“We’ll just keep it a trade secret.”
It is one of the most common statements we hear from inventors discussing a new technology. Sometimes it reflects prior legal advice. More often, however, it stems from a common misconception that choosing not to file a patent application somehow creates trade secret protection.
Unfortunately, that is not how trade secret law works.
A trade secret is information that derives economic value from not being generally known or readily ascertainable and that is subject to reasonable efforts to maintain its secrecy. Simply deciding not to file a patent application does not create a trade secret. If the information becomes public or can be lawfully discovered through reverse engineering or independent development, trade secret protection may be lost.
Maintaining a trade secret also requires more than keeping quiet. Companies must take affirmative steps to preserve confidentiality through measures such as non-disclosure agreements, restricted access policies, employee confidentiality obligations, security protocols, and other documented practices designed to keep the information secret. Without those safeguards, what a company believes to be a trade secret may simply be unprotected information.
The patent system was designed around a different philosophy. In exchange for publicly disclosing an invention, the inventor receives a limited right to exclude others from making, using, offering for sale, selling, or importing the invention. When that exclusivity expires, the public benefits from the disclosure, allowing future innovators to build upon the technology. That exchange has fueled innovation for generations.
Trade secrets certainly have their place. Manufacturing methods, source code, algorithms, formulas, customer lists, and internal business processes that can realistically remain confidential may be excellent candidates for trade secret protection.
Many commercial products, however, are different.
Once technology is embodied in a product that can be purchased, inspected, tested, or reverse engineered, maintaining secrecy may be difficult or impossible. Even where reverse engineering is not straightforward, the burden of preserving confidentiality remains with the company. For many commercial inventions, the practical value of trade secret protection may therefore be limited.
We were reminded of this recently during a consultation with a potential client. Years earlier, the company decided not to pursue patent protection because it believed the technology could simply remain a trade secret. By the time it sought patent counsel, the product had long since entered the marketplace and the opportunity to obtain meaningful patent protection had passed.
The unfortunate reality is that, for many commercial innovations, the choice is not patent or trade secret. The choice is often patent or nothing at all.
That does not mean trade secrets lack value. To the contrary, they can be extraordinarily powerful when applied to information that can realistically remain confidential. But many inventors overestimate their ability to keep an invention secret once it becomes part of a commercial product.
For companies bringing technology to market, the better question is often not:
“Should we keep this a trade secret?”
Instead, it is:
“Can this realistically remain a trade secret at all?”
If the answer is no, delaying a patent strategy may mean that by the time the question is asked, the opportunity has already been lost.
*Please note that this article is not legal advice; it is not a legal opinion; nor should you rely on it as legal advice or as a legal opinion. This article merely expresses the author’s general thoughts on a topic regarding the business of patents. Nothing in this article establishes any form of an attorney client relationship between you, the reader, and the author of this article.
