineered.
- Also, it took quite a few lucky accidents to discover the process so it’s not highly likely that someone else would be equally as lucky and discover the method.
- Finally, there is not a lot of financial incentive in your industry for someone else to invest the money necessary to try to re-invent your discovery.
In these circumstances, you might be justified in avoiding the effort and expense of a patent by keeping the machine and process a trade secret.
How Long Will Your IP Be Valuable?
If your invention is likely to have a short life, obtaining a patent may not pay off financially. For example, assume a design for a cell phone antenna is expected to become completely unmarketable in two years because of the rapid pace of technological evolution in the industry.
Even though keeping the antenna design a trade secret won’t protect you from reverse engineers, by the time you start delivering your product to customers, you will have sewn up a sizable percentage of the market. Competitors attempting to reverse engineer it still have manufacturing hurdles and probably can’t get a product to market until after the market peaks.
In this example, the 20-year monopoly the patent provides has no value for a product that is defunct in two years. Why spend the money and effort?
For a different example, consider our beer suds manufacturer. In 20 years, beer suds are probably still going to be a viable commodity. Having a monopoly on that business by virtue of a trade secret could still be very valuable. If the manufacturer chooses to obtain a patent, however, the patented process becomes public knowledge and free for anyone to use after 20 years, which could have a very negative effect on the manufacturer’s livelihood. Yet one more reason in this case to consider trade secret over patent protection.
Related Articles
- How to Protect Trade Secrets
- Guide to Non-Disclosure Agreements
- Trade Secrets - Fast FAQs
- Patents - Fast FAQs
- How to Patent Your Invention
- Key Provisions of the Uniform Trade Secrets Act
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