Patents Versus Trade Secrets

patents versus trade secrets

At Gravit-e Technologies we deal with a lot of startups with concerns around intellectual property. We often get asked if the company should obtain a patent before proceeding to release a Software-as-a-Service application or other technology. We also see a lot of startups whose ideas don’t necessarily meet the criteria for a patent or who think they are talking about a patent when they are actually referring to trade secrets. In light of such conversations we thought we’d put together a blog post that differentiates between patents and trade secrets.

What is a patent?

A patent provides a time-limited, legally protected, exclusive right to make, use and sell an invention. In Canada this time period is 20 years from the date the patent is filed. Patents apply to both new technologies and improvements on established products and processes.

What makes an invention eligible for a patent?

  • Novelty: In order to receive a patent your invention must be new- the first in the world.
  • Utility: The invention must be useful, functional, and operative.
  • Non-Obviousness: The idea must demonstrate ingenuity that not just anyone could invent.

What is a trade secret? 

A trade secret is a technique or device used by a company to manufacture its products or otherwise grants them a competitive edge in business. A good example is the recipe for Coca Cola or KFC. Registered Trade Secrets restrict the unauthorized disclosure of such secrets by persons other than the holder.

Patents Versus Trade Secrets

A patent involves publicly disclosing how your invention works in exchange for time limited protection. A trade secret means your idea only remains protected so long as how it works remains secret. Patents are particularly useful for inventions where how it works becomes disclosed as soon as you purchase the product, for instance a paper clip. There are some cases where an invention could be kept a trade secret or receive a patent and the choice is up to the inventor/owner. It is important to evaluate the advantages and disadvantages of both.

Advantages of Trade Secrets:

  • Trade secret protection is not time limited. It is valid so long as the secret is not revealed to the public.
  • Trade secrets are not limited to one territory/country.
  • Trade secrets have no registration costs.
  • Trade secrets take effect immediately.
  • Intellectual property rights for trade secrets are less costly to enforce.
  • Can be used to protect ideas that fail to meet the inventiveness criteria for patents.

Advantages of Patents:

  • Deterrence- Patents discourage people from using your proprietary technology.
  • Patents provide protection regardless of whether your invention is replicable or it’s manufacturing has become public knowledge.
  • Patents can be sold or licensed, making them business assets and helping attract investors.

Disadvantages of Trade Secrets:

  • Once the secret is made public, anyone may have access to it and use it at will.
  • Keeping a trade secret confidential can be complex and costly.
  • A trade secret is more difficult to enforce than a patent and are not as strongly protected.
  • A trade secret may become patented by someone else who develops the same invention by legitimate means.
  • A trade secret may be able to be reverse engineered and trade secrets offer no protection beyond this point.

Disadvantages of Patents:

  • You cannot disclose the invention to the public before filing for patent protection. In Canada, However, there is a one year grace period for disclosure so long as you file before the expiry of that year.
  • Patents cost money.
  • Patents no longer protect your invention after a specific time period.

Some determining factors for deciding whether you should apply for a patent or trade secret protection include your budget, how easily your invention is kept a secret, and your timeframe (applying for patents may cause delays in releasing your invention). Patents are best reserved for ideas that could be easily copied by someone else where patent protection would be important in maintaining a competitive edge and attracting investors. Trade secrets are best reserved for inventions that cannot easily be reversed engineered (such as a recipe or particular manufacturing process) and startups with lower budgets.