How do you protect trade secrets and patents?

Technology and ideas are critical to a company's survival and growth. Two typical ways to protect it are trade secretset patentsThis is it. However, many companies ask, “Should we protect it with a trade secret? Or should I register a patent?” I often fall into this dilemma. These two protection methods are essentially different, and each has its own advantages and disadvantages. In this article, we'll cover the definition, characteristics, specific examples, and selection criteria of trade secrets and patents in depth. It also explores the legal requirements for being recognized as a trade secret and how to manage it.

What is a trade secret?

Trade secrets are important information held by a company that must not be disclosed, and it refers to technical or management information with economic value. For example, Coca-Cola recipeis a typical trade secret example. Coca-Cola has kept this recipe private for over 130 years and has succeeded in differentiating itself so that competitors cannot make the same product.

Requirements to be recognized as a trade secret

To be protected by trade secrets, the following three legal requirements must be met:

1. secrecySome text
   • The information must not be publicly known. For example, it must be confidential material that can only be accessed from within the company, and information that has already been disclosed cannot be recognized as a trade secret.
2. economic valueSome text
   • This information must enable differentiation from competitors and generate economic benefits through this. Like Coca-Cola's recipe, information itself must be a source of competitive advantage.
3. Rational managementSome text
   • Businesses should make reasonable efforts to maintain secrecy. For example, measures such as signing a confidentiality agreement (NDA) or restricting access to information are necessary.

If these three requirements are not met, the information cannot be protected by law.

What is a patent?

A patent is a system where inventors are granted exclusive rights for a certain period of time by registering their technology or idea with the government. Instead of disclosing inventions through patents, it is possible to legally block other competitors from duplicating or commercially using the same technology.

Typical examples of patents
Cyclone technology in Dyson vacuum cleanersis a patent-protected technology. This technology is an innovative method of separating dust with the centrifugal force of the air, and Dyson registered it as a patent to prevent competitors from launching similar products.

Trade Secrets vs. Patents: Comparing Pros and Cons

Pros and cons of trade secrets

merits

• Can be protected indefinitely: As long as secrets are kept, permanent protection is theoretically possible.
• No registration required: It takes less time and money.
• versatility: It can protect various information such as recipes, customer lists, and management strategies.

shortcomings

• No protection when exposed: If information is leaked or if a competitor independently develops the same technology, there is no protection.
• Security management required: Continuous management is required to maintain secrecy.
• Weaknesses in legal disputes: In disputes with competitors, it may be difficult to prove confidentiality.

Pros and Cons of Patents

merits

• legal monopoly: Inventors are guaranteed the right to exclusive use of technology for a certain period of time (usually 20 years).
• Advantage in case of dispute: Since the scope and content of the technology are clearly defined during the patent registration process, it is possible to have an advantageous position even in the event of a dispute.
• Commercialization potential: You can generate additional revenue by licensing or selling patents.

shortcomings

• Disclosure obligation: All technical details are disclosed when registering a patent.
• Cost burden: Application, registration, and maintenance costs are incurred, and additional costs are required to register a patent in each country.
• Term limits: The protection period is limited to 20 years, so anyone can use this technology after that.

Criteria for selecting trade secrets and patents

Choosing between trade secrets and patents can depend on many factors.

(1) Characteristics of information

• Trade secrets: Technology that can be kept private (such as the Coca-Cola recipe).
• Patents: Technology whose disclosure is unavoidable or highly innovative (for example, Dyson's Cyclone technology).

(2) Lifespan of information

• Trade secrets: Technology that is worth maintaining in the long term.
• Patents: Technology that must be quickly commercialized and market-preempt.

(3) Competitive environment

• Trade secrets: When technology leaks are unlikely and self-protection is possible.
• Patent: When legal protection is needed to prevent disputes with competitors in an environment where technology is easy to replicate.

(4) Costs and procedures

• Trade secrets: No registration fees, only simple security management required.
• Patents: Expensive to register and maintain, but provide clear legal protection.

Strategy as a concrete example

Case 1: Coca-Cola's recipe (trade secret)

Coca-Cola keeps its recipe a trade secret and is protected indefinitely. If this recipe had been registered as a patent, anyone would have been able to copy it after the end of the protection period.

Case 2: Dyson's Cyclone Technology (Patent)

Dyson used patents to prevent competitors from copying its innovative technology. We accepted disclosure, but thanks to legal protections, we were able to effectively control competitors' products in the market.

Case 3: Google's search algorithm (trade secret)

Google keeps its search algorithm a trade secret. When registering as a patent, competitors can easily analyze the algorithm or utilize it, so they avoided disclosure and chose a private management strategy.

Case 4: Apple's technology (trade secret + patent in parallel)

Apple has registered core hardware and software technologies as patents, and manages sensitive information such as internal processes as trade secrets. This allows us to enjoy the advantages of legal protection and privacy at the same time.

How to manage trade secrets

Effective protection of trade secrets requires the following management strategies:

1. Sign a Non-Disclosure Agreement (NDA)
   • Prevent information leakage by signing contracts with employees and suppliers.
2. Restricted access
   • Minimize access rights to sensitive information and implement a system to manage it.
3. Use security technology
   • Strengthen technical security measures such as data encryption and firewall construction.
4. Regular training
   • Train employees about the importance of trade secrets and how to manage them.

Bottom line: strategic choices are key

Trade secrets and patents are protective measures with clear advantages and disadvantages. Choosing one of the two methods or using them in combination should depend on the company's technical characteristics and business goals. Trade secrets may be appropriate when confidentiality is key, such as Coca-Cola's recipe, and patents may be more effective if innovative technology needs to be quickly protected in the market like Dyson.

The key is to systematically design and continuously manage a protection strategy. If a company can properly protect its technology and information, this will soon lead to competitiveness.

Are you considering the most complete way to protect your ideas and technology?Pine IP provides the best customized services in all fields of intellectual property, from patent and trade secret consulting to trademarks and designs.