A vexing question often facing inventors, from individuals to start ups to well established Hi Technology companies, is whether to protect their inventions by a patent or trade secret.

The patent gives its owner a 20 year period of exclusivity from the filing of a patent application. In exchange for this exclusivity right, the patentee must fully disclose his invention to the public. Drafting and getting the patent through the patent office can be fairly expensive and time consuming; the process of obtaining a patent takes about 3 years. In accordance with the full disclosure requirements of patent law, the patent office carefully examines the patent application for compliance with the statutory requirements of novelty, non-obviousness, enablement, best mode and written description. Even after all that, there is no guarantee that a patent with the desired scope of protection will ultimately issue. On the other hand, a patentee who successfully traverses this ardous path has an exclusivity right that he can use to produce and sell products at a higher profit margin than a competitive market would bear, or use the patent as leverage to obtain favorable licensing terms when licensing his/her technology.

Another, lesser known option for the inventor to obtain a competitive edge is to treat his invention as a trade secret. In contrast to the limited term of a patent, a trade secret lasts for as long as it remains secret. A well known example of a successful trade secret is the Coca Cola formula, which the company has successfully maintained as a trade secret for over a century. Also, unlike a patent, there is no requirement for registration or filing of an application. The cost of a trade secret is that of maintaining the information a secret, which typically include taking precautions such as putting employees on notice, requiring them to sign nondisclosure agreements, and limiting their access to the trade secret.

To enforce a trade secret, the owner is required to prove the existence of the trade secret, including that it was kept in secrecy, of commercial value, and not generally known or easily ascertained. If the possessor changes her mind and decides to obtain patent protection, the public use of the trade secret can bar her from obtaining a patent.

Of course, there are risks involved in choosing the trade secret route. A major risk is that third parties may reverse engineer the invention. Another major risk is that a third party may independently discover the invention and, even worse, obtain a patent and try to prohibit the possessor of the trade secret from continuing to practice his invention. Finally, many investors prefer the certainty of a patent, which the law treats as any other property, to the uncertainties of protection under a trade secret approach.

Dr. Dariush Adli
PRESIDENT/FOUNDER
Adli Law Group P.C