Trade Secrets – To Patent or Not to Patent?

With the development of any new technology and its eventual commercialization, formulation of an appropriate IP Strategy for protection and maximization of the return on R&D investment is a core business consideration.

Typically, with the advent of a new technology, particularly where it is a process, a conundrum can present itself – to patent the IP of the technology, or maintain it as a trade secret?

Patents vs Trade Secrets: the Key Difference…

Patents and trade secrets both offer a means for keeping the IP of a technology under the exclusive control of a company. However, they differ in one key way.

Put simply a patent is a statutory monopoly right offered by the government which grants the patentee the exclusive right to manufacture and use the technology, in return for the patentee fully disclosing to the public details of its technology and how it can be implemented.

A trade secret on the other hand necessarily requires the company to ensure it does not disclose details of its technology to the public so that competitors cannot make use of it.

There are also other notable differences between the two forms of protection. For example, a patent only has a term of 20 years before the monopoly right expires, at which point any one can make use of the technology. However the protection afforded by a trade secret can, in theory, last for 20 years or more, provided it is kept secret and competitors are unable develop the technology independently – Coca Cola or KFC being cases in point as you can see from this step by step guide for inventors.

The Importance of Context …

So when is it appropriate to patent the IP of a technology and when is it prudent to maintain it as a trade secret?

Answering this question requires consideration of what the commercial objective(s) are with respect to the technology, and then analyzing these objective(s) taking into account the following factors:

The likely market for the technology – Is it a niche market? What is the size of the market? What’s the market worth? Can the market be saturated? How will the technology be exploited?

The likely competitors for that market – Who are they? Are they conducting R&D in the area of the technology? How advanced is their research?

The nature of the technology itself – Can the commercial end product be reverse engineered to identify the IP of the technology used to produce the product? Can the IP of the technology itself be kept secret? How will the IP be kept secret? Is it a rapidly evolving technology? Can the technology be fully exemplified at the time of commercialization? Is the technology ready for commercialization?

Ownership – Who will own, or have rights to the IP of the technology? How will the IP of technology be maintained as secret?

Commercialization – Who will manufacture and/or market the technology?

It is only once the commercial context of the technology has been defined that the benefits of protecting the IP of the technology via a patent or keeping it a trade secret can then be meaningfully explored. The answer to the conundrum could turn on only a single factor, or may be decided by several factors.

In some cases, a decision as to whether to patent or maintain as a trade secret may need to be deferred until more information is at hand. In such situations it is generally prudent to lodge a patent application to keep both options alive until such information is available. However, in other situations, one needs to be ever mindful as to the date when the contents of the patent specification become published so as not to forgo the trade secret option as you can read from

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