Protecting IP: Should an invention hold patent or trade-secret status?
Your company has created a new innovation. Now you would like to protect this intellectual property (IP) asset and use it to create value for your business. Four types of IP protection exist: copyright, patent, trademarks, and trade secrets. Which type of protection is best for your IP asset? The answer is found in the type of protections provided by patents and trade secrets.
A patent is a government-sponsored right to exclude others from making or using your invention. This right is conveyed in an issued patent, which is a published, publicly available document. A patent has a life span of 20 years from the filing date of the patent application. Obtaining a patent is rigorous, time-consuming, and expensive.
A trade secret is proprietary company information that achieves its value from not being known to the public and that a company takes steps to maintain as a secret. A famous example of a successful trade secret is the formula for Coca-Cola, a trade secret for more than 100 hundred years.
A patent protects an invention by making it known publicly (vis-à-vis the published patent). A trade secret, on the other hand, protects an asset by keeping it out of public knowledge. Patent protection is limited in duration. Conversely, a trade secret can theoretically last forever—i.e., as long as the information is kept secret. Keep in mind, however,that a trade secret can be lost in an instant if the secrecy is lost or if a competitor develops the IP asset on its own. Once a trade secret is lost, it is lost forever.
The answer whether to seek patent protection or trade secret protection for your IP asset also lies in an assessment of the company’s corporate structure and business model. The following considerations can assist you in determining which type of protection to pursue:
1 . Assess your corporate structure . Given your corporate structure and culture, determine whether it is feasible to develop and implement a trade secret protection program. If your business is not enabled to protect sensitive information, consider the resources and effort required to put the following safeguards in place:
• Controlling access to the IP asset (such as granting access to the IP asset on a need-to-know basis);
• Ensuring nondisclosure agreements are signed with third parties having access to the IP asset;
• Preparing employment agreements with trade-secret nondisclosure clauses; and
• Limiting the number of people having access to the IP asset.
2. Evaluate your business model . The way in which the IP asset is to be leveraged should be considered when deciding between patent protection and trade secret protection.
• Is your business plan to manufacture—or have a third-party manufacture—a product embodying the IP asset? If so, can a competitor readily disassemble the product and discover the IP asset? In this situation, patent protection may be best because trade-secret protection does not prevent a competitor from reverse-engineering your product.
• Is your IP asset a method to make a product more efficiently or in a more cost-effective way? Does the product made by your innovative method look the same as the original product? In this situation—where your IP asset cannot be determined upon examination of the product—trade secret protect may be best.
• Is licensing the IP asset a significant revenue generator for your business? If so, patenting the IP asset that will eventually be licensed may be best.
The decision to obtain patent or trade-secret protection for your new innovation should be performed in a business context. An evaluation of your corporate structure/culture and your business model can assist you in determining the appropriate type of intellectual property protection for your situation.
About the author:
Ted Barthel is an attorney in the Milwaukee office of Whyte Hirschboeck Dudek S.C. He may be reached at firstname.lastname@example.org