Patent or Trade Secret — Which One to Choose?

by: Robert Wagner, intellectual property attorney at Picadio Sneath Miller & Norton, P.C. (Robert Wagner on G+)

There was an interesting article on CNBC yesterday that highlights a popular misconception people have regarding how to protect their ideas and innovations. While people often think of using patents to protect their ideas, the law provides a number of different mechanisms (such as trade secrets) that can often be far more useful and valuable than patents. The article highlights how some of the most valuable intellectual property in the world, such as the Dr. Pepper formula, KFC’s “Secret Recipe of 11 Herbs and Spices,” and the formula for WD-40, is not patented, but is instead protected as a trade secret.

Both patents and trade secrets provide important protections for an individual’s or company’s innovations, but they protect them in very different ways. Patents generally entitle an inventor to the exclusive right to make, use, and sell the invention described in the claims of the patent for a 20-year period from the date the patent application is filed. As part of the quid pro quo for obtaining this government-sanctioned exclusive right, the inventor must describe how to make or use his or her invention in sufficient detail that a person in that field would be able to make or use the invention without significant difficulties. Once that 20-year period expires, anyone is free to use that invention.

Trade secrets, on the other hand, potentially can last forever and the law will prevent others from improperly taking or using the invention, as long as the individual or company takes sufficient steps to keep the invention secret. Thus, a former employee who happens to know the secret will not be allowed to make the product in competition with the inventor, or a competing company cannot use industrial espionage to steal the secret. The law does not prevent another from using the secret if the person independently and lawfully discovers the same invention on his or her own, though. It only protects the inventor from others who have improperly discovered or used the secret.

From these brief descriptions, it is clear that patents better protect some kinds of inventions, while keeping the invention a trade secret may better protect others. For instance, it may make more sense to consider patenting the invention when the innovative aspect of an invention is readily seen simply by looking at a product (such as with a paper clip or a pop-top soda can).  The law will protect the inventor from anyone else making or selling the same invention for 20 years, even if that other inventor independently came up with the same idea. Trade secret protection is likely of little to no value in this case, because once the invention is sold, everyone knows what the invention actually is.

On the other hand, inventions such as the Dr. Pepper formula are not easy to determine, even when you have a can of Dr. Pepper in your hands. The precise ingredients and the process by which they are blended are not apparent. This kind of invention lends itself to being kept as a trade secret because the invention is not easily reversed engineered. If Dr. Pepper had chosen the patent route instead, it would only have had an exclusive right to make and sell the soda only for 20 years, after which everyone could make exactly the same product. By protecting it as a trade secret, it potentially can keep its invention a secret forever.

One of the keys with trade secrets is that the inventor must take reasonable and active steps to keep the invention secret. As the article mentions, many of these companies restrict knowledge of the complete formulas or processes to only a handful of individuals and take steps make sure that the products are manufactured in such a way that no one can determine what the recipes are. If an inventor does not take steps to keep his or her invention secret, the law will not do it for him or her.

Obviously, both patent and trade secret law are far more complex than what is discussed here. However, the basic principles are useful to understand so that the right questions can be asked and the right strategies considered when deciding how to protect your secrets and inventions.