There are two basic strategies for protecting a product/process you’ve invented: patents and trade secrets.
There is no best strategy; neither is perfect. This article explores the pros and cons of both.
Readers who need this post probably have no strategies.
Consider swapping “you’ve got” with “there are” or “strategies” with “options”
This sentence takes a bit to parse. At first, the reader doesn’t know if “that comes in the form of a process or a physical product” is referring to the strategies or the IP.
A patent, as you may know, is an exclusive license that protects your right to use a product or process for a period of time, typically 20 years.
So what qualifies as a trade secret? According to the US Patent and Trademarks Office, a trade secret:
- is information that has either actual or potential independent economic value by virtue of not being generally known,
- has value to others who cannot legitimately obtain the information, and
- is subject to reasonable efforts to maintain its secrecy
They also note that “All three elements are required; if any element ceases to exist, then the trade secret will also cease to exist. Otherwise there is no limit on the amount of time a trade secret is protected.”
A trade secret does come with some legal protection (more on that below). But it requires that you make reasonable efforts to keep it safe. In others words, it needs to be clearly communicated that this is, in fact, a proprietary secret.
Pros and cons of each strategy
|Pros||• you don’t have to share your process with the public
• you don’t have to go through the time and expense of applying for a patent
|• your exclusive right to use a product/process is protected by the law
• you can easily license your patented work to others for extra revenue
|Cons||• you run the risk of your secret being misappropriated, and a subsequent legal dispute
• it’s more difficult and risky to share your process or product for profits
|• you have to share details about your process/product with the public
• your patent protection only lasts for a set period of time.
• There’s a financial cost to filing for your patent
As you can see, both methods of protecting your IP come with a cost, and neither are perfect. However, patenting tends toward 1) less risk, and 2) more clear cut legal interpretation of ownership. Additionally, you can license patented work for a profit. If, indeed, your IP gives you economic value by being kept a secret, that implies that others would profit from such knowledge. In other words, there may be a market to license your patented IP. This can lead to extra revenue for you, as the patent holder.
Of course, it’s technically possible to arrange for sharing your trade secret with other parties via the implementation of contracts. However, it’s much murkier and open to misinterpretation when it’s a trade secret.
How much protection does a trade secret have, by law?
The USPTO has a page explaining in brief how trade secret protection can be legally enforced:
“U.S. courts can protect a trade secret by (a) ordering that the misappropriation stop, (b) that the secret be protected from public exposure, and (c) in extraordinary circumstances, ordering the seizure of the misappropriated trade secret. At the conclusion of a trade secret case, courts can award damages, court costs, reasonable attorneys’ fees and a permanent injunction, if warranted.”
Extra protections offered by patents
When your IP (say, a culinary recipe) is a trade secret, there is no legal protection against somebody reverse engineering a sample of your product, and then using it themselves or – even worse – patenting it.
Patents do protect your IP from reverse engineering, and even from somebody separately inventing the same exact product or process. Again, if somebody can develop your product without accessing your trade secret, they have the legal right to use it.
Other considerations for patents include:
- Patents come with significant up-front cost, but offer more guarantees
- Patents can make for their cost via licensing
- Trade secrets require trust in anybody who needs access to your IP, such as employees and partners
The best strategy is really a question of risk management
You can keep a trade secret indefinitely, but there’s a risk of losing it all. Patenting it offers some strong guarantees, but the protection comes at a cost and has an expiration date. However, in that term of 20 years, you can enjoy a relatively risk-free monopoly on your patented IP, and license it, as well.
Small businesses may be tempted to neglect patenting, simply because cash flow and time constraints can be inhibitory. But not patenting when it is the best move can be a mistake that cripples your business. The best way to know you’re making the right choice is to consult a legal expert with a background in IP.