Protecting Your Developments: Patent or Trade Secret

To understand which form of protection, patents or trade secrets, may be more appropriate in a given situation, it is best to understand what each one is and what are its advantages and disadvantages. No form of protection is ideal in every respect.
By Thomas B. McGurk | March 06, 2014

When you develop a new product, process or formulation, deciding how to protect this development can have long-lasting ramifications for you and your business. Two ways for protecting such developments are by patent protection and trade secret protection. Each option has advantages and disadvantages that must be weighed in determining which one is the better choice for a particular development. To understand which form of protection may be more appropriate in a given situation, it is best to understand what each one is and what are its advantages and disadvantages. 

In general terms, a patent is a government grant of the right to exclude others from making, using, selling or importing the claimed invention. A patent is enforceable in the jurisdiction in which it is granted and expires after a predetermined time period. In the U.S., a patent is enforceable for 20 years from the filing date of the patent application. A patent can be viewed as a contract with the government. In order to obtain the government-granted exclusivity provided by the patent, an inventor must provide a detailed and enabling disclosure of the invention. Thus, once a patent is issued (or a patent application published), the inventor’s disclosure is publically available for all to see. There is no guarantee that a patent will be granted simply because an application has been filed. The claimed invention must meet all the requirements for patentability, including patentable subject matter, novelty and nonobviousness.

As defined by the Uniform Trade Secret Act, a trade secret is information, including a formula, pattern, compilation, program, device, method, technique or process that derives actual or potential independent economic value from not being generally known to or readily ascertainable through appropriate means by other persons who might obtain economic value from its disclosure or use; and is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. Unlike patents over which the federal government has exclusive authority, trade secret protection derives from state law.  

Patent rights protect against all making and use of an invention whether copied, independently developed or reverse engineered and as such provide far more effective protection than trade secret protection can provide. Patent litigation can be expensive to defend against and can result in damages being tripled against a willful infringer. The cost of defending against a patent infringement suit and the chance of a substantial damages amount being awarded if unsuccessful deters many would-be infringers from ever attempting to compete with the patent holder.

Patents can be expensive to pursue and may not be granted if the claimed invention does not meet the requirements for patentability. Patents make public the details of how to make and use the protected invention, and, thus, provide a means for others to copy the invention when the patent expires. 

Trade secret protection arises immediately upon taking the steps reasonably necessary to maintain secrecy and can extend indefinitely, unlike patents, which eventually expire. Trade secret protection can be far less expensive to implement and can keep would-be competitors from ever learning the details of the protected development.

Trade secret protection does not protect against independent development, reverse engineering, or copying of publically disclosed developments. Once a trade secret has become publically disclosed it is no longer protected; and recourse is available only against those who wrongfully disclosed or misappropriated the trade secret. 

Inventions that have not been publically disclosed more than one year and are both novel and nonobvious are potential candidates for patent protection. In particular, those inventions that would be publically observable if used would be more difficult to protect as trade secrets, especially if they could be reverse engineered. 

Certain types of information, articles and processes tend to be better candidates for trade secret protection than others. Developments that are not publically observable during normal use, nor are easily reversed engineered or likely to be independently developed are better candidates for trade secret protection than those that are. If time to implementation and initial cost are overriding factors, then trade secret protection may afford the more immediately effective alternative. If the development is such that its commercial utility has a limited life span, or its design can be easily ascertained in the course of its use, then patent protection may be the better alternative. 

The most appropriate form of protection can be determined only after careful contemplation of all the technical and business considerations—and no form of protection is ideal in every respect.

Author: Thomas B. McGurk
Attorney, McGurk Intellectual Property Advisors
[email protected]

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