By: Debby Winters
With the patent system switching from first to invent to first to file, trade secret law, as an alternative to patents, may be one of the most important ways to protect and develop new and cutting-edge ideas. Trade secrets are generally defined as an exclusive right to valuable information not generally known in the industry or readily ascertainable by competitors.
In many cases, it makes more sense to protect intellectual property using trade secrets rather than patents. Trade secret law: (1) provides broader protection than patent law; (2) is immediately available and requires no government approval and costs significantly less; and (3) permits the inventor to keep the innovation “secret” without having to disclose the idea through patent publication.
First, with respect to breadth, trade secret law protects assets that are not otherwise protectable under the patent law. Trade secrets need not be “novel” and extend to valuable information like business plans, customer lists, technical drawings, processes, procedures, marketing data and forecasting that are specific to the innovator so long as they are secret, valuable and not generally known in the industry. A trade secret can also be “negative” know-how, that is, what paths to development would be unsuccessful, which are sometimes as valuable in terms of time and money as those that are successful. Moreover, trade secrets may be protected in perpetuity – or until someone else independently develops the idea or reverse-engineers it – whereas the duration of a patent term is 20 years.
Second, trade secret protection will attach automatically to ideas and information that are kept secret and subject to reasonable measures to protect secrecy. Trade secrets do not require any government approval, they are not subject to a registration process, or incur any official costs. Trade secrets are also not subject to the attendant delay of the patent process, which could take years to complete, and therefore are a more practical and attractive alternative for innovators in fast-moving industries. For the same reasons, trade secret protection is often less expensive than obtaining a patent and is also attractive to start-up companies and small businesses.
Third, unlike patents that are published and must be enforced through litigation if infringed, the holder of a trade secret must only keep the information secret to qualify for protection. The ability to keep information secret, rather than disclosing it through the patent process, could potentially be a very lucrative decision. The classic example, of course, of where an inventor made a great choice choosing trade secret over patent protection is the formula for Coca-Cola, which still maintains its trade secret status approximately 100 years later.
Trade secret protection is not always the best strategy for protecting intellectual property. Trade secrets are not protected if another person develops – independently and without accessing the secret information – the same exact idea. Moreover, if a product that contains a trade secret is released into the market, trade secret protection is lost if the trade secret can be reverse-engineered. Thus, trade secret law is not effective for obvious and generic new ideas or those that could be easily reproduced once a product is in the market. For example, the design of a cement mixing truck was held not to be a trade secret because it was obvious once the truck hit the street which direction the cement was being loaded to be mixed.
With the upside of protecting vast amounts of otherwise not patentable information and ideas through the use of trade secrets, the question becomes: Are innovators doing enough to protect their trade secrets? Methods for protecting trade secrets will vary depending on the size and scope of the enterprise and the secrets kept therein, but here are general guidelines to help ensure secrecy:
• Build a culture where innovative ideas and information are highlighted as critical, valuable and that they will be protected.
• Emphasize the importance and secrecy of the information through the use of nondisclosure and non-compete agreements.
• Ensure that facilities where trade secrets are kept are physically and electronically secure with locks, passwords and credentials, and limit access to such information to those that really need to know.
• Mark physical and electronic documents with legends and footers indicating that the information is “trade secret” and “confidential.”
•Establish policies and procedures to protect the information and continue to make employees aware of the importance of such information through training.
• Keep current with technological advances that allow misappropriation of trade secrets and adjust security, monitoring and policies as necessary.