Trade Secret vs Patent

11 Key excerpts on "Trade Secret vs Patent"

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  Nolo's Patents for Beginners

  • David Pressman, Richard Stim(Authors)
  • 2021(Publication Date)
  • NOLO

    (Publisher)

  For example, a complicated manufacturing machine with many new designs and that incorporates several new techniques can be covered as a trade secret merely by keeping the whole machine secret. To cover it by patent, on the other hand, many expensive and time-consuming patent applications would be required, and even then the patent wouldn’t cover many minor ideas in the machine. • Trade secret rights are obtained immediately, whereas a patent takes a couple of years, in which time, rapidly evolving technology can bypass the patented invention. Disadvantages of Trade Secret Protection The main disadvantage of trade secrets is that protection is lost if the public learns the secret by inspecting, dissecting, or analyzing the product (called “reverse engineering”). Because very sophisticated analytic tools are now available, many objects and methods can be analyzed and copied, no matter how complex. And remember, the law generally allows anyone to copy and make anything freely, unless it is patented or subject to copyright protection. Strict precautions must always be taken and continually enforced to maintain the confidentiality of a trade secret. If the trade secret is discovered legitimately (reverse engineered, accidentally posted on a company website, or by any other method), it’s generally lost forever, although the trade secret owner does have rights against anyone who obtains the trade secret by illegal means. CHAPTER 1 | PATENTS AND INTELLECTUAL PROPERTY LAW | 21 A trade secret can be patented by someone else who discovers it by legitimate means. For instance, suppose an inventor creates a new formula for a hair treatment lotion, and someone who has never even heard of the lotion comes up with the same formula and patents it successfully.

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  Video Game Law

  Everything you need to know about Legal and Business Issues in the Game Industry

  • S. Gregory Boyd, Brian Pyne, Sean F. Kane(Authors)
  • 2018(Publication Date)
  • A K Peters/CRC Press

    (Publisher)

  In modern times, a trade secret is loosely defined as some information that may be used for business advantage that a company keeps secret. This is the only form of IP that is not disclosed publicly; patents, copyrights, and trademarks all rely on some form of public disclosure. Trade secrets are company business secrets. A pretty good legal definition comes from the U.S. Uniform Trade Secrets Act, which defines a Trade Secret as follows:

  “Trade secret” means information, including a formula, pattern, compilation, program device, method, technique, or process, that: (i) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

  What Can Be a Trade Secret?

  Any idea can be a trade secret as long as it is an idea that confers some business advantage and can be kept secret. Trade secret rights can extend to virtually any concrete information that grants a business advantage such as formulae, data compilations, devices, process, and customer lists. The most well-known example of a trade secret is the formula for Coca-Cola. The formula is known by some people at the company, but it is not known for certain by anyone else. The secret has been held by the company for more than 100 years. Though many public descriptions exist, none have been verified.

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  Furthermore, great steps are taken to prevent anyone from discovering the secret. Other examples of trade secrets include notes on game development, business contacts, license terms, and other internal business items that are valuable to game development but not protected with the other IP tools.

  Two advantages of trade secret are that they have no registration cost and can be protected quickly. Trademarks require using the mark, and patents require an application and a lengthy approval process. Both also require registration fees. While there is no registration fee for trade secrets, it would not be entirely fair to say that their protection is free. A company must make structured efforts to keep valuable business information a secret if that company wants to claim that information as a trade secret.

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  Intellectual Property at the Edge

  The Contested Contours of IP

  • Rochelle Cooper Dreyfuss, Jane C. Ginsburg(Authors)
  • 2014(Publication Date)
  • Cambridge University Press

    (Publisher)

  This evidence impels the questions of how secret information must truly be to qualify as a trade secret, both with regard to reverse-engineerability and disclosures to third parties. The law tends to cut a good deal of slack for trade secrets to not be truly secret in this regard. On this metric, by comparison, patent law does a better job at disclosing inventions more widely. Yet there are ways in which patent law permits secret-keeping, with regard to the enablement standard and its statutory bars, in ways that come into tension with 129 Metallizing Engineering Co. v. Kenyon Bearing & Auto Parts Co., 153 F.2d 516 (2d Cir. 1946). 130 W.L. Gore v. Garlock, 721 F.2d 1540 (Fed. Cir. 1983). 131 Jonathan R. Siegel, “The Polymorphic Principle and the Judicial Role in Statutory Interpretation,” 84 Tex. L. Rev. 339, 363 n.131 (2005); see also Michael J. Meurer & Katherine J. Strandburg, “Patent Carrots and Sticks,” supra note 79, at 569. 132 Leahy-Smith America Invents Act, Pub. L. No. 112-29, §§ 3(b)(1), (n), 125 Stat. 284 (2011) (codified in 35 U.S.C. § 102). 133 Cf. Dreyfuss, “Trade Secrets,” supra note 95, at 11. Trade Secrets – US 293 trade secrecy provisions. Moreover, there are important questions about what the patent law puts into the public domain that cannot later be maintained as a trade secret. All in all, there is an interconnected jumble of disclosures and secrets in trade secrecy and patent laws, sometimes moving in the same direction and sometimes cutting against one another. These tensions have been long present and still remain mostly unresolved. 294 Jeanne C. Fromer 14 Patents and trade secrets in England: the case of Newbery v James (1817) Lionel Bently * Just as in the United States, where inventors are confronted with a choice between protecting their inventions by taking out patents or relying on the law of trade secrets, so in the United Kingdom a similar choice exists between patents and reliance on the law of breach of confidence.

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  Genetic Resources, Traditional Knowledge and the Law

  Solutions for Access and Benefit Sharing

  • Evanson C. Kamau, Gerd Winter, Evanson C. Kamau, Gerd Winter(Authors)
  • 2009(Publication Date)
  • Taylor & Francis

    (Publisher)

  According to Cornish and Llewelyn (2007) these are: (1) valuable information; (2) not generally known to the relevant portion of the public; and (3) being subject of reasonable efforts to maintain their secrecy (Cornish and Llewelyn, 2007, p308; Francis et al, 2007, p30f). Thus certain factors would determine what a ‘trade secret is and what is not’. These include: the extent to which the information is known outside the business; the extent to which it is known to those inside the business, that is, by the employees; the precautions taken by the holder of the trade secret to guard the secrecy of the information; the savings effected and the value to the holder in having the information as against competitors; the amount of effort or money expended in obtaining and developing the information; and the amount of time and expense it would take for others to acquire and duplicate the information. 20 Therefore, a trade secret is any valuable business information that is not generally known and is subject to reasonable efforts to preserve confidentiality. 21 Patent law does not offer any protection for trade secrets because they do not fulfil one of the conditions of patent protection, that is, disclosure. In addition, some of the trade secrets do not meet the patentability criterion of novelty, as they require only a minimal level of inventiveness (Francis et al, 2007, pp10, 22). 22 They are hence maintained through secrecy and transferred under an oath of no breach of confidence. For a breach of confidence (in respect of technical, commercial, personal and other information) to be actionable in the American and English courts, the following conditions are necessary: 1  The information itself must have the necessary quality of confidence about it (Cornish and Llewelyn, 2007, §8-09). No right of action would exist if the object is available in the open market and an obtainer is able to analyse it so as to find out its secret content (see Francis et al, 2007, p9)

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  Intellectual Property Overlaps

  Theory, Strategies, and Solutions

  • Robert Tomkowicz(Author)
  • 2013(Publication Date)
  • Routledge

    (Publisher)

  86 which is becoming more common as many inventions are initially created through computer simulation without the physical creation of the invention. And because only one patent can be granted for utility of identical or equivalent inventions, patent rights are most exclusive of all intellectual property rights – in the search for the patent monopoly there is only one winner. This unique characteristic of patent rights has profound consequences for overlaps of intellectual property rights, which is explored in subsequent parts of this chapter.

  Strong patent rights are balanced with various policy considerations that are expressed in specific statutory provisions. For example, in the UK the Crown can effectively take over a patent, subject to payment of compensation, on the bases of national security,87 or force exploitation of a patent contrary to the patentee’s decision.88 Similarly, in Canada, the federal or provincial government may request authorization to use patented inventions for the benefit of the general public without authorization of the patentee upon payment of reasonable fees,89 and in cases of national emergency this request cannot be denied.90 The government can also authorize use of medical patented inventions and set royalties for their manufacturing for humanitarian purposes,91 and impose compulsory licences when patent rights are abused.92 In this way, the general public, represented by the government, is protected to some extend from possible abuses of patent monopolies by patentees. The strength of patent monopoly is also offset by its relatively short 20-year duration.

  2.2 Patents and trade secrets

  Trade secrets are protected under the law of contracts, fiduciary obligations, and equity, which will pursue secret information into the hands of a third party who receives it with knowledge that it was communicated in breach of confidence.93 A trade secret may be a plan or process, tool, mechanism, or compound known only to its owner and his or her employees who need to know it. It may also be a secret formula known only to certain individuals who use it to compound an article of trade that has a commercial value or is used in a business, and which gives them an advantage over competitors. Trade secret is lost when it is discovered by an examination of the product or by any other honest way.94

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  Intellectual Property Excesses

  Exploring the Boundaries of IP Protection

  • Enrico Bonadio, Aislinn O'Connell, Enrico Bonadio, Aislinn O'Connell, Aislinn O’Connell(Authors)
  • 2022(Publication Date)
  • Hart Publishing

    (Publisher)

  9 and consequently by many countries around the world. There are three primary reasons why a business might opt for trade secrecy protection rather than patent protection. The first and most obvious reason pertains to the cost-effective nature of trade secrets as compared with patents. Indeed, while obtaining a patent is contingent on a time consuming and (often) expensive registration process, trade secrets obviously require no registration and have no public notice requirements. In some cases, the innovation might be relatively minor, thus not justifying such investment. The second reason is that trade secrecy and patents only partially overlap in their potential coverage. There remain areas where patent law would not apply (customer lists and data; research plans; business plans, etc), with trade secrecy law being able to provide protection for such information instead. Third, while patent protection lasts for a relatively short period of time (generally 20 years from the date of filing the application), trade secrecy may potentially be protected indefinitely, until the information becomes public, for example because it is uncovered through reverse engineering or other legitimate means.

  II.Manifestation of Excess in Trade Secrecy

  In the previous section I have highlighted the importance of trade secrets, and the rationales for protecting them. It seems however that over time and in light of new challenges trade secrets are slipping quietly from the domain of asset into the domain of liability. In other words, while such protection is intended to facilitate innovation and cooperation and safeguard economically relevant information, in certain circumstances it can be subject to abuse due to excessive protection. What follow are five distinct scenarios where such excesses may materialise.

  A.Trade Secrecy and Non-Compete Clauses

  Movement of workers from one workplace to another is no longer a unique phenomenon. In the modern economy, mobility of employees has become prevalent. This is likely to further expand in the coming Metaverse era.10 As such, the risk of trade secret exposure by employees (whether inadvertent or deliberate) has risen. Consequently, many employers have resorted to pre-emptive measures by inserting non-compete terms into employment agreements. It is worth noting that there is no unified legal approach towards dealing with this.11 For example, according to Kesan and Hayes given the variations among states in the US, with respect to non-compete agreements it is difficult to enforce such agreements across state lines.12 They further point out that some jurisdictions such as California ‘explicitly prohibits almost all application of non-competes’.13 Kesan and Hayes also observe that other states restrict the use of these agreements (eg Massachusetts, Minnesota).14 These differences in non-compete clauses depend on the specific interests that laws want to protect and types of market. In a market where movement of information is encouraged in order to preserve worker mobility, non-compete clauses would be limited or even prohibited. Conversely, in more conservative settings these clauses would tend to be tolerated. The issue is indeed contentious given the clash between the two legitimate and opposing interests of both the employers and employees.15

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  The Economic Structure of Intellectual Property Law

  • William M. Landes, Richard A. Posner, William M. LANDES(Authors)
  • 2009(Publication Date)
  • Belknap Press

    (Publisher)

  The net expected benefits of patent infringement must sometimes be positive, or there would be little or no patent infringement liti-gation. One way to avoid infringement is not to patent. An invention, moreover, may have only modest value, and obtaining pat-ent protection involves nontrivial fixed costs of preparing the patent applica-tion as well as the substantial maintenance fees that we discussed in Chapter 11. Protecting a trade secret avoids these costs. And while it requires expen-ditures on preventing disclosure of the secret, these should be roughly pro-portional to the value of the secret to prospective appropriators (only roughly because other factors affect the cost of keeping an invention secret, such as how many people within the company must be privy to it in order for it to be exploited effectively). More resources will be devoted to trying to discover a trade secret the more valuable the secret is believed to be. Since the cost of defense is therefore likely to be low when the secret is of modest value, trade secret protection will often be cheaper than patent protection and the differ-ence may exceed the difference in benefits arising from the fact that patent protection is broader and, in the posited case, lasts longer. In addition, the cost of obtaining a patent must be incurred in every case in which a patent is obtained, regardless of the patent’s commercial value, whereas the cost of es-tablishing trade secret protection is incurred only if the secret turns out to be sufficiently valuable to incite someone to try to steal it. Then too, “lasting longer” is not always a source of significant additional value because of dis-counting to present value, technological change, or shifting consumer prefer-357 The Economics of Trade Secrecy Law 357 8. Only about 2 percent of patents are challenged in litigation, but when there is a patent suit and it is not quickly settled, the cost is considerable.

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  Business Law and the Regulation of Business

  • Richard Mann, Barry Roberts(Authors)
  • 2019(Publication Date)
  • Cengage Learning EMEA

    (Publisher)

  928 And he that invents a machine augments the power of a man and the well-being of mankind. HENRY WARD BEECHER (1870) 1. Explain what trade secrets protect and how they may be infringed. 2. Distinguish among the various types of trade symbols. 3. Explain the extent to which trade names are protected. 4. Explain what copyrights protect and the rem- edies for infringement. 5. Explain what patents protect and the remedies for infringement. I NTELLECTUAL PROPERTY I ntellectual property (IP) is an economically significant type of intangible personal property that includes trade secrets, trade symbols, copyrights, and patents. These interests are protected from infringement, or unau- thorized use, by others. Such protection is essential to the conduct of business. For example, a company would be far less willing to invest considerable resources in research and development if resulting discoveries, inventions, and processes were not protected by patents and by regula- tions safeguarding trade secrets. Similarly, a company would not be secure in devoting time and money to mar- keting its products and services without laws to defend its trade symbols and trade names. Moreover, without copyright protection, the publishing, entertainment, and computer software industries would be vulnerable to piracy, both by competitors and by the general public. In this chapter, we discuss the law protecting (1) trade secrets; (2) trade symbols, including trademarks, service marks, certification marks, collective marks, and trade names; (3) copyrights; and (4) patents. TRADE SECRETS [40-1] Every business has secret information. Such information may include customer lists or contracts with suppliers and customers; it may also consist of secret formulas, processes, and production methods that are vital to the successful operation of the business.

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  Design of Biomedical Devices and Systems, 4th edition

  • Paul H. King, Richard C. Fries, Arthur T. Johnson(Authors)
  • 2018(Publication Date)
  • CRC Press

    (Publisher)

  Intellectual Property Patents, Copyrights, Trade Secrets, and Licensing

  Ultimately property rights and personal rights are the same thing. Calvin Coolidge The march of invention has clothed mankind with powers of which a century ago the boldest imagination could not have dreamt. Henry George

  Intellectual property (IP) is a generic term used to describe the products of the human intellect that have economic value. IP is “property” because a body of laws has been created over the past 200 years that gives owners of such works legal rights similar in some respects to those given to owners of real estate or tangible personal property. IP may be owned, bought, leased (licensed), and sold the same way as other types of property.

  There are four separate bodies of law that may be used to protect IP. These are patent law, copyright law, trademark law, and trade secret law. Each of these bodies of law may be used to protect different aspects of IP, although there is a great deal of overlap among them.

  20.1 PATENTS

  A patent is an official document, issued by the U.S. government or another government, which describes an invention and confers on the inventors a monopoly over the disposition of the invention. The monopoly allows the patent owner to go to court to stop others from making, selling, or importing the invention without the patent owner’s permission. This amounts to a “fence around the property,” the property being the patent itself.

  Generally, an invention is any device or process that is based on an original idea conceived by one or more inventors and is useful in getting something done or solving a problem. An invention may also be a nonfunctional unique design or a plant. But when the word “invention” is used out in the technical world, it frequently implies a “utility patent” which means a composition, device, or process. In order for an invention to be patentable, it must meet three criteria: novelty, nonobviousness, and usefulness. Many inventions, while extremely clever, do not qualify for patents, primarily because they are not considered to be sufficiently innovative in light of previous developments. The fact that an invention is not patentable does not necessarily mean that it has no value for its owner.

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  The Organizational Contract

  From Exchange to Long-Term Network Cooperation in European Contract Law

  • Stefan Grundmann, Fabrizio Cafaggi(Authors)
  • 2016(Publication Date)
  • Routledge

    (Publisher)

  According to the second premise, it should be pointed out that any information regarding an element related to the company may be considered a trade secret. This is true whether the information has to do with the technical and production divisions of a company (formulae, manufacturing methods or processes, designs, information regarding the optimization, organization or maintenance of a product, a process or industrial facility, the products themselves as well as the specifications for their manufacture, the results of research or analyses, etc) or whether it concerns the commercial, organizational, financial or other spheres of the company (business, marketing and new product development plans and strategies, information on clients and suppliers and, specifically, their identities, purchasing habits, addresses, prices, information regarding the techniques or ways of organizing business activities, production costs and the calculation thereof, sources of funding, market strategies and studies, business methods, etc).

  The Secret Nature of Information

  The next requirement for certain information to be deemed a trade secret is of course, as per Article 39.2 of the TRIPS, for it to be secret. Simply stated, the information must not be in the public domain. The confidential status of information is really the basic foundation underpinning the entire trade secret protection system, because its value lies in this element, as this chapter will try to show.

  Even so, this aspect, i.e. whether specific information shall be deemed as secret, is not as easy to determine as it would initially appear. Courts and scholars have offered several approaches that illustrate how difficult this task is.

  Article 39.2 of the TRIPS lays down two criteria along these lines: firstly, the information must not be generally known; and secondly, it must not be readily available to interested third parties. In our view, this latter criterion is the only pertinent one to determine when an information is indeed secret because the first – requiring that the information not be generally known – brings about two major drawbacks: the first is the difficulty in drawing the line, because those who support this approach must back the opinion that information loses its secret nature at an intermediate point which is somewhat blurry and falls between absolute secrecy and the complete opposite, that is for it to be known by all. Needless to say, such a point is difficult to define. The second

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  What Every Engineer Should Know About Starting a High-Tech Business Venture

  • Eric Koester, Philip A. Laplante(Authors)
  • 2009(Publication Date)
  • CRC Press

    (Publisher)

  396 What Every Engineer Should Know About Starting a High-Tech Business Venture Taking Advantage of “Free” and “Low-Cost” Intellectual Property Protections When new entrepreneurs are told about the average price tag for a patent (between $15,000 and $25,000), they may become concerned that their bootstrapped startup just won’t ever be able to make it. However, what you must remember is that patents only represent one piece of an intellectual property strategy for a high-tech company, and several key aspects of that strategy do not involve expensive filings or fees. There are three key areas that all high-technology companies should incorporate into their business from the beginning: (1) trade secrets, (2) copyrights, and (3) agreements to retain the rights to your company’s inventions. Trade Secrets As discussed previously, trade secrets include any information (formula, technique, pat-tern, physical device, program, idea, process, compilation of information, or other infor-mation) (1) that provides a business with a competitive advantage (that is generally known and not readily discoverable), and (2) in which the individual or company takes reasonable steps to protect the secret and maintain these protections, absent improper acquisition or theft. The scope of trade secret protection can be incredibly broad and, therefore, can be a key tool for startups. From day one, the founders of the company should put a trade secret protection policy in place. This policy will limit the disclosure of key information internally and externally to prevent information from being spread inappropriately. ASPECTS OF A TRADE SECRET PROTECTION POLICY Company Confidential Documents and Materials Label any proprietary or confidential documents and materials as “confiden-• tial” or “proprietary.” Use password protections on key files and programs. • Require all confidential or proprietary documents to be locked in file cabi-• nets, desks, or company safes.

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