Patents versus Trade Secrets. Which One to Choose?

Authors: Birute Dauderiene, Patent Consultant at METIDA, Dr. Jacekas Antulis, Associated Partner, Head of Patent Division at METIDA

Statistics show that there are certain aspects that need to be considered when applying for a patent. Firstly, it is important to check if a patent is innovative enough and could be commercialized, as only 20 % of inventions are patented and used, 25 % of them do not have an inventive step and, thus, cannot be patented and 5% of them are not realized at all. Most crucially, an invention must meet the patentability criteria. Business plans or confidential information could only be kept as a trade secret and cannot be patented. Yet, in other cases, both types of protection may be applied, thus, legal, technological and commercial aspects should be considered when aiming for a protection of an idea.

Differences and Similarities Between a Patent and a Trade Secret

  1. An invention is a technical formula, whereas a trade secret is information. The latter should be preferred if an object that has to be protected does not meet the requirements for the invention. The protection granted to a trade secret is weaker than the one granted by a patent. In fact, someone else could patent an idea kept as a trade secret resulting in an annulment of exclusive owner’s rights to the idea.
  2. A patent consists of a set of exclusive rights granted to an inventor for a limited period of time in exchange for a public disclosure of an invention. As a patent makes an invention known for public, it may be used by all persons in countries, where the patent is not valid. Thus, it is possible to get around a patent. A trade secret is confidential information related to technology, business or organizational issues that could have a commercial value. A trade secret is protected through Non-Disclosure Agreements signed by a fixed number of persons. Internal affairs of a company, product ingredients, formulas, recipes may be good examples of what could be kept as a trade secret.
  3. A patent could last for up to 20 years. Due to the rapid change of technologies, some patents may become outdated. Thus, if the time is an issue for a created idea, trade secrets should be favoured as they are not limited in time. As mentioned before, trade secrets are protected through Non-Disclosure Agreements signed, for example, between a company and its employees. Yet, there is a danger for information to be leaked to third parties, as employees could take advantage of their knowledge and create their own company or work for other market players.
  4. Patents and trade secrets could bring different economic advantages. As for patents, their holders could advertise their inventions, pursue for business partnerships, sell patent licenses to others. Furthermore, without having enough resources, patent holders can contribute to the development or realization of their created product. Patents could help to eliminate other rivals from the market. Regarding trade secrets, companies are advised to assess their realization and production potential and check if they meet the market demand before opting for trade secret. In addition, companies should carefully form licensing contracts and keep a secret undisclosed at best efforts.
  5. It is much easier to protect patents than trade secrets, as patents are granted with legal protection which scope is defined in a claim, whereas in trade secret scenario, its infringers are difficult to detect and the confidential information might be revealed throughout the litigation process.
  6. Patent owner’s rights are protected for a limited period of time depending on how much has been spent on fees. The fees for patents are relatively high and strictly regulated. But, the costs of trade secrets are difficult to specify as their protection may vary relying on the nature of agreements and the use of other ways of protection towards the secret.

Thus, every concern of protection for a commercial product is unique. And although it’s sometimes easy to decide on a type of protection, it is very important to think about a length and aims of protection, as well as look through the requirements of the patentability or a trade secret before taking any further steps.

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