Patents vs. Trade Secrets – What’s Best for You

October, 23rd, 2019

Categories: Articles, Blog Tags: 101, CBM, chemical, computer, patent, RCE, software, startup, USPTO, whipgroup

By Christopher J. Stankus

Why do some companies choose to patent their invention while others choose to keep it secret? It comes down to determining what protection is best for your business and invention.

A well-kept trade secret lasts forever, while a patent only lasts 20 years. But keeping an invention a secret comes with great risk. For example, you have to ensure the invention actually stays a SECRET. That is very difficult; particularly for a product that will be sold in the open market as a competitor can reverse engineer it. There is also the risk that a competitor independently reproduces the product. Even worse, an employee or contractor can steal your secret sauce—corporate espionage is real. It’s rumored that the recipe to Coca-Cola is stored in a vault in Atlanta, access is restricted to only a handful of executives, workers are routinely subjected to security checks, and no single contractor or employee has the full recipe. Such security costs a lot of time and money. But even with Coke’s high level of protection, an employee in 2006 stole the formula and tried to sell it to Pepsi. Luckily for Coke, Pepsi informed Coke officials, and the employee was arrested.

On the other hand, patent protection is much stronger than a trade secret even though its limited to 20 years. Independent invention is no defense to patent infringement, and many products will be obsolete in 20 years with new technological advances. Further, a company that’s first to the market with exclusive rights to exclude others from making, using, selling, and importing a product or process for 20 years can build brand recognition and remain the market leader even after the patent expires.

It’s wise to evaluate your options for each new product, process, and formula you invent. When determining whether to patent or keep your invention a secret, you should first ask your patent attorney to analyze whether the invention is patentable at all. That is, determine whether the technology is patent eligible and whether the invention is novel, useful, and non-obvious. Then ask yourself:

• Is 20 years a sufficient period of protection?
  • Will the invention be useful beyond 20 years?
• During the 20-year patent period, can a competitor reverse engineer the product?
  • Is the invention embedded in the product itself or is it part of an internal manufacturing process?
  • Is the product regularly observed in public settings?
• During the 20-year patent period, is the invention likely to be independently discovered?

It’s important to choose the right approach for each product, process, and formula that you develop. Given the relative ease to reverse engineer, and the limited lifespan of, many products, seeking patent protection is normally the best option. But in certain circumstances, keeping your invention a trade secret can lead to unlimited years of market dominance.

WHIPgroup is leading counsel for U.S. and international technology companies. We specialize in patent and trademark law.

© 2019 Whitmyer IP Group, Stamford, Connecticut.