Patent vs Trade Secret: The Differences

Patent vs Trade Secret: The Differences

Patents and trade secrets are unique intellectual property rights. These IPRs help you to protect and monopolise your inventions and creations.

The differences between patents and trade secrets lie in the nature of IPR protection each of them offers. While patents provide you with the exclusive rights to gain a monopoly and commercial benefits from your invention, trade secrets are formulas, processes and business information properties that  derive their commercial value from being kept as an active secret. Businesses that succeed are often those that offer something unique to their customers. It is this uniqueness and exclusivity that draws the customers’ attention and makes them choose one brand over another. A classic example of brand loyalty is the division of the cell-phone consumer market – where one group prefers Apple’s iOS system, whereas the others are Android users.

Customers are attracted to products and services that can give them a high value for their money spent, despite the presence of thousands of similar products in the market. Though brand loyalty and exclusivity may seem like every day, mainstream words, it takes years of hard work and research to build a customer base – all of which starts with practices like filing patents and safeguarding trade secrets. So what are these two business practices? This article draws a comparison of the differences between patents and trade secrets. Read on

Patent vs trade secret – understanding the meanings and definitions

Patents must be filed while trade secrets are actively protected.

What is a Patent?

What is a Patent?A patent is primarily an intellectual property right (or IPR) that you can file for when you invent something new, novel and unheard of before. As an inventor, you can gain a monopoly over your invention by filing for a patent. This legal certificate provides you due credit along with some exclusive rights over your invention. You can use your invention to gain commercial benefits as you deem fit. For instance, you could use the invention to start a business. Or you could enter into licensing deals with various brands and claim a hefty price as a licensing fee. Patenting also provides you with the necessary legal rights that enable you to prevent other businesses from replicating or reproducing your invention without your permission.

In India, you can file for patents for both tangible and intangible inventions which typically involve research and technology. The patent could be for a brand new invention or an improvement on an already existing invention (such as a desktop to a laptop). You can file different types of patents, which broadly include design, utility and plant patents.

What is a trade secret?

What is a trade secret?Like patents, trade secrets are also deemed as intellectual property, which fall under the IPR law. This type of IP mainly comprises of several practices, formulae, processes, instruments, patterns, designs or compilations of information, which have an inherent economic value. Trade secrets are the properties that make an invention valuable and render it its economic value. They are safeguarded and protected actively as a practice, and are not generally known to others. Additionally, they are not readily ascertainable. A trade secret is deemed a trade secret because owners take the necessary measures to keep it clandestine.

Sometimes also referred to as confidential agreements, trade secrets vary as per jurisdiction and the type of information safeguarded, and which are subject to protection. Also, the secret is revealed to a handful of insiders, who are all bound by law not to reveal it. Perhaps the most coveted, most quoted example of a trade secret is the formula for Coca-Cola. In Atlanta, Georgia, USA, tourists can take a tour of the Coca-Cola Company, which includes a tour to the vault where the formula for the beverage is safeguarded. Google’s robust search algorithm is another example of a well-guarded trade secret.

Patents vs trade secrets – Comparing the Differences There are six significant points that comprise the differences between trade secrets and patents. They are as under:

  1. Publicly disclosed vs confidential
    The most apparent difference between patents and trade secrets is that the former is typically publicly disclosed. A trade secret, as is apparent from the term ‘secret’, is usually kept confidential. Only a few select people within the organisation are made aware of this secret and are bound by a legal contract, typically worth millions, to keep it confidential.
  1. Protection – new vs valuable
    A patent is meant to protect novel and useful inventions, which mainly affect humanity as a whole; for instance – something that simplifies an otherwise complicated task. The trade secret, on the other hand, helps protect information that is deemed valuable and should be kept secret, so that the inventor alone can profit from their invention.
  1. Rights Exclusion vs misappropriation
    Another point of difference between trade secrets and patents relates to the rights associated with the invention. As a patent holder, you have the right to exclude everyone else from using your invention and making any monetary profits from your idea, including replicating, reproducing or theft. You can put a stop to any illegal practices via legal recourse. Conversely, since trade secrets usually involve complex strategizing and are typically guarded, the inventor can protect their invention from being misappropriated.
  1. Formal application vs private protection
    People who wish to patent their invention are required to file for a formal patent application. The process of filing and subsequently being granted the patent can take anywhere from two to three years. The patent office also examines your application and cross-references other inventions which may be similar to yours, before granting the patent. In the case of trade secrets, there is no need to file an application. The onus of protecting your trade secret lies entirely in your hands. Also, there is only so much you can do to protect your trade secret if it is discovered publicly.
  1. The validity of the patents and trade secrets
    Once it is granted, a patent is usually valid or protected for up to 20 years. Inventors have the right to renew their patent upon expiration. In the case of trade secrets, there is no fixed validity. A trade secret may be safeguarded in perpetuity.
  1. Expenses related to patents and trade secrets
    As mentioned above, inventors need to comply with the due patent filing process that can take years. Depending on the type of patent they are filing for, inventors also have to bear several expenses, which could be in the tunes of several lakhs. Also, since a patent is inherently territorial (restricted to only the country in which it is filed), inventors have the option to file for international patents for the specific country in which they wish to market their products. This can mean additional expenses. On the other hand, a trade secret does not involve high costs. You only need to pay for the costs associated with internal procedures.

What to do if your invention is not patentable?
There are instances when you decide to file for a patent for your invention and are informed by the Patent Office in India that your invention is ineligible for a patent. In such a case, you still have the option to protect your invention by merely filing a claim to register it as a trade secret. If the invention enables you to gain an advantage or upper hand over your competition, since your competitors do not have that information, it may be rightfully protected and can qualify as a trade secret.

Patent vs trade secret – the criteria to consider while filing for IPR
Having explained the differences between patents and trade secrets, let’s look at the criteria you should consider if you’re ever on the fence of deciding between whether to file for a patent or to safeguard your invention as a trade secret.

  1. Check whether the invention is patentable
    Before filing, you must check whether the invention is indeed patentable. If it isn’t, it is better to spend your resources in seeking trade secret protection instead of going through the patentability route. If it is not applicable for a trade secret, then you may have no choice but to spend the money and file for a patent to monopolise your invention.
  1. The considerations of enforcing patents and trade secrets
    Should you choose to enforce a patent, you need to prove that another company is replicating or reproducing your invention when you file for infringement. However, proving infringement can be quite a challenge based on factors such as the technology leveraged by the competition or the protections obtained by them. Enforcing a patent can be especially tricky when the theft happens abroad, by foreign individuals or companies in jurisdictions in which your patent is not enforced which is quite common. The same is also true of trade secret enforcement. The proceedings governing the enforcement of trade secrets in a foreign country are typically subjected to numerous barriers, similar to patent enforcement. However, it is much easier to prove trade secret misappropriation, since you can base it on circumstantial evidence.
  1. The criteria surrounding disclosure of patents vs trade secretsTrade secrets, along with the laws that protect them, are usually based on the premise of non-disclosure of the economically valuable information. For instance, two companies may choose to safeguard their patentable inventions as trade secrets and prevent the information flow to their market competition. On the other hand, disclosures in patent applications are published in patent journals, which your competitors can also access. The published information can provide your competition with some significant strategic insights into what your company is doing and the course of action you may be pursuing. This competitive intelligence may result in your financial rivals, especially those with excessive resources to gain a competitive head start, to develop a similar, competitive product. Furthermore, your competition may leverage the published information to improvise your design and file for a design or utility improvement patent, based on your invention.
  1. Cost-specific differences between trade secrets and patentsYou must decide whether to file for a patent and spend the necessary money or choose a more affordable option, i.e., register a trade secret. The decision you make should be based on your invention and the value you think it holds. It is rather apparent that it takes a lot of time and money to procure a patent, than it does to create a trade secret.The factors mentioned above are some of the most relevant factors you should consider when you decide whether to file for a patent or a trade secret.

Patent vs trade secrets
– the position in India

While there are laws in place for patent protection, there is no specific legislation in India that protects trade secrets. Trade secrets are typically upheld on the basis of principles of equity as well as common-law action of confidence breach. If someone breaches a confidential agreement, a trade secret owner can obtain an injunction. They can also take legal recourse and have the confidential, proprietary information returned to them, and sue for any losses endured as a result of disclosing the trade secrets. Indian law prohibits anyone from disclosing any information revealed in confidence by upholding a restrictive clause in agreements.

Final note: Patents and trade secrets are the only two forms of intellectual property rights designed to protect inventions. As an inventor, you can exercise your right to either patent your invention or file for it as a trade secret. However, since both processes often involve a lot of factors as mentioned above, you must consider the differences between trade secrets and patents  before deciding the course you wish to pursue – whether to file for a patent or a trade secret. You should weigh your options and determine the appropriate course of action.


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