Lesson 1: How Patents Intersect with Other Forms of IP: Confidential Information/Trade Secrets
ARE PATENTS AND CONFIDENTIAL INFORMATION/TRADE SECRETS MUTUALLY EXCLUSIVE OR CAN A COMPANY USE BOTH?
In some respects, patents and confidential information/trade secrets are mutually exclusive since the former requires disclosure and the latter requires secrecy. However, in the early stages, until a patent is filed, there is a need to preserve your information as confidential information/trade secrets. Also, patents and confidential information/trade secrets can be combined in a “hybrid“ or mixed strategy.
In deciding whether to file for patent protection or rely on confidential information/trade secret protection, the following are some of the factors you should consider.
Whether the invention can be patented:
Confidential information/trade secret protection is much broader in its scope in that the types of information or ideas that are protected are more expansive than patents, which have threshold requirements for patentability.
Furthermore, given the uncertainty surrounding the availability of patent protection in various jurisdictions in such things as software, business methods and certain biotechnology inventions, it may be preferable not to file for a patent because of the required disclosure of particulars, which can be capitalized on by competitors if your patent is not granted.
Whether the invention can be easily reverse-engineered:
Protection over your confidential information/trade secrets does not guard against someone else independently developing your invention or reverse-engineering and copying it.
If your invention can be easily reverse-engineered or easily developed independently, then absent other factors, it may be best for you to file for a patent since only a patent will guard you against these actions by competitors.
The life cycle of the product:
If a product has a short shelf life, then confidential information/trade secret protection may be a better option because you may be able to capitalize on a first-mover advantage instead of devoting time and costs to filing your patents and delaying your product launch.
Whether protection is desired that is longer than the life of a patent:
A patent only provides protection for a finite period of time.
Confidential information/trade secrets can last indefinitely, so long as the information remains secret.
Whether it is feasible to maintain the secrecy of the invention:
There are logistical impediments to maintaining something as a secret, particularly where a business is growing rapidly or requires a multitude of people to know the secret to allow for efficient production. In these sorts of circumstances, the logistical constraints for maintaining secrecy, as well as the associated costs, may warrant consideration of whether patenting is a more effective strategy.
Whether you can afford to pay the patent filing and maintenance fees (particularly if the product is going to be manufactured/distributed in multiple jurisdictions):
Patents are costly to secure. They require the payment of fees to prepare, file and maintain them. These costs increase substantially as the scope of your business becomes more global since patents must be filed and maintained in multiple jurisdictions to have protection in these jurisdictions.
In contrast, other than the costs of maintaining the secrecy of the invention, protecting yourself through confidential information/trade secrets is more cost-effective.
Whether you have the financial resources to enforce a patent:
It can be very costly to sue someone for patent infringement. You have to consider whether you can afford to sue an infringer. It may well be that a competitor, recognizing your resource constraints, uses your patent filing as a road map and takes the calculated risk that you won’t sue. In this case, relying on confidential information/trade secret protection may be a better option if you can maintain the secrecy.
Financing strategies around your invention:
Often, venture capitalists, angel investors and other sources of business funding look more favourably on a company that holds patents such that securing a patent may be the best option, regardless of whether confidential information/trade secrets offer you equal or greater benefits in your particular circumstances.