Trade secrets have been in practice since long and are very different from patents. While patents require you to disclose your information in the application process that eventually becomes public, trade secrets allow you to actively keep the information secret.
The protection from patents is limited (20 years) and demands a considerable budget to maintain the patent. However, after 20 years the invention is open to public use. Trade secret protection can potentially last longer, as long as you are able to maintain the secrecy or till someone with independent research or reverse engineering comes up with the same thing. However, patents have a stronger legal protection for the limited period as opposed to trade secrets as it grants the patentee the right to exclude third parties from making or using an invention during the term of the patent. A legal protection for trade secret can also be sought, but only in cases where there exists a non-disclosure agreement with the person who is illegally using or disclosing the trade secret. Once disclosed to public, it’s no longer a secret and you lose the monopoly.
The formula for Coca-Cola, also referred to by the code name “Merchandise 7X” is a trade secret. The formula is known to a few people and kept in the vault of a bank in Atlanta, Georgia. An interesting fact, may be lesser known by generation today, Coca-Cola was the leading soft drink in India until 1977 when it chose to withdraw from the country rather than to disclose its formula, wherein an old Indian law ( later amended in 1991) demanded Coca-Cola to reveal the formula.
As can be understood, any invention in its initial stage is always a trade secret with an explicit or an implicit confidentiality agreement among the individuals involved. In the later stages, a subsequent decision on, whether to convert the trade secret asset into a patent asset needs to be taken. The traditional approach, generally followed checks the patentability of the invention and suggests if a patent protection is to be sought, in case the invention meets the patentability criteria. The traditional approach is easy and straight forward as can be observed with reference to the patent at-issue in the famous Alice Corp. Ltd. V. CLS Bank litigation. The patent describes a method for mitigating settlement risk, which the Supreme Court held to be invalid because it was simply an abstract idea implemented by a computer. However, the method could still have been protected as a trade secret had the inventor kept it secret and not published it in the patent application. As the court found that it was not patentable subject matter, and the method is now already in public domain as a published patent document, anyone is free to use the invention. The inventor could have kept the commercially valuable information secret if patent protection was uncertain.
However, another case brings forth the other aspect. In 1942, Premarin was the only hormone replacement therapy drug, predominantly in US and Canadian market. Wyeth, a pharmaceutical company acquired by Pfizer in 2009, was the sole supplier of Premarin. Multiple patents were issued on the drug in the 1940s, but long after they had expired, there were still no generic competitors in the market to compete with Wyeth. The question is obvious, “How could Wyeth sustain this exclusivity for such an extended period of time, decades beyond the 20 years of the patent’s term?” The answer is interesting. The key ingredient in Premarin is conjugated estrogens extracted from pregnant mare urine. But, the extraction process was not patented by Wyeth, rather was kept as a trade secret.
Let’s look at the issue with patent infringement perspective. In patent infringement, it is necessary to map each and every claim element of the patent with the infringing product. If the novel features captured in the claim elements cannot be mapped or easily detected in a potentially infringing product, then the patent then cannot serve the commercial purpose of ‘claiming royalty for using the patented technology’. Trade secret may be a good option in case of such inventions.
However, the decision of whether to go for patent protection or trade secret is subjective and may be taken by analyzing the pros and cons to the business of the company.
Author: Sanjeevani Patil
Contributed by Electronics, Telecommunications, and Software Patent Division of BananaIP in India
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