Patents or trade secrets – How should I protect my tech?

Choosing between patent protection for your invention or keeping it as a trade secret is an important decision that can have a long-lasting impact on your company’s success. As such, it shouldn’t be made lightly. The earlier you consider the pros and cons of each type of intellectual property protection (IP), the more assured you can be that your tech will be well protected.

Are patents the key to an IP strategy?

Patents can be a very powerful form of IP protection. A well-crafted patent gives you the right to keep anyone else from making, using or selling your invention until the patent expires, typically 20 years from its filing date. A strong patent portfolio can give you a leg up on your competitors, act as a bargaining chip in negotiations and litigation, and contribute to your bottom line. Patents can be expensive, however, with typical drafting and filing fees ranging from $10K to $30K per patent, depending on the complexity of the invention and the patent strategy you choose. In addition, you must pay maintenance fees periodically to keep your patent alive.

Source: Adobe

It’s also important to note that patents are jurisdictional; you’re only protected in the countries or regions where you have a valid patent. If you only patent in Canada, for example, anyone outside of Canada can make, use and sell your invention anywhere else in the world. A robust patent strategy that covers numerous countries can cost hundreds of thousands of dollars in filing, prosecution and maintenance costs. There are tips and tricks you can use to help minimize the costs of patent protection. I always recommend using a patent agent to help you set out the best patent strategy for your business.

Trade secrets protection can also be very important to your business. Trade secrets protect any information that has value for your business as long it’s kept a secret. This can include things like processes you use to make your product, data you’ve collected, and know-how that you and your employees have developed over the years. Anything you know or do that would give your competitors an edge against you if they learned about it can be considered a trade secret. Since they don’t have to be registered like a patent, the costs to protect your trade secrets can be a lot less than patenting, though you should think about what measures you must take to keep your secret from getting out.

If you have a very high value secret that requires a lot of security, you may have to spend money on things like physical protection to (i.e. security systems, monitoring, etc.) and cybersecurity (perhaps you need to provide employees with secure laptops for work, for example) to keep it from getting into the wrong hands. You should also ensure that any disclosures you make are under non-disclosure agreement (NDA). For example, if you need to share your trade secret with a supplier in order for them to understand your needs, you should have them sign an NDA. And, remember that your secret is only as safe as the security of those you share it with, so make sure you understand who you’re sharing your secret with and how well they will be able to protect it.

How do I choose?

There are several factors that should be considered when deciding whether or not to use patents or trade secret protection for your IP. Consider patent protection when:

• You have an invention that can be reverse engineered. If you’re building a semiconductor chip that can be examined and analyzed, for example, trade secret protection won’t help you. In this case patent protection would be more appropriate.
• You’re working in a field where everyone is working towards the same end goal. Relying on trade secret protection would be ill advised in this case since anyone who independently comes up with your trade secret is free to use it and to publish it, which would destroy the value of your trade secret.

You’re seeking investment. Though not always the case, investors can sometimes be concerned if your tech isn’t protected by patents.

Consider trade secret protection when:

• You wouldn’t be able to tell if others are infringing on your patent. If trade secret protection is available for your tech in this case, it might save you from disclosing your tech in a patent that you can’t enforce.
• You don’t have the funds to patent yet and want to protect your ability to file patent protection in the future, or you don’t have the funds to enforce your patent if someone infringes it.
• Your tech has a very short life span. It usually takes at least a few years, and sometimes even longer, to obtain a patent from the day you first file your application. If your tech will be obsolete by the time your patent issues it might not be worth the time and money you’ll need to spend to obtain patent protection.
• Your tech has a very long life span. If your tech is foundational and could be profitable for your company for the next 30-plus years, keeping it as a trade secret could mean extra years of profitability, whereas a patent on the tech would expire after twenty years and anyone would then be free to use the technology.

An additional consideration when deciding whether to patent or maintain your tech as a trade secret is that a regular patent application will be published 18-months after filing. If you’re uncertain about your ability to obtain a patent, know that after publication (which is very likely to occur before you know whether-or-not your patent will grant) your information will be out there for the world to see. If your patent doesn’t grant, you’ve effectively given your invention away for anyone to use. Starting your patent strategy by filing a U.S. provisional patent application is a one way to give yourself more time to determine whether or-not you want to move ahead with a regular patent application, since provisional patent applications aren’t published unless you convert them to a regular patent application within 12-months.

Every company’s IP strategy should be built around its unique business objectives; your available IP budget also comes into play. Two companies operating in the same industry could have similar products but very different IP strategies. Many companies use a mix of patents and trade secrets to ensure the best protection for their IP. To get the most return from your IP investment, be sure to consult an IP professional who can help you work through the pros and cons of each type of IP protection and help you tailor your IP strategy to meet your unique needs and objectives.

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Josée Pharand is ventureLAB’s director of IP. She has a Bachelor’s of Applied Science in Mechanical Engineering and developed her interest for IP and innovation during her 13 years at the Canadian Intellectual Property Office.

ventureLAB is a leading global founder community for hardware technology and enterprise software companies in Canada. www.venturelab.ca