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This article is written by Alvira Sadik Shaikh, pursuing a Diploma in Advanced Contract Drafting, Negotiation and Dispute Resolution from LawSikho. The article has been edited by Khushi Sharma (Trainee Associate, Blog iPleaders) and Vanshika Kapoor (Senior Managing Editor, Blog iPleaders).

Introduction

In today’s competitive world, there is an ever-increasing need to create, innovate and produce unique ideas in order to gain a competitive advantage over others. Businesses all around the world are striving to create new products, inventions and technology to build an identity in the market and attract customers. Along with the innovation of new ideas, comes the need of protecting them from competitors and the public domain. For example, if a cosmetics manufacturing company creates its own new and unique beauty product and launches it in the market, this product will create a curiosity among the customers and even attract them toward buying it. Subsequently, the company’s market value will increase along with the rise in its customer database and the need for protecting this information as well as the new formula of their beauty product. All such innovations, ideas, information come under one umbrella i.e. Intellectual property. Such intellectual property can be protected through copyrights, trade secrets, patents, etc. But how to understand which law can be used to protect our intellectual property?

This article will help you understand the difference between trade secrets and patents and will act as a guide to choose between the two to protect your intellectual property.

What are trade secrets? 

New inventions come with new designs, patterns, information, formula, and methods that are unique to one’s own product or innovations. For example, when you start your own restaurant and sell a dish which has its own unique recipe, name and your restaurant is famous for this dish which helps you attract a large number of customers, thereby increasing your market value and giving you a competitive advantage over others. This unique recipe is your trade secret which, if revealed to your competitors or the public, will lead to a huge loss for your business. So, wouldn’t you want to protect your secret information and not let it out in the public domain?

However, such information should not be already available in the public domain, have some economic value and be confidential to become a trade secret. Many times businesses or individuals have to share their trade secrets with their employees or the parties with whom they are carrying out the business. These secrets can be easily let out or used in an unauthorized manner by anyone. In order to protect such confidential information, you can enter into a trade secret agreement with the party or your employees. This agreement binds the party to protect your confidential information and ensures that your trade secrets are protected.

What are patents?

A patent gives the exclusive or sole right to the owner of an invention. Such inventions must be new, unique, technical and provide a solution. For example, if you invent a machine that is completely new, provides a solution to a problem, then this machine can be patented and you will become the sole owner of it and have an exclusive right over it. 

A patent is an intellectual property right that allows us to prevent others from using our unique inventions for a period of up to twenty years. After this period, your invention becomes free to be used by anyone, if you do not renew it. Moreover, you can sell your patent rights to someone to use it for commercial purposes.

Difference between trade secret and patent

Both patents and trade secrets are used to protect inventions, ideas and information that are unique and provide us with an economic value. However, there are some differences between patents and trade secrets which can help us understand which one will be suitable to protect our inventions.

PATENTTRADE SECRET
ProtectionProtects new, useful inventions.Protects confidential information kept secret and not disclosed in the public domain.
Disclosure The inventions are disclosed in the public domain.The information is kept confidential.
Validity Up to twenty years.The information is kept confidential as long as it is a secret and known by the general public or revealed by the owner himself.
Duration The duration to grant a patent is approximately two to three years.There is no such duration for trade secrets as it depends upon the internal procedure.
Prevention A patent prevents others from using the invention for commercial purposes.A trade secret prevents the information from being used in an unauthorized manner.

What is right for you: patent or trade secret?

Often there is confusion regarding what to choose in order to protect your intellectual property. So, here are criteria that can help you determine which one to choose based on your needs and usage.

Patentability

The most essential part in the process of choosing the method of protection of your information is to identify whether it is patentable or not. If the information at hand is not patentable, then it is always better to opt for trade secrets and use your resources for it. Moreover, any sensitive information which is your company’s secret and brings you an economic value, cannot be revealed in the public domain and hence it will be better to protect it with a trade secret agreement and maintain its confidentiality.

Duration of protection

The registration of a patent is a costly and lengthy process. A patent lasts for twenty years and it has to be renewed after this period expires. If it is not renewed, the competitor can use the information and produce a similar product which can lead to a great loss to the original producer or inventor of the information or product. 

As opposed to this, the process of protecting a trade secret is usually easy and short. The duration can be determined by us and we can decide for how long our trade secrets remain protected from being used by others. We can enter into confidentiality agreements with the people with whom we are sharing our confidential information and include all the terms and conditions and the duration of the agreement. This also helps us in making the party bound to protect our information and stating the consequences that the party might have to face if he/she reveals or uses the information in an unauthorised manner.

Disclosure

Trade secrets are usually protected and kept a secret thereby preventing the competitors from getting to know about what is going on in the business or whatstrategy they are using for carrying out their business to gain a competitive advantage over others. If you want to keep all your unique inventions, customer information, process, designs, patterns, strategy, etc. a secret and prevent others from using it, then entering into a non-disclosure agreement to protect your trade secrets would benefit you.

If you opt for protecting your information with a patent, the information is published and known to the public. Your information is accessible to everyone and they have insights into your strategy or what goes on in your business. This can be helpful for people who want to publish their information and protect it from getting exploited, copied, and used in an unauthorised manner. For example, when a company invents a light-bulb with its own unique functioning and technology which was never invented by any other company, it will choose to protect it with a patent and prevent others from producing a similar product with similar technology. However, this does not stop the competitor from inventing a competing product with a more advanced technology thereby increasing the competition in the market.

Cost

The choice of choosing between a patent and a trade secret will completely depend upon the producer of the information. However, it is also important to note that the cost of obtaining a patent is higher than trade secrets. Hence, it will also depend on how much the producer is ready or able to invest in the protection of his information along with all the other factors mentioned above. After taking all the factors into consideration, it becomes easier for the inventor to choose the right way to protect their inventions.

Conclusion

Whenever there are new inventions produced that give a competitive advantage and economic value to its producer, it becomes necessary to protect these inventions from being used in an unauthorized manner by the competitors or the people to whom it is disclosed and thereby causing a loss to the producer. These inventions can be protected with trade secrets or patents and it is important to understand the use of each of these intellectual property rights. Trade secrets are used to protect the information that is confidential and prevent them from reaching the public domain whereas the patents help in giving the exclusive right of ownership to the producer and the information is in the public domain and prevents others from producing a similar product. The invention of new technology and products is very important today. Along with this development, comes the risk of losing our valuable information and facing a loss and here, intellectual property rights come to our rescue, helping us innovate and pave the way towards development.

References

  1. https://www.mondaq.com/india/trade-secrets/783558/what-to-choose-between-trade-secrets-and-patents
  2. https://www.ouryclark.com/resource-library/quick-guides/intellectual-property/patents-vs-trade-secrets.html
  3. https://www.ipwatchdog.com/2017/11/01/patents-and-trade-secrets-revisited/id=89641/
  4. https://www.morningtrans.com/trade-secrets-vs-patents-which-approach-is-right-for-you/
  5. https://www.jdsupra.com/legalnews/trade-secrets-and-patents-similarities-20313/
  6. https://hbr.org/2013/11/filing-for-a-patent-versus-keeping-your-invention-a-trade-secret

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