Fortunately for small businesses, trade secret protection can be significantly less expensive than a portfolio for patent-eligible assets. It also goes without saying that the possibility of perpetual confidentiality and legal protection are attractive to any business organization. However, there are downsides to trade secret protection of which business owners should be aware.
As an initial example, from the instant the trade secret comes into existence it must be protected as such, and in a manner to be addressed in a subsequent article. Even if your business complies with trade secret requirements from inception, if these requirements are subsequently ignored, then that information, product or service loses trade secret status. Moreover, subsequent resumption of the legal requirements for trade secrets will not reinstate that status.
Another downside is independent development of the identical trade secret by third parties. If this occurs, then the third party has the same ownership and other rights to the trade secret as the original developer. This is the result because there is no ‘first in time’ requirement for trade secret development and exploitation, as is the case with patenting an invention. This is clearly the law even though courts generally follow patent law to determine trade secret ownership.
Another disadvantage of trade secret protection is the risk that a third party will independently develop the project and obtain a patent thereon. The earlier and original developing business that selected the trade secret protection route is now an infringer unless it abandons its own trade secret! This consequence is disastrous for your businesses and your investors, especially if you were originally advised to obtain patent protection for this particular asset.
A fourth downside of trade secrets that obviously follows is that they be maintained in secret. There is no such requirement for United States copyright protection of eligible works that are exposed to the public. With United States copyright a work is protected and owned from the moment it is embodied in a tangible object, and even if it is not registered in the Copyright Office. Examples of these works include: a drawing, manuscript or software code. This means that even if these works are exposed to the public prior to registration, the copyright owner still owns the rights (although the work must be registered to be eligible for judicial remedies).
Patents differ from copyright and trade secrets because one does not automatically own patent rights to an invention as soon an idea is implemented within a tangible object or method. Furthermore, after the application becomes a patent and the rights are created, the invention details are immediately and continuously available the public. However, despite this exposure the patent owner reserves the right to exclude others from making, using or selling the invention. patent. This advantage further differentiates patents from trade secret protection in a very significant manner.
The business owner must be vigilant for trade secrets embedded within a pending United States patent application. If the applicant does not submit a document requesting non–publication, then approximately eighteen months after filing the application the patent office will publish the application globally. Consequently, prior to filing the business owner must determine whether there are trade secrets in the application that will lose that status if published by the patent office. Your experienced patent attorney should be consulted prior to making this complex and financially important determination.
© 2010 Adrienne B. Naumann
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