Introduction
What are trade secrets and patents, and what do they protect?
Advantages of patents over trade secrets
Advantages of trade secrets over patents
Comment
Filing patents is often an important part of innovative companies' IP strategies. However, patents are not the only way to protect an invention. In some cases, filing a patent application is not recommended.
A patent application is usually published 18 months after its filing date (or its priority date), which means that all the technical details and know-how described in it will become publicly available. This may have important ramifications for businesses and may influence the way in which they protect their innovations.
This also raises important questions – for example:
- Do businesses want to give their competitors access to the technical data and know-how of their inventions or would they prefer to keep this information secret?
- Does it make sense to systematically file a patent for every invention?
What are trade secrets and patents, and what do they protect?
Trade secrets
According to the EU Directive on the Protection of Trade Secrets,(1) a trade secret is information that:
- is secret;
- has commercial value because it is secret; and
- has been subject to reasonable steps to keep it secret.
Trade secrets are typically used to protect:
- chemical formulae;
- composition recipes;
- manufacturing processes;
- analytical methods;
- lists of clients and suppliers;
- marketing analysis;
- software;
- research and development (R&D) data;
- know-how;
- financial information;
- business methods; and
- pricing information.
Patents
A patent is a registered IP right. According to the European Patent Convention (EPC),(2) an invention is patentable if it is:
- novel;
- inventive; and
- susceptible of industrial application.
Patents may, for example, protect:
- devices;
- chemical compounds;
- compositions (ie, mixtures of compounds);
- processes or methods;
- uses;
- systems; and
- computer-implemented inventions.
However, not everything may be patented. The following are not considered to be inventions under the EPC and thus may not be patented:
- discoveries;
- scientific theories and mathematical methods;
- aesthetic creations;
- schemes, rules and methods for performing mental acts, playing games or doing business;
- computer programs; and
- the presentation of information.
Some workarounds exist regarding computer programs (for further details, see "IP protection for software in Europe"). Some inventions are also explicitly excluded from patentability, such as:
- those which are contrary to public order or morality;
- plant or animal varieties or essentially biological processes for the production of plants or animals;
- methods for treatment of the human or animal body by surgery or therapy; and
- diagnostic methods practised on the human or animal body.(3)
Advantages of patents over trade secrets
It may be tempting to think that the best strategy is to keep everything secret and never file any patent applications. However, this may not be the most appropriate strategy in most cases.
Information may be considered as a trade secret only if, among other things, reasonable steps were taken to keep it secret. These steps may include, for example:
- setting up non-disclosure agreements;
- controlling and restricting internal access to the information; and
- notifying employees of the nature of the information they are accessing.(4)
It is thus clear that an effective trade secret strategy requires more than simply declaring that a given piece of information is secret.
Further, a trade secret is not considered to be infringed if a competitor commercialises a product that it has independently developed (without the knowledge of another company's trade secrets). However, that same competitor may still infringe a patent. This is an advantage that patents have over trade secrets.
Another advantage of patents is that they can be used for marketing purposes and for attracting investors. This is obviously more difficult with trade secrets, as they have to remain secret.
Further, patents can be used as tools in negotiations. For example, a business may be contemplating whether to put on the market a product that appears to infringe a patent of its main competitor. If the business possesses a patent of a narrower scope that protects the product in question, it and its competitor could prevent each other from exploiting the product. As a solution to this situation, the business may wish to offer a licence to its competitor in exchange for a licence to the patent of its competitor. Clearly, the outcome of this situation would be different if the business had chosen to keep its invention secret.
Both patents and trade secrets can be sold or licensed – in some cases, this can generate a significant amount of revenue.
Advantages of trade secrets over patents
Patents are registered rights that are valid for 20 years (from the filing date) and are obtained after an examination procedure. Moreover, renewal fees must be paid in order for them to remain valid. However, trade secrets do not necessitate registration, and they can in theory exist for more than 20 years.
Further, financial information, marketing studies and pure data (eg, R&D data) may not be patentable. Therefore, it is clear that one of the advantages of trade secrets over patents is that their potential scope of protection is a lot broader.
Some companies choose to protect at least part of their inventions as trade secrets. Prior use rights may be invoked by a company in order to keep exploiting a given invention protected by a patent owned by a competitor. However, in order to prove prior use, a company must prove that it used the patented invention before the filing date (or the priority date) of the patent. In practice, prior use is not always easy to establish and it is limited to a given territory.
If the details of the invention will be made public anyway, filing a patent application is obviously the most appropriate form of protection. The same applies if the invention concerns a product that can easily be retro-engineered by a competitor.
Another important point to consider is whether a potential infringement is easily detectable. For example, a patent covering a manufacturing process would be of little use in terms of conferred protection if it is impossible to establish whether competitors are using such manufacturing process. However, this does not mean that filing a patent application in those cases is not necessary. It might be difficult to detect the infringement now, but this may not always be the case.
The decision to file a patent application or to keep an invention secret depends on the type of technology, the context and the risk a company is willing to take. The choice must be made on a case-by-case basis. In many cases, a blended approach is most appropriate – that is, patenting some aspects of the invention (eg, the characteristics of the product and part of the production process), while keeping other aspects of the invention as trade secrets (eg, some parameters of the production process). Also, after filing a patent application, the applicant retains the possibility of withdrawing it before publication, thereby keeping it secret. The withdrawn patent application can be used as evidence to show that, at the filing date, the (ex-) applicant developed a given invention. This could be useful in a trade secret or patent entitlement dispute arises.
For further information on this topic please contact Roland Duchêne at GEVERS by telephone (+32 2 715 3711) or email ([email protected]). The GEVERS website can be accessed at www.gevers.eu.
Endnotes
(1) Directive (EU) 2016/943 of the European Parliament and of the Council of the 8 June 2016 on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure, Official Journal of the European Union, 15 June 2016, L 157/ 1-18.
(2) Convention on the Grant of European Patents as in force since 13 December 2007, Part II, Chapter I, article 52 – Patentable inventions.
(3) Id, article 53 – Exceptions to patentability.
(4) David W Slaby, James C Chapman and Gregory P O'Hara, "Trade Secret Protection: An Analysis of the Concept Efforts Reasonable Under the Circumstances to Maintain Secrecy", 5 Santa Clara High Tech L J 321 (1989). See also "Trade Secrets", World Intellectual Property Organization.