To Patent or Keep Secret? That Is the Question
As an emerging technology company, maintaining an edge over your competitors may depend to a great extent on choosing the right strategy for intellectual property (IP) protection. The question is what kind of protection do you actually need, and how do you go about getting it? Two types of IP protection that most tech startups will want to consider are patents and trade secrets. Each offers different types of protection with distinct benefits and risks, so you will need to decide which path is right to meet your business goals.
Is Patent Protection the Right Option for You?
Patents can provide broad protection for invention and innovation. They can cover almost any novel aspect of a technology, including hardware, software, compositions, materials, and business methods. Patents can also be obtained on improvements to existing technology—the innovation need not be radical or revolutionary in order to be patentable, merely new and not obvious. Many innovations developed by an emerging technology company can likely be patented, and patenting those innovations can create significant advantage in the marketplace.
For example, a strong patent portfolio can help attract investments for the emerging company. Venture capitalists and angel investors often look to see whether a fledgling company has protected its intellectual property when determining whether to invest.
However, patent registration can take significant time and money to prepare and subsequently to process by the Patent Office, and this is often one of the largest obstacles for inventors. Patents should be viewed as a long-term investment in a product’s future, and the cost of filing is simply the cost of doing business.
Also, patents generally have a limited length of protection, with the patent owner receiving 20 years of protection from the time that the patent is filed or from its earliest priority date. After this period, anyone, including your competitors, can legally copy or reproduce your innovation.
Trade Secrets Offer an Alternative Route
Certain emerging technology innovations may be more effectively leveraged if they were held as trade secrets instead of being disclosed to the world through the patenting process. Trade secret protection can provide, in many situations, a viable option to protect the IP of the company when used in conjunction with or as an alternative to patent protection.
One requirement for trade secret protection is that the invention must be kept secret, as opposed to patent protection, where the innovative technology must be disclosed for the world to see. The requirement that the IP remain secret, however, can make trade secret protection difficult to maintain. Once a trade secret is divulged, it is no longer protected and can become part of the public domain. It should be noted that even technology that is available for purchase on the open market can be held as a trade secret, so long as such technology is not disclosed, cannot be discovered, or reverse-engineered.
Trade secret protection involves protecting ideas simply by keeping them secret. It therefore avoids the effort and expense associated with filing patent applications. Protection can remain for as long as the underlying technology is kept secret. Trade secret protection, however, requires continuous diligence, since once the technology is revealed, it is no longer protected. So it is critical that employees are educated on keeping information confidential, and that a corporate program is implemented to maintain secrecy of the company’s technology.
Another advantage to pursuing trade secret protection is that it is often times easier to obtain an injunction for misappropriation under trade secret law. The chances of early success in seeking a preliminary injunction in a theft of trade secret litigation usually can be greater than in a patent infringement action. This is because, in the absence of a prior favorable court finding of infringement and validity of the same patent, courts may not be as willing to issue preliminary injunctions in relatively complex patent cases, thus allowing wrongdoers to continue infringing. However, courts might be more willing to issue a preliminary injunction in a trade secret case. Because of its potential to prevent wrongdoers from benefiting from a misappropriated technology, trade secret protection may be considered as a viable alternative or complement to protecting owners of emerging technology against infringement.
A Decision Matrix to Help You Choose
With the availability of both patent protection and trade secret protection, how does a company decide which strategy to pursue? To determine which of the two may be a viable strategy, here are a few things to consider:
Two Options Converge for Maximum Protection
In combination, patents and trade secrets are an important facet of IP strategy. Patents (which require full disclosure) and trade secrets (which are kept confidential) can complement one another: patents protect inventions and trade secrets protect collateral know-how. For example, as licensing has become the preferred approach for technology transfer, most technology licenses cover both patents and trade secrets. Using patent and trade secret protection together in a synergistic manner results in potent IP protection.
Whether you choose the patent or trade secret path, emerging tech companies should carefully consider each option in the context of their overall IP strategy to gain the edge they need to succeed against their competition.