How does trade secret protection compare to patent protection in the United States? Is trade secret protection more cost-efficient or of longer duration? As a preliminary matter although there is a federal law for misappropriation, trade secret law is generally determined on a state by state basis. Consequently, prior to investment in trade secret or patent protection, the law of a business’ state(s) should be reviewed.
Initially the business owner must determine whether a product or method is patent-eligible. If not, there is no option except trade secrets (or maybe contracts or copyright registration). For example, perhaps your business has developed a confidential customer list. A customer list generally is not patent eligible in the United States, and trade secret protection is the only option available.
Secondly although patents may be preferable in a particular situation, deadlines for filing a patent application may have expired. For example, perhaps there is a chemical formula that is patent eligible but the non-extendable deadline for filing an application has expired. Again, your only option is the trade secret route. As another example, perhaps your business has developed a machine implemented production method. Although the deadline for filing a patent application has expired, no one in the facility has access to the machines except on a need to know basis. If other requirements for trade secret protection are otherwise met, then the machines may qualify for trade secret protection.
A great advantage of trade secret protection is its potentially infinite duration. In contrast, a patent is maximally enforceable for twenty years from the initial filing of the application. As a practical matter this time period is generally less if an application requires several years to victoriously emerge as a patent from the patent office. There is also a progressively shorter lifetime for subsequent related applications that are filed serially in the patent office. Why? Because each subsequent related application’s lifetime is measured from the filing date of the initial application (often referred to as the “parent” application).Consequently whenever a related application is filed in the patent office later in time, the enforceable lifetime of each successive patent will be correspondingly shorter.
The potentially infinite lifetime of a trade secret is an advantage over this patent timetable. Maintenance of trade secret status can be tricky as will be explained in a subsequent article. Nevertheless, well-known examples of trade secrets that have withstood the test of time include formulas for Coca-Cola® beverages. For a large company maintenance of trade secrets is an expensive ongoing process that could approach or exceed the cost of a patent portfolio. This process invariably includes a comprehensive in-house trade secret policy. Ongoing protection also requires a close relationship with an attorney who is familiar with the client’s business. For a smaller business there will be analogous expenses, but the overall cost will generally be less with fewer employees and vendors.
Access to an attorney who can appear in court at short notice to preempt dissipation of a trade secret is also recommended. However, to reduce the statistical probability that such emergencies will occur, for companies of all sizes vigilance and enforcement of a savvy internal trade secret policy may save the day.
© 2010 Adrienne B. Naumann
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