Trade Secrets and Patents: Differences in Protection

In the world of intellectual property, trade secrets and patents are two valuable ways of protecting your assets, and the future of your business or product. They each offer different types of security, and depending on your needs, you may need to pursue one or both in order to remain fully protected from your competition.

Trade Secrets vs. Patents

Before reviewing the differences, it helps to understand what each type of protection entails. Trade secrets protect information, processes, products or other concepts that are not disclosed to the general public, while a product or invention must be fully disclosed to the US Patent and Trademark Office (USPTO) in order to be eligible for a patent.

This is the main factor that separates trade secrets and patents. If your business advantage or strategy is dependent upon keeping the confidentiality of your information or processes, then a trade secret is an appropriate type of protection.

But if you plan on distributing or selling your invention, a patent would offer the best level of protection. Each inventor or business has a different strategy: Coca-Cola keeps their product protected with a trade secret, while a business like Apple must patent their technology in order to prevent competitors from duplicating their products.

Differences in Property Protection

1. Trade secrets are more informal, while patents are easier to enforce.

Because trade secrets are not based on disclosure, there’s no formal paperwork or registration to maintain one. There are also no costs involved, which is much different than filing for a patent.

Patent registration takes significant time and money to process, and this is often one of the largest obstacles to overcome for inventors.

But the informality of trade secrets makes them more difficult to legally enforce. A misappropriation of trade secrets claim must prove that a trade secret was acquired improperly, which often makes for vague and complex legal cases. And if a trade secret is acquired lawfully, then the acquiring party can then use that information for their own purposes.

On the other hand, patent protection is more enforceable because there is more documentation to back up the dates and specifics of an invention and its patent protection.

2. Trade secrets and patents are protected by different laws and statutes.

Patents are offered at the federal level, by the USPTO, while trade secrets are protected under state laws, usually by the Uniform Trade Secrets Act (USTA), except in a handful of states. In Arizona, for example, the USTA has been adopted and is part of the state’s statutes in Title 44, Chapter 4.

Only Massachusetts, North Carolina and New York have yet to adopt the USTA, though they have their own statutes regarding trade secrets and misappropriation.

3. Patents have a limited length of protection, while trade secrets have no time restrictions.

For the most common types of patents, inventors receive 20 years of protection from the time that the patent is filed. After this period, anyone, including competing businesses and inventors, can legally produce, distribute or sell the product.

With trade secrets, there is no fixed length of protection, and as long as the trade secret meets its requirements, it can be protected for an infinite amount of time. Coca-Cola, for example, has held its trade secret for decades and has successfully kept the public from knowing its confidential information.

4. Patents can be expensive to file, while trade secrets are essentially free.

Filing for a patent is considered an investment in a product’s future, and the cost of filing is one of the main considerations many investors weigh before pursuing legal protection. The process typically involves hiring legal help to complete an effective patent application, and if amendments are required, the cost of filing can fluctuate even more.

Trade secrets, however, require no paperwork and therefore, no filing or registration fees. This gives secrets a financial edge, but again, only for those products or processes that depend on confidentiality. If your business requires a patent, then the financial investment outweighs the risk of another party patenting an invention before you do.

5. Trade secrets are immediately effective; full patent protection can take years.

As soon as a trade secret is acknowledged and the owner of the secret takes the steps needed to ensure it’s a trade secret, it is immediately protected under the respective state laws on trade secrets.

According to the USPTO, the average patent application takes more than two years to be processed. Starting on the filing date, the inventor automatically receives “patent pending” status for the invention, which offers some protection to the inventor.

But full patent protection comes only after the patent has been approved, and in the two years that it may take to get approval, competing businesses or parties may come up with similar or improved products that can affect your invention’s future.

Deciding Which is Right for You

As you can see, patents and trade secrets offer varying levels of protection for intellectual property, and deciding what’s right for you and your product is based on your operation and goals.

In many situations, the best type of protection is a combination of trade secrets and patents – in the case of Coca-Cola, for example, they may keep their ingredient formulas a trade secret, but may patent a certain product in order to keep competing products off the market.

Determining what’s best for your business can be easier by discussing your needs with a qualified attorney. At JacksonWhite Law, our intellectual property team can help you focus on what matters most to you and your business. We can help create an effective intellectual property plan that allows you to best manage your assets and products. We may be based in Phoenix, but we work globally to offer inventors the best IP solutions.