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Selecting between a Trade-secret & Patent?

Origiin IP Solutions > Blog  > Selecting between a Trade-secret & Patent?

Selecting between a Trade-secret & Patent?

Most of the organizations often find it tough to select the best way of protecting their innovations. The decision of keeping it a secret or filing for a patent is something that pops up again and again. Filing for a patent requires them to disclose the innovation whereas maintaining a trade-secret may be risky for business. Further, if any of their competitors develop the same innovation and file for a patent, then the original organization can be stopped in the market from using its own innovation.

The Black’s Law Dictionary defines trade secrets as “A formula, process, device, or other business information that is kept confidential to maintain an advantage over competitors; information- including a formula, pattern, compilation, program, device, method, technique, or process”. Thus, any confidential business information which provides an organization a competitive edge over its competitors may be considered a trade secret.

For the first time in history, trade secret was introduced under Article 39 of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) which talks about trade secrets.

Few popular trade-secrets are Coca-Cola’s beverage recipe, KFC’s selection of herbs and spices, McDonald’s Big Mac Special Sauce and Google search algorithm to name a few and the one thing common amongst all of them is they have maintained their secrets well.

One of the most important parameters that one must consider before choosing between patent or trade-secret is that whether the innovation is difficult to reverse engineer or not. If the answer is yes, it is difficult to reverse engineer, then one may choose to keep it as a trade secret. The advantage of maintaining a secret is that it makes the innovation very unique because no one in the market knows about it. Further, you don’t have to undergo complex and expensive processes of getting a patent for it and trade-secret does not have any specified life unlike a patent. As long as secrecy of the innovation is maintained, it is protected. Therefore, if the innovation is easy to reverse engineer, it may be bad idea to protect it as a secret. It’s also important to know that it’s legitimate for anyone to reverse engineer your trade-secret and replicate the process. In other words, we can say that the independent creation of a trade-secret is legitimate.

Keeping secret a secret requires lots of planning in terms of processes and procedures. Once your secret is out, there is no way to restore it. Therefore, you must have stringent processes in the form policies, processes and contracts that can be implemented to maintain secrecy.

The organizations need to analyse the following points carefully and decide the best way they can protect the innovation:

  1. Is your innovation easy to reverse engineer?
  2. Is the asset in question commercially valuable and worth keeping secret?
  3. What is likelihood of independent creation of work?
  4. Would this process be valuable after 20 years?
  5. What are the chances of getting a patent? If the chances are bleak, you will face a double whammy. You will disclose your process openly and additionally if the patent gets rejected, you have nothing in hand.
  6. Your competitors may come up with similar processes, file for a patent and later stop you from using it.
  7. Are your policies and processes enough to maintain secrecy of the process?

By Bindu Sharma (bindu@origiin.com)

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