The Difference Between Patents and Trade Secrets How Is Your Business Protecting Its Valuable Data? Should your business get a patent for a new technology invention, or would it be better considered a trade secret? The answer is not always easy to discern.  Patents and trade secrets have distinct advantages and disadvantages based on the type of information to be protected, regardless of the income stream the new invention may bring.

Below is a brief overview of the considerations when determining if your businesses’ information should be maintained as a trade secreted, or patented.

What is a Trade Secret? 

Trade secret law developed from state common and statutory laws, and aims to avoid misappropriation of valuable business information. Generally, trade secrets:

  • are “information, including a formula, pattern, compilation, program, device, method, technique or process”;
  • are not generally known or ascertainable by the public;
  • derive economic value from being held secret; and
  • are protected from disclosure with reasonable efforts.

Trade secret law protects any information that is not “commonly known” and which the company has taken reasonable steps to keep in confidence. The protection is more limited than patent and copyright protection. Further, trade secret law prevents only misappropriation, which means wrongful taking.  Securing trade secrets is possible without completing an application or any formal governmental examination. However, there are costs associated with keeping information secret.

Unlike a patent, however, owning a trade secret does not come with exclusive rights. While the owner can take action against third parties who misappropriate the secret, the owner has no recourse if a third party independently invents the information, discovers the information through reverse engineering, or obtains the information due to accidental disclosure. Once any of these events occurs, the owner loses his or her property rights in the secret.

Further, trade secrets have a potentially unlimited life, if the proper safeguards are taken. A trade secret can be lost forever through independent discovery, accidental disclosure, or intentional unauthorized publication

Patents

Patents, on the other hand, are available if the information or device is novel and inventive.  Patent protection allows the patent owner to exclude competition during the life of the patent. Most utility patents have a term of 20 years, and design patents have a term of 14 years (design patents issued on patent applications filed after December 18, 2013, will have a term of 15 years). During the patent term, only the patent owner can make or sell the device. A patent owner can generate income during the limited life of the patent by licensing the technology, but that income stream must be weighed against the significant cost in time and money required to obtain and then enforce a patent.

T o obtain a patent, certain conditions must be met.  The proposed invention must be the right type of subject matter, be new, inventive, useful and the owner of the invention must have clear title to ownership of the invention.  Patent registration is generally done on a country-by-country basis but there are some treaties and agreements in place that facilitate registration in more than one country at a time.  The rules around patent registration differ from one country to another so it is important that you seek the advice of a professional.

To apply for a patent, the applicant must make public the details of the patented invention.  These include:

  • Background information (the ‘state of the art’)
  • The nature of any technical problems solved by the invention
  • A detailed description of the invention and how it works
  • Illustrations of the invention where appropriate.