To Patent Or Not To Patent, Is That The Question?

A technology driven company whether large, medium or small and at every stage of its life cycle or development will need to consider the question of whether to patent or not to patent. Often a business chooses to refrain from filing a patent application at a particular point in time and instead relies on the law of confidential information and trade secrets as a form of protection.

Whilst trade secrets are the most intangible of intangible assets, they are nonetheless valuable business assets that play an important role in fostering innovation and in creating a competitive edge. Not surprisingly, there is significant commercial value in protecting trade secrets. Many innovative companies are increasingly relying on trade secrets to give them a competitive advantage but the legal landscape in Europe is not that easy to navigate.

So are trade secrets an alternative to patent protection - should the question that you ask be: to patent or not to patent? should you rely on trade secrets and confidential information instead of patents?

The position in the UK

The UK has one of the most well developed regimes for the protection of confidential information including trade secrets. What is loosely termed "The Law of Confidential Information" has developed over many years through a combination of the common law, equitable rights and contract law.

The law of confidential information requires the information to:

have the necessary quality of confidence; be disclosed in circumstances importing an obligation of confidence; and be used without permission to the detriment of the party communicating it. We have to rely on case law to determine whether something has the necessary quality of confidence in that: "it must not be something which is public property and public knowledge"1. Whether an obligation of confidence arises is subjective and one needs consider whether "a reasonable man standing in the shoes of the recipient of the information would have realised that upon reasonable grounds the information was being given to him in confidence"2.

"An action in breach of confidence is based ultimately on conscience"3 and in order for the conscience of the recipient to be affected, he/she must have agreed or must have known that the information was confidential. Thus a person who receives confidential information in circumstances where he/she does not appreciate that it is confidential is unlikely to be liable for misuse of confidential information, unless he/she is found to have "blind-eye knowledge". Nonetheless, if that person becomes aware that the information is, in fact, confidential he/she will become liable from that moment.

The courts in the UK are already sympathetic to the importance of maintaining alleged confidential information out of the public domain and there are arrangements that one can put in place without too much difficulty (as long as, of course, there is justification for it) to preserve...