Companies often grapple with the difficult decision of how to protect their innovations: apply for a patent or maintain a trade secret. This decision typically hinges on many factors. Significant factors include the state of the technology, competitive landscape, and merits of succeeding at the Patent Office. Companies may also treat their intellectual property differently based on their economic circumstances and respective business models. Fortunately, in some limited instances, the company may delay this decision, at least for a period of time, by keeping their patent application confidential until it issues.
A company may consider using a patent portfolio to protect its market space, create a licensing strategy, add tangible assets, and defend against other portfolios, among other strategic business concerns. For instance, an independent solo inventor often lacks the capital to develop the technology and will therefore look to sell or license the intellectual property. This entity therefore needs a tangible asset that can be licensed and to prevent an acquirer from simply taking the idea. Start-ups may pursue a patent to protect their core technology, carve out new space in a particular industry, or bolster their intellectual property portfolio to increase valuation. Similarly, large corporations may file patent applications to protect improvements to existing products, as well as for defensive purposes. In particularly litigious industries, companies will develop or acquire a patent portfolio as ammunition to defend against infringement claims from competitors. A perfect example of dueling portfolios is the Apple and Samsung patent disputes over their mobile phones. Therefore, this option is available for technology, methods of manufacturing, and processes that are innovative, and where the company has the funds to prosecute an application to obtain protection for 20 years from filing.
On the other hand, maintaining an invention as a trade secret can be a viable strategy as well. For start-ups and large corporations, maintaining secrecy of an invention can be very lucrative. If a company creates sufficient safeguards to protect its secrets, then the protection can be maintained indefinitely. The classic example here is the secret formulation of Coca Cola®. Therefore, this option is available for technology, methods of manufacturing, processes, and other company information that can be kept a secret through sufficient company policies and safeguards.
In certain circumstances, both options are viable. However, such a strategy is very nuanced and requires sufficient preparation prior to execution. This is because patent applications automatically publish 18 months from the earliest filing date associated with the application. Thus, upon publication, any trade secret status of the confidential information in the application is lost. To make matters worse, in some cases, the disclosure of a general combination (e.g. formula of a compound) may destroy secrecy of a specific ratio within the broader range, even if the narrow ratio had not been explicitly disclosed. Therefore, segregating the trade secret information from a patent disclosure is treacherous.
However, a company may strategically consider disclosing trade secret information in a patent application to buy time to make the decision between patent protection or trade secret protection. A patent application may be held confidential during its examination if it is filed with a nonpublication request. But this comes with several caveats. The biggest restriction on this strategy is that it is limited to the United States. A foreign patent application cannot be filed while the non-publication request is pending. Other restrictions include the timing of the request, as well as providing notice to the patent office of certain activities.
As such, a company that is not interested in pursuing a patent in another country may include trade secrets within a patent application and file it with a non-publication request to “test the waters.” If the application is ultimately granted, the patent will publish and the secrecy is destroyed. But the company has presumably now protected the idea in the form of a patent. If the case is ultimately unsuccessful, or the company decides not to continue prosecuting the application, it can be abandoned. Since the application has not been published, the disclosure remains secret. Here, the intellectual property in the form of a trade secret is retained.
There are some tradeoffs, however, to employing this strategy. A published patent application serves as constructive notice and may allow the patentee to accrue reasonable royalties for infringement as of the date of publication. Therefore, not publishing the application could mean foregoing the royalties accumulated between the dates of publication and patenting. Since the application can be pending several years before it is patented, the amount or royalties in this period can be substantial. Further, if an application is not published, it cannot serve as prior art against another application. Therefore, the non-published patent application will not be used as prior art against competitor patents until it issues. In a heavily patented and competitive technical area, a published application can be useful at blocking efforts of competitors.
Companies faced with the decision of protecting their ideas in the form of a patent or a trade secret may benefit from filing an application with a non-publication request. However, anyone contemplating this strategy should seek advice from counsel.