Trade Secret V/S Patent: How To Choose

Safeguarding one’s invention from being stolen or copied is an instinctive step taken by a business. But one is often confused in choosing between trade secrets and patents as the best step to move forward for IP protection.  

Each has its own pros and cons that if clearly understood may help you find a way out of this dilemma and make an informed decision. This article aims to offer a comprehensive view of the trade secret vs patent debate so that you can make the right choice.  

Filing for and registering a patent is a long and tedious process. It entails submitting an initial application, publication, and a thorough and substantive examination by experts before the grant of a patent.  

The patent drafting process must follow stringent requisite guidelines for it to be considered by the patent office. A fee is associated with each step of the filing process and is mostly a considerable amount. Once approved, a yearly renewal fee is applicable in order to maintain the patent for its validity of 20 years.  

In contrast, in patent vs trade secret, the requirements and fees involved in trade secrets are minimal. Protecting a trade secret only involves the signing of confidentiality agreements or NDAs that are fairly inexpensive to draft. There is no authority where one must register the trade secret unlike patents or pay any associated fee. There is no time limit to the validity of trade secrets which stay in force so long as there are no confidentiality breaches.  

Both patents and trade secrets are IP Rights that protect your invention and give you an exclusive monopoly over its usage. Both can be used to protect manufacturing processes and other similar categories. But that is where the similarities end in patent and trade secret. Below we enlist the difference between the two:

1.In the case of independent development, patent protection emerges stronger than trade secrets. A patented invention cannot be replicated or reproduced under any circumstances without infringing upon the patent. The patent owner is eligible to demand damages in case a competitor is found using or selling their invention in any manner without prior permission.

For trade secrets, the protection is only extended to an unlawful breach of information. If a competitor recreates the product/formula/process and independently develops their own version then trade secrets offer no legal security unless a breach is proved. The rival company could also patent the invention thereby shutting out the original inventor!  

2. For companies looking to earn revenue from their invention by licensing, patents again emerge as the stronger candidate in offering suitable protection. The licensing agreement clearly defines the terms and conditions related to validity and infringement.

When licensing trade secrets there is always the fear of loss of exclusive control over the information and a disregard of contract by employees to leak the secret. Also, for the licensee, it is difficult to trust that the information is truly confidential and hence commercially valuable. 

3. Cost is easily the biggest advantage trade secrets have over patents. Patent documents and filing is a very technical process that demands expenses right from inception. Drafting the patent, and filing it are complicated tasks that are usually outsourced to hired professional firms.

Then there is the patent maintenance fee that must be paid till the patent protection lasts. Trade secrets on the contrary are free from the registration or approval process. Any confidential information that meets the eligibility criteria may be declared as a trade secret with immediate effect. There is no additional fee of any kind involved in declaring or maintaining trade secrets.  

4. The time period is another important distinguishing factor. If your invention is immune to technological innovations and you want to retain it in the long-term then trade secrets offer better protection as they last forever (unless breached), unlike patents which are valid only for a period of 20 years.  

5. The level of disclosure in patent vs trade secret is a crucial factor to consider. Trade secrets rest heavily on the non-disclosure aspect. This keeps their information secret and unavailable to competitors. Patents on the other hand require full disclosures to be published as part of the filing process. While a business rival cannot copy this disclosure and create a product, it does offer strategic insights as well as a creative inspiration to improve on the patented product or develop a better one.