Should I Patent My Trade Secret? | Dunlap Bennett & Ludwig PLLC
If your business is keeping a valuable secret, you may be trying to figure out the best way to protect it. The question may turn on whether your secret is something like the secret Coke formula or a groundbreaking technology for producing eco-friendly, biodegradable, and cost-effective packaging materials.
If the Coke formula were patented, it would lose its value, because it would now (after a defined number of years expired) be publicly available. On the other hand, while you would need to disclose the specific details of your packaging technology in a patent application, the potential benefits of patent protection, including exclusivity and commercialization opportunities, may outweigh the risks associated with disclosure.
Whether a trade secret should be patented depends on a number of complex factors. Let’s take a look at some of the most important considerations.
Trade secrets vs. patents
Trade secrets have actual or potential economic value because they are known only by a select few or are not publicly ascertainable. Protection is afforded indefinitely (assuming the secret can be kept) where reasonable steps have been taken to keep the information secret by using, for example, confidentiality agreements or nondisclosure agreements (NDAs) and implementing security measures to limit information access.
Patents are different. They are “open,” in the sense that they publicly disclose key details in exchange for exclusive rights. In fact, the word itself comes from the Latin letterae patentae, meaning “open letter.” Patents give the owner the right to exclude others from using a process, a design, or an invention during its term. While trade secrets are protected by the act of keeping them secret, patents provide protection through the “patent bargain”: disclosure to the public, including clear notice of the “claim,” which is the term for the perimeter of protected rights. The primary purpose of patents is to prevent third-party exploitation of the invention inside that perimeter, and they are important because they encourage and promote even further innovation through mandated “openness” so the public can learn and make further discoveries that build on the patented ones.
Patent application process and requirements
Filing and maintaining a patent is a sometimes lengthy and often costly process. Initially, a patent professional might search the state of the art to ascertain whether the invention or one similar to it has already been patented or publicly disclosed. A patent client needs to determine what kind of patent is required (i.e., utility, design, or plant) and, where applicable, whether the patent will be provisional or nonprovisional. A provisional patent is not really a patent but a type of application that establishes an effective filing date and keeps a “foot in the door” for a period of one year to file a real (or “nonprovisional”) patent application. Provisionals can be short-term and inexpensive tools that gives the inventor 12 months to test and perfect the invention or determine its marketability before filing a nonprovisional patent application. Provisional applications are not examined at all — they just sit there locking down a date that can be used for a properly filed future nonprovisional application.
Applications themselves have detailed legal requirements, which differ depending on the type of patent being filed. Generally, the requirements include application fees, a detailed written description of the invention/art, and the claim(s) of the patent (i.e., the boundaries of the patent and what it covers and does not cover).
To be eligible, the patent must meet these criteria:
- Be patentable subject matter (i.e., a process, machine, manufacture, or composition of matter but not abstract ideas, laws of nature, or natural phenomena)
- Be novel (i.e., new and does not form part of the prior art)
- Have utility (i.e., provides some identifiable benefit and is capable of use)
- Be non-obvious (i.e., involves an inventive step that is not obvious to a person skilled in the applicable art)
- Be able to be made and used by a person with ordinary skill in the relevant field
The applicant may receive objections to the application by an examiner’s “office action,” and the applicant may take steps to respond to the objections, including by scheduling an interview with the examiner.
The receipt of a Notice of Allowance (usually a happy event) means the patent is nearly granted, requiring only payment of the applicable fees within three months from the date of the notice. Once granted, payment of maintenance fees (sometimes called annuities) is required at intervals of 3.5, 7.5, and 11.5 years, at least for utility patents.
Considerations in seeking patent protection
Myriad considerations apply when deciding whether to seek patent protection for a trade secret beyond the process taking time and having costs, including whether the trade secret is patentable subject matter, the ability to reverse engineer and copy the invention, and how the invention will be used among individuals.
Patentable subject matter
A trade secret can be almost anything that adds value to a business, provided that it gives some kind of competitive advantage and actually has value. A trade secret does not have to meet the patentable subject matter test that a patent requires, but overlap can exist.
Something that is patentable may start out as a trade secret, but a business is likely to have many more trade secrets than patentable inventions. For example, a customer list or a business plan may be considered a trade secret but is not patentable subject matter. An invention, on the other hand, may have current trade secret status but could also meet the patentable subject matter test and may be eligible for patent protection.
Reverse engineering
Disclosure of a trade secret effectively destroys its value, but disclosure is required to seek patent protection. Once disclosed and publicly accessible, the trade secret may be vulnerable to reverse engineering and independent development. Under trade secret law, there is no liability for reverse engineering, nor can one claim trade secret misappropriation based on information readily available to the public.
If an idea is easily reverse engineered (for example, by removing an enclosure to see how a device works), trade secret protectability will be impossible; in that case, patent protection for any included innovations is the way to go. To capture the most protection, it may be prudent to protect some aspects of a product or method with a patent and other aspects with trade secret status (that is, so long as one can do so while complying with the Patent Office’s “best mode” disclosure requirement).
Use of the invention
Trade secret status is only effective if the invention is actually kept a secret. Of course, NDAs and tightly restricted access to the invention can be employed, but they both require individuals to keep the information to themselves. Unfortunately, leaks and unauthorized disclosure do sometimes happen, so where the invention will be used collaboratively or by a larger and less controllable group, a patent may be more appropriate.
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