Patents vs Trade Secrets: Which IP Approach is Right for You?

July 27, 2021

What do the New York Times Best Seller List, Big Mac special sauce, and WD-40 have in common? Aside from being household names, they are all also trade secrets. Intellectual property (IP) is protected in the US via a number of different mechanisms: copyright, trademarks, patents, and trade secrets. Sometimes choosing which of these mechanisms to use is easy. Copyright and trademark are used to protect very specific types of information such as software and brand names. But patents and trade secrets can protect the same information.  With a list of competing pros and cons for each, how do you decide which approach is right for you? Read on to learn about the pros, cons and considerations when looking into patents vs trade secrets. 

 

What are patents?  

Patent protection grants the owner of a patentable invention or discovery legal rights over it. Once a patent is approved, it essentially empowers the inventor to control how a product is made, distributed, and used. The registration process is costly and lengthy, and the protection lasts 20 years – so long as you pay the maintenance fees, which become increasingly expensive over time.  

Benefits of patent protection 

 The major benefit of a patent is that it offers considerable protection to holders from reverse engineering or independent invention, as well as exclusive control over how the invention or discovery is marketed and used, via license agreements. Patents may also be accepted by financial institutions as a form of security.  

Finally, patent protection remains intact even when the details of the invention or discovery are made public. This means the inventor (and anyone else) can publicly discuss the details of their invention without fear of losing their rights to it. In fact, inventors must publicly disclose these details to obtain patent protection. 

 

What are trade secrets?  

The US Patent and Trademark Office defines a trade secret as:  

  • Information that has either actual or potential independent economic value by virtue of not being generally known, and  
  • Has value to others who cannot legitimately obtain it; and  
  • Is subject to reasonable efforts to maintain its secrecy.   

Benefits of Trade Secrets 

The benefits of trade secrets essentially mirror the drawbacks of patents: trade secrets are inexpensive, not limited by the 20-year time limit (there is no time limit on trade secret protection), and relatively simple to implement.  

How does trade secret protection work? 

Trade secrets are usually protected by physical measures, as well as legal mechanisms, such as non-disclosure agreements, put in place to prevent the people who are privy to it from disclosing it. While trade secrets can last indefinitely, the protection is fragile. Once a trade secret is made public in the first instance, there is no way to prevent further or future infringements. This means that if someone reverse engineers or inadvertently discovers the IP, and they make it public, there is no recourse for you.  

As a result, companies must take the requirement to make reasonable efforts to maintain its secrecy quite seriously. The original, handwritten recipe for KFC’s 11 secret herbs and spices is reportedly stored in a safe in Kentucky, with a select few employees ever seeing it. To prevent the manufacturers from getting their hands on the recipe, two separate companies are contracted to each blend a portion of the mixture. These counterparts are then run through a computer processing system to standardize the world-famous blend.  

 

Patents vs Trade Secrets: Which is better? 

The answer to this will always depend on your circumstances. You need to intelligently weigh up the pros and cons, balancing the likelihood of your IP being reverse engineered or otherwise recreated or disclosed, with the cost of the patent registration process. It’s strongly advisable that you reach out to an experienced attorney to help you make your decision.  

CGL’s Intellectual Property team would love to help. Get in touch to book your first consultation! 

Disclaimer

The materials available at this website are for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem. Use of and access to this website or any of the e-mail links contained within the site do not create an attorney-client relationship between CGL and the user or browser. The opinions expressed at or through this site are the opinions of the individual author and may not reflect the opinions of the firm or any individual attorney.

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