Patents vs Trade Secrets

Is it better to keep a Trade Secret?

Registering a patent is a lengthy and costly process; the initial application normally takes four years before final approval, and part of this process involves publishing details of your invention.

Five years after the filing date, the patent then needs to be renewed and thereafter it needs to be renewed annually (with the annual renewal cost increasing year on year).

A patent lasts for a maximum of 20 years. After it expires, a competitor can legally use this information to produce a similar product using the invention designs. A careful assessment therefore needs to be undertaken to ascertain how easy it is likely to be to reverse engineer the underlying invention when compared to the likely lifespan of the product.

In contrast to registering a patent, the initial cost of a trade secret is minimal. A trade secret can be protected by confidentiality agreements (or NDAs), so there is no registration requirement and therefore no fee. The initial cost will be the legal fees of drafting the relevant agreement.

Unlike a patent, a trade secret has no time limit. Protection will last as long as your agreement(s) remain in place provided that there are no breaches. For products which have a longer lifespan and cannot be reverse engineered, a guarded trade secret will provide protection without competition after 20 years at a minimal cost.

Whilst much cheaper than patenting, a trade secret will only give you protection to the extent that employees or third parties to whom the invention is disclosed can be trusted. Once breached, there is no way to prevent further infringement, and if a confidentiality agreement is breached, then the cost of enforcement may be greater than the available compensation or the equivalent infringement action for a registered patent. Breach of confidentiality will be harder to prove than infringement as the initial source of the breach may be unclear. Often a breach will be committed by an individual who has little financial worth, meaning that taking action is futile.

A trade secret will not give protection against improvements in technology, particularly for reverse engineering. A product that can be analysed or deconstructed will not be appropriate for protection by a confidentiality agreement as this would not protect against a competitor recreating the product.

Should a competitor successfully copy a product, then they may choose to patent the invention causing the earlier invention to be an infringement of their patent which could ultimately result in the original product having to be removed from the market or licence fees becoming payable to the competitor.

Not all types of invention are capable of patenting, and so for some inventions, a trade secret will be the only option.

Computer games, business methods and most software cannot be patented under the Patents Act 1977, so for these inventions a confidentiality agreement may be the only method of protection from infringement by employees or third parties with product knowledge.

Alternative Option – Publishing

An alternative option available to avoid others profiting from an idea, is publication. Although this will not necessarily protect your IP, publishing is often used as a defence mechanism to prevent others gaining an exclusive patent right. The details published will be available for competitors to use freely on the market, so whilst publishing will not give the publisher a monopoly over that invention, it will, unlike a trade secret, prevent competitors from gaining an exclusive patent right, due to the removal of the patent novelty criteria.

Publishing can be achieved through many different formats including journals, patent applications and online publishing companies. The most obvious of these is a patent application, which can be abandoned later to save costs. Once published, the details of the invention will remain in the patent directory and will be available for patent examiners to inspect, should a similar application be submitted at a later date.

Which option is right for your business?

Your method of protection should be based on the needs associated with the individual product and on how you plan to exploit that product in the future.

You may choose to use a combination of registered patents and trade secrets to protect your products, or even consider publishing details if you operate in a crowded market where others may patent an idea before your products are developed enough to make an application.

In the early stages of invention, it is always worth implementing confidentiality agreements before a product is ready for patenting. This then acts as a safeguard regardless of whether or not you intend to patent your fully- developed product.

If you require any further information or assistance in connection with the intellectual property of your business then please contact: contact@ouryclark.com