Protecting Inventions Through Patents and Trade Secrets

Let's explore the unique strategic considerations you need to review to decide which of the two would help your company best protect and profit from your ideas and innovations. 


When it comes to protecting a company's technical innovations and ideas, there are two main options: patents and trade secrets. Let's explore the unique strategic considerations you need to review to decide which of the two would help your company best protect and profit from your ideas and innovations.

Defining Patents and Trade Secrets

Granted by the United States Patent and Trademark Office (USPTO), a U.S. patent gives its owner a federally granted monopoly over inventions for a limited time — 20 years for utility and plant patents, 14 years for design patents — in return for a detailed public disclosure of the invention. Under federal law, patent owners have the right to exclude others from using, selling, or importing a patented invention in the U.S. for that period of time. To be patentable, an invention must be unique and "teachable" — meaning you cannot patent something naturally occurring or unrepeatable, and your invention must be outlined through the patent in a clear way that will empower others to practice what you've described once the patent expires.

Alternatively, trade secrets generally refer to all forms of information whose owner has made reasonable efforts to keep secret. They derive independent economic value from not being generally known or readily ascertainable to others, and mustn't be readily ascertainable through proper means like reverse engineering. Traditionally, the protection of trade secrets has been governed by a patchwork of individual state laws, with all states but New York and North Carolina having enacted some form of the Uniform Trade Secrets Act (UTSA)—a uniform act published in 1979. In 2016, Congress enacted the Defend Trade Secrets Act (DTSA), which provides parties with the right to bring trade secret lawsuits in federal court, and can extend to conduct outside of the country so long as "an act in furtherance of the offense was committed in the United States." Under the UTSA, trade secrets can be "information, including a formula, pattern, compilation, program, device, method, technique, or process." Per the DTSA, trade secrets can be "all forms and types of financial, business, scientific, technical, economic, or engineering information" regardless of "how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing." As such, eligibility for trade secrets is broad, and even abstract ideas may be subject to trade secret protection in the United States.

For example, artificial intelligence (AI) is currently aiding many companies and research organizations to predict and identify previously unknown compounds and structures. Such AI-discovered compounds and structures may not be eligible for patent protection, but as long as they remain generally unknown and not readily ascertainable, they could be protected as trade secrets.

Another key consideration is that, while a utility patent has a lifespan of 20 years from its effective filing date, a properly maintained trade secret can have an unlimited lifespan and is protected as long as it remains secret. For example, Coca-Cola has been protecting its formula as a trade secret for over 130 years. However, unlike a patent, a trade secret loses all protections once it is generally known or independently developed through proper means. If a company's secret is likely to be discovered or independently developed by others or is significant for only a limited time, the certainty provided by a patent may outweigh the risks of relying on trade secret protection.

The Difference Lies in Disclosure

While patents and trade secrets both serve to protect IP, they do so by taking fundamentally opposite approaches to disclosure. Essentially, the value of trade secrets lies in their confidentiality, while a patent is something you have to disclose in a clearly defined manner to the entire world.

Some of the most important policy goals behind the patent legal framework are encouraging early disclosure of useful inventions and eventually allowing the public to make use of expired patents. As a result, a patent application must include a detailed description that enables a person of ordinary skill in the invention's field to make and use the full scope of the claimed invention without undue experimentation, as well as the inventor's best mode for practicing the claimed invention, if there is one. Most importantly, the patent must conclude with "one or more claims particularly pointing out and distinctly claiming the subject matter which the inventor or a joint inventor regards as the invention." Thus, the claims define the scope of the patented invention and what the patentee has a right to enforce against others.

By direct contrast, trade secrets refer to all forms and types of information whose owner has made reasonable efforts to keep secret and that derives independent economic value from not being generally known or readily ascertainable by the public. "Reasonable efforts" might include: requiring employees to sign non-disclosure agreements with training and periodic reminders of confidentiality obligations, limiting access to a "need to know" basis, deploying IT security measures as well as physical security in office facilities, and promptly investigating and acting against suspected misappropriation of trade secrets.

Furthermore, a company must be able to keep trade secrets fairly confidential, even if suing another company for stealing them. Since trade secret protection extends only for as long as the underlying information is kept secret, it's vital to consider whether an idea or invention may practically be kept confidential for the desired term of protection — otherwise, patent protection may be a better alternative.

Ultimately, the best approach will depend on your business. Industries with an inherent lack of transparency may rely more heavily on trade secrets than patents. For example, cybersecurity companies may lean toward trade secret protection, as exposing their confidential security algorithms via patents could aid competitors in developing competing products or hackers in creating tailored attacks. In contrast, companies making consumer-facing electronics that are easily detectable rely more on patent protection, as do companies whose products must comply with industry-wide standards, given the transparency surrounding standardization efforts. With the right legal approach, you can find the delicate balance of disclosure, timing, and strategy best for protecting your company's inventions.

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