Trade Secret Or Patent Protection – How Do We Decide?

In our recent article on trade secrets, we indicated that virtually anything that adds value to a business could be regarded as a trade secret, and this may include any method, formula, device, process or information (technical or business, e.g., a list of suppliers) that gives the owner a competitive advantage. In this article, we focus on the factors to consider when determining how to protect technological innovation, and particularly whether to patent or keep as a trade secret.

In our first piece article of the series, we also mentioned possibly the world's most famous trade secret - whose recipe or "chemical composition" has been kept secret since the 1880s. This "product and method" fades into insignificance compared to the "secret" method of making Chartreuse liqueur. This was first "invented" in 1605 and has been in commercial production since 1737. So, it can be done provided protection strategies are well-planned and implemented. When it comes to technical innovations, we start by considering patentability criteria. Most jurisdictions have five main requirements for patentability. These are:

The patentable subject matter, Novelty, Utility, Whether the innovation involves an inventive step (the obviousness test), and finally Whether the innovation has had prior commercial use (e.g., A key test: has the product been sold already?). Because trade secrets have no specified criteria, they also can be considered to fit these patentability requirements - except, unlike patents, there is no Patent Office examination process to test them. The last criterion is always an area where organizational awareness is frequently lacking and can have a detrimental impact. Often innovative companies may prevent themselves (inadvertently or otherwise) from obtaining patent protection by commercially using (such as selling) their innovation before filing a patent application. In such circumstances, the only protection remaining is a trade secret, provided that the company can retain that status and manage the secret- now and in the future! We strongly recommend the training of commercial and technology team members to increase awareness of these criteria to manage this commercialization risk.

Given the background outlined above, we can now look at several questions that should be raised when making a conscious decision.

To patent or to keep secret?

The first issue is the subject matter. All jurisdictions have limitations on the patentable subject...