Should You Patent Your Invention or Keep It a Trade Secret?

If you or your startup has a patentable invention, it may be worthwhile to stop for a moment and consider whether you should patent your invention or keep it as a trade secret, as moving one way or the other will likely foreclose the other option to you.

There are a number of factors to consider when deciding what to do. The first thing to consider is what exactly you or your company is going to do with your invention. If it is a product that your company will sell to customers, then a trade secret is largely impractical, since in order to have a trade secret, you need to keep your invention *secret*, and publicly selling your invention does not lend well to secrecy. However, if your invention happens to be, for example, a business process that you will use to provide services for or on behalf of clients (but one you don’t reveal to said clients), then a trade secret may be an option.

If a trade secret is an option, trade secrets or patents have both their pros and cons. The pros of a patent include its superior protection. You can only prosecute against use of a trade secret if it is misappropriated — that is, someone who had access to the information revealed it without the trade secret owner’s authorization. So, if someone independently comes up with your invention or obtains the information without it having been misappropriated, a trade secret offers no protection whatsoever, unlike a patent that provides protection against anyone using or selling your invention in commerce. This also means that with a patent you can publicly sell or use your invention in commerce (unlike with a trade secret which cannot be publicly revealed) because it is still protected if someone else then tries to sell or use your invention in commerce. Furthermore, a patent protects against every violation during the life of the patent, whereas a misappropriation of a trade secret resulting from a public reveal of the trade secret means that the trade secret is most likely invalidated, since the information is no longer secret.

One con of patents can be its scope — the protection of your patent only extends as far as its scope. You may have to narrow the scope of your patent in order to get the Patent Office to accept your application, or a court may later decide to limit the scope of the patent. Therefore, if someone is able to achieve the same result as your invention, but with through a different method, if your patent is too limited it may not be able to protect you. However, with a trade secret there is usually no worry with having to limit the scope in order to please the Patent Office or a court — as long as you are keeping all the information in the scope of the trade secret under lock-and-key, you should be able to enjoy the full scope of the trade secret.

The primary con of patents is their relatively short life, less than 20 years, depending on when the patent application is filed and when the final patent is actually issues. This can be an issue for a company that manages to permanently establish itself — its competitive advantage will disappear once the patent expires. This is why the formula for Coca-Cola or KFC’s Secret Recipe are protected as trade secrets — as long as you can keep the information secret, a trade secret lasts forever, which is the primary pro of trade secrets. However, the downside and con of that is that the law requires you to take reasonable steps to keep the information secret in order to enjoy the protection of trade secrets — you must keep electronic information password-protected and/or encrypted, physical information locked up, you must restrict access to the information to those who need to know, and monitor who actually does access the information, among other efforts to protect the information. These efforts carry ongoing costs, whereas the protective power of the patent technically doesn’t cost anything, although patents do carry monitoring costs to discover any infringers, as well as litigation costs to actually defend the patent.

Finally, a trade secret may be able to offer you protection if your “invention” is not patentable. For example, I suspect that if Colonel Sanders tried to patent his secret recipe, it might have been ruled unpatentable by the Patent Office. However, because KFC keeps the recipe secret, it is able to nonetheless enjoy the protection of a trade secret, which will allow KFC to pursue legal action against anyone who may try to misappropriate the recipe.

If you have the option, it may be worthwhile to stop for a minute and think about whether you want to protect your invention or process under a patent or a trade secret, and discuss with a patent attorney which option may be best for your company and its goals. However, for a number of reasons, I believe that most startups will choose patent protection over trade secrets, at least for the more stable protection of a patent