Vantage Point: Patent or Trade Secret?

Nov. 7, 2008
It’s time to reevaluate IP strategies

Kelly Burris
Intellectual Property Attorney
Brinks Hofer Gilson & Lione
Ann Arbor, Mich.

Thanks in part to a Supreme Court ruling last year (KSR International vs. Teleflex) patents are becoming more difficult to obtain and enforce. Other efforts may broaden the authority of the U.S. Patent and Trademark Office and severely limit the rights of patent applicants. And this is amid fundamental changes to patent laws that aim to move the U.S. from a “first to invent” to a “first to file” approach practiced throughout most of the world. Thus, it’s a good time for companies to reevaluate the best approach to intellectual property (IP) protection.

Deciding between patents and trade secrets can be critical to a company’s long-term viability. Key factors include costs, how long the process or product requires protection, and whether trade secrets can remain confidential without others independently creating the same information. A patent is a property right that offers a 20-year monopoly preventing others from practicing the invention during that time, and is one of the broadest forms of IP protection. However, a key question is whether the product or process will be viable in 20 years. If it’s timeless, a trade secret may be the best option.

Trade secrets, often referred to as “know-how,” derive economic value from not being generally known and are the subject of efforts to maintain the secrecy. Probably the most-famous one is the recipe for Coca-Cola. Trade secrets can provide a monopoly forever as long as a company keeps the information under wraps. So a key factor is whether or not the process or product can be reverse engineered. If so, then the information is not entitled to tradesecret protection.

And worse, if a competitor independently develops the information, they can then file for patent protection and stop the original inventor from using it. In that case, a patent is likely the better option.

Manufacturing is unique in that one can see the final product yet have no idea what process created it. And even general techniques such as molding give no indication as to processing temperatures, pressures, and cycle times. Should such a process rely on a patent or trade secret? Again, decide based on factors such as the ability to reverse engineer the process and its long-term viability.

Patenting demands significant time and typically costs more than maintaining trade secrets. But trade secrets aren’t free. While there are no governmental fees or formal filing processes, there typically are internal costs associated with properly maintaining a trade secret. More importantly, in litigation, courts demand proof that a trade secret was truly treated as a secret. That means precise and sometimes costly security measures must be in place. For example, if employees are not bound by a nondisclosure agreement, contractors and vendors have easy access, or if there are no security protocols to protect the information, it’s highly unlikely a court will consider it a legitimate trade secret.

Brinks Hofer Gilson & Lione ( specializes in intellectual property and unfair-competition litigation, patents, trade secrets, intellectual asset management, and technology licensing agreements.

Edited by Kenneth Korane

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