Under lock and key: weighing the pros and cons of patents and trade secret protection.

• Author: Nielsen, Eric
• Position: Legal Brief

patents can undoubtedly be powerful r swords, offering owners up to 20 years of exclusionary rights in exchange for enabling public disclosure of the invention. Trade secrets, on the other hand, can protect an invention indefinitely. Why, then, are patents still considered king by investors? Why did the Coca-Cola Company maintain its famous recipe as a trade secret?

There is considerable overlap between the subject matter that is protectable by patents and by trade secrets. The Uniform Trade Secrets Act (UTSA) defines a trade secret as "information, including a formula, pattern, compilation, program, device, method, technique, or process." The U.S. patent laws identify a patentable invention as "any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof."

Below are several key considerations when faced with the choice "to patent, or not to patent." Is the invention likely to be independently discovered or reverse engineered?

Is it even patentable? At the very moment an invention is made public, trade secret protection is lost forever. So if the invention is likely to be independently discovered or reverse engineered, reliance on trade secret protection is not appropriate, and patent protection should be considered.

Conversely, a trade secret need not be patentable to be protectable and have value. If the invention does not meet the standards for patentability, even limited trade secret protection may be preferable in favor of public disclosure with no patent protection, notwithstanding the risks of independent discovery and reverse engineering.

What is the commercial lifetime of the invention? The process to obtain a patent from the U.S. Patent and Trademark Office (USPTO) can take several years. While there are some limited opportunities for accelerated and prioritized examination before the USPTO, examination on average takes two years to begin and lasts an additional year. Ultimately, if a patent is issued, its term is 20 years from the earliest filing date.

As a result, if the commercial lifetime of the invention is less than about three years, trade secret protection should be considered. This is because a patent on an obsolete invention may have only nominal value. Similarly, trade secret protection may be ideal if the invention's commercial lifetime is more than about 20 years. For example, had Coca-Cola filed a patent application on its recipe in the late 1800s, any...