Protecting your business’ information - Trade Secrets and Patents

Protecting your business information through trade secrets and patents and the issues you should consider from the perspective of the owner of an SME

You are the owner of a small to medium-sized business (SME) and it has information that you consider crucial to keep your business a step ahead of your competitors. You may have then stopped to think: “How can I protect such information? Should I keep it as a trade secret or patent it?”

In this article, we will try to draw the distinction between trade secrets and patents from a perspective of EU law and raise some questions you should ask yourself when deciding between trade secrets or patent protection.

Trade Secrets

A trade secret is information that is: (a) not generally known among or readily accessible within a group of persons who would normally deal with such information; (b) has commercial value, and (c) has been subject to reasonable measures to keep it secret.

This means that computer software, algorithms, and formulas your business has created, list of customers, suppliers, and distributors your business has can be trade secrets if they are:

 ·       held by your business in a way that they are not generally known or readily accessible to others who would normally deal with such information (e.g., your competitors);

 ·       of commercial value (e.g., meaning that others would likely cause harm to you if they were to use your business’ trade secret unlawfully); and

 ·       subject to reasonable measures adopted by you to keep it secret – there is no exhaustive list of what these measures would be and they would essentially depend on the size and level of sophistication of your business.

 Unlike other intellectual property rights, trade secrets are not registrable rights. This means that the protection period of your trade secret is unlimited as long as you keep it secret (e.g., the most common example of this is how Coca-Cola has to this date kept its soft drink formula a secret). It also means you will not have to go through the registration processes of patent offices or payment of their fees.

 However, it also means that not being a registrable right you would not have exclusive use over your business’ trade secret, and protecting it would be harder in comparison to other registrable intellectual property rights (e.g., patents). This can be a headache for you, as once your products using your trade secret are out in the market you will not be able to stop your competitors from using your trade secret if they are able to lawfully create it, including through independent research or reverse engineering. It also means that there is the risk of your competitors developing the same trade secret as yours and obtaining patent protection, in which case this would mean they would have exclusive rights over the same trade secret as yours and have the right to stop you from using your trade secret (see below on patents).

Patents

A patent is an exclusive right given to the inventor of an invention (an invention being a product or process that provides a new way of doing something). In addition to the invention, for the information to be patentable, it must be of industrial application, new, and involve an inventive step. This means that the information giving your business a competitive edge over your competitors may, or not, be patentable.

Once registered as a patent, you as the patent owner would have the right to exclusive use of your invention for a period of 20 years from the filing date of the patent application in the country/region you obtained registration. By having exclusive rights, you would be able to stop others from using your invention without your authority and choose to whom you would want to license it and which terms.

 However, patent registration would not ensure your invention is kept secret. This is because either throughout the application process or after the patent has been granted the details of your invention would be disclosed to the public. The idea behind this is that in return for your ownership of the patent, the public would be allowed to know the details of your invention so they can learn from it and develop new technologies for the society’s benefit.  

So, which path should I choose for my SME?

Although this requires taking into account several factors, it will essentially come down to asking yourself the following questions:

 (a)  Is the information that my business holds patentable?

 (b)  If so, do I want to patent it noting that on one hand, I would have exclusive use over it for a period of 20 years, and on the other that the business information covered by my patent would fall into public hands?

 (c)   Assuming my business information is patentable, do I have the financial means and the personnel to handle patent applications across the countries and regions I would like to obtain patent registration?

 (d)  If I decide to keep my business information as a trade secret, have I implemented, or have I created strategies, to ensure that such information is kept secret?

 These are just some of the questions you should ask yourself as the owner of an SME when choosing between trade secret or patent protection.