Patents vs. Trade Secrets: What You Should Know

A patent can be an excellent way to protect an invention. Machines, processes, compositions of matter, and manufactures can all be protected by a patent. Having a strong patent gives the patent owner a virtual monopoly on his or her invention for 20 years. Patents, however, are not the only way to protect an invention. Depending on the circumstances, trade secret protection may be the better option. 

A patent is obtained by disclosing an invention to the United States Patent and Trademark Office (USPTO) via a patent application. The application must describe the invention in such a way that a skilled artisan would be able to understand and practice the invention. The USPTO, upon receiving the application, will compare the disclosed invention to the prior art (which can be any publication that exists before the filing date of the application) and determine whether the invention is novel and nonobvious. If so, the USPTO will issue a patent on the invention which subsequently publishes for public inspection.   

A problem with patenting an invention, however, can arise if the USPTO does not view the invention as novel, believes it is obvious, or constitutes unpatentable subject matter (for example, an abstract idea). Additionally, even if some aspect of the invention is considered patentable, the actual scope of protection may be relatively thin. As such, an inventor, through the patent process, may ultimately disclose an invention to the public without having any real protection on the invention.   

Trade secrets, in some situations, may be the better option for protecting an invention. A “trade secret” means information, including but not limited to a formula, pattern, compilation, program, device, method, technique, or process that is both of the following:  a. Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by a person able to obtain economic value from its disclosure or use; and b. is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. This latter element distinguishes patent protection from trade secret protection. Whereas patent protection is granted in exchange for disclosing the invention to the public, trade secret protection is granted to those who take reasonable steps to keep their invention secret. 

Trade secrets are best suited for inventions that are not “readily ascertainable by proper means.” This is because reverse engineering a trade secret is perfectly legal. For example, there is generally nothing illegal about a party purchasing a good and disassembling it to determine how it works. Thus, if an invention is easily reverse engineered, the value of trade secret protection is low. However, if a product or method is not easily reverse engineered, then trade secret protection can be relatively strong. Coca-Cola, for example, elected to protect its Coca-Cola formula via trade secret rather than patent. Whereas they could have patented their formula, the protection afforded by the patent would have run out in about twenty years. However, because the formula for Coca-Cola was not easily reverse engineered, the formula has been protected for well over 100 years. This, of course, highlights another difference between patents and trade secrets. Whereas patent protection lasts for only 20 years, trade secret protection lasts as long as the trade secret remains a secret. Of course, if one elects to protect their invention by trade secret one must take reasonable steps to keep their trade secret a secret. These steps could very well include the proper use of nondisclosure agreements, limiting access to the trade secret, encrypting files, providing adequate security, marking documents as confidential and so on. 

In short, patents and trade secrets can be valuable tools for protecting inventions. As a general rule of thumb, if the invention is easily reverse engineered, then patent protection is likely the best option. If the invention is not easily reverse engineered, then trade secret protection may be the better option. Before electing an option, however, it is strongly advised to contact an intellectual property attorney who is well versed in both patent law and trade secret law.  Such an attorney will help you determine the best option for protecting your invention and can help devise a strategy for trade secret protection if necessary. 

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