When to Use Trade Secrets Rather than Patents

If you’re a small business with an invention, process, formula, or similar type of intellectual property, you may balk at the cost of patenting it. In some cases, keeping it as a trade secret may be a preferable option to filing for a patent.

Difference between Trade Secrets and Patents

Patents are official government licenses that give you exclusive rights to profit from your inventions for a set period of time. It covers such items as manufacturing, reverse engineering, or selling your invention.

Trade secrets, on the other hand, are processes, formulas, designs, instruments, etc. that derive value from being kept secret. They may range from something as simple as a secret recipe to complex tech such as search engine algorithms.

Ideal Scenarios for Trade Secrets

In general, keeping a piece of intellectual property as a trade secret has various advantages over patents, including:

  • No time limit – Patents are limited to 20 years of protection, while trade secrets last as long as you can protect them.
  • Less paperwork – Trade secrets don’t require any paperwork or specific compliance. You simply have to keep them safe through your own efforts.
  • No disclosure – Patents are made public, which could put your invention at risk. Trade secrets require no disclosure.
  • Potentially low upfront cost – Trade secrets have no registration costs, though some investors may be needed to keep them secure.

With these items in mind, let’s look at a few scenarios where a trade secret might be the preferable means of protecting your IP.

Can Be Practiced Privately

If your invention, process, etc. can be practiced without making it public, keeping it as a trade secret could well be a viable option. Doing so can be especially valuable for preventing reverse engineering.

Commercial Viability Extends Beyond 20 Years

Many inventions don’t remain commercially viable long enough for the patent to expire, while others can last far longer. If yours looks like it could be profitable for decades to come, keeping it as a trade secret could be the best course.

High Complexity

In some cases, highly complex IP (such as software) is best kept secret rather than disclosing it as a patented invention. If it’s made public, it may be possible for competitors to find workarounds that can mimic your invention without violating the patent. Additionally, that complexity will make the filing process all the more harrowing, so it could save precious time and resources to avoid that process.

Few Resources

Filing a patent takes time and money, especially for complex inventions that may result in long hours of legal writing. As such, it may be more cost-effective to safeguard your idea as a trade secret rather than a patent.

When Using Patents Would Be Better

While there are many use cases for trade secrets, there are still instances where a patent would be preferable. If your invention can’t be practiced without making it public, it may be better to patent it rather than rely on internal controls to keep it secret.

Additionally, if your invention is susceptible to reverse engineering, patenting it would likely be better since it safeguards against that.

Choosing the Best IP Protection Strategy

Ultimately, choosing the best IP protection strategy depends on your business, its resources, and the type of IP you’re trying to protect. An attorney—like us at Hart David Carson LLP—can help you through that process.

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