Protecting intellectual property and trade secrets within any company is a vital element of prolonged success. As you make a meaningful impact in your industry, protecting your unique processes and creations becomes crucial. If anyone can replicate your processes and innovations without repercussions, then establishing meaningful value becomes challenging or impossible. It’s essential to understand the difference between trade secrets and patents as you strive to protect your work and power your company’s growth.

Trade Secrets vs. Patents: What’s the Difference?

Protecting intellectual property and trade secrets within any company is a vital element of prolonged success.

Catherine Cavella, ESQ.

Learn How Your Business Can Leverage Both

Protecting intellectual property and trade secrets within any company is a vital element of prolonged success. As you make a meaningful impact in your industry, protecting your unique processes and creations becomes crucial.

If anyone can replicate your processes and innovations without repercussions, then establishing meaningful value becomes challenging or impossible. It’s essential to understand the difference between trade secrets and patents as you strive to protect your work and power your company’s growth. Confusing the two exposes your company to risks, such as exposing key trade secrets in obtaining a patent, or relying on trade secret protection (instead of patents) for something that is discoverable through reverse engineering. 

What is a Trade Secret?

Defined under the Uniform Trade Secrets Act (UTSA), a trade secret is anything, “including a formula, pattern, compilation, program device, method, technique, or process, that: (i) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.”

This extensive definition provides clarity on elements of your business that are eligible for trade secret protection. A crucial aspect of this definition is the requirement of deriving “independent economic value … from not being generally known … and not being readily ascertainable.” You cannot claim trade secret protection for business elements that anyone in your industry (or outside your industry) could deduce on their own through the course of the work being done, or from reverse engineering your product, or from any other public and legal means. A trade secret must be something distinct from common industry knowledge. Your customer list information is a key trade secret you should guard as a trade secret – using “efforts that are reasonable under the circumstances to maintain its secrecy.” Your internal business process, if they provide value and are not discoverable or generally known outside your company, should be protected as trade secrets. Your proprietary software code that lives on firewalled servers is a trade secret. 

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What is Patentable?

Patents provide more public protection through the application process with the US Patent and Trademark Office (USPTO). To qualify for a patent, the USPTO mandates four main criteria: 

1. 1. Useful and able to be used (the invention must actually work – it cannot violate the laws of physics, be simply theoretical, or be an abstract idea)
   2. A clear description of how to make and use the invention
   3. New, or “novel” (something not done before)
   4. “Not obvious,” as related to a change to something already invented

There are three types of patents: utility patents, design patents, and plant patents. Utility patents cover new or improved processes, machines, articles of manufacture, or compositions of matter. Design patents are for new, original, and ornamental designs for an article of manufacture. Plant patents pertain to the invention or development of asexually reproducing distinct plants.

As noted above, patents provide public-facing, government certified protection for your inventions and designs. In that sense, they are well-defined, whereas trade secrets are harder to present and prove in that they are secret. However, both provide strong and legally backed protection for the valuable intellectual property they protect.

Know the Differences

The most apparent difference between the two is cost. Obtaining a patent can involve thousands of dollars in application and attorney fees. Conversely, a trade secret incurs little or no direct cost, protected simply with restrictions on access. Restrictions should be both actual (passwords, keys, safes) and legal (usually using contracts as the legal tool for enforcement). Enforcement costs are similar, with potential expenses arising from litigation, which may be reimbursable upon successful defense.

When you’re not sure you can keep the innovation secret, opting for patent protection is advisable. When you apply for patent protection, your application documents are date-stamped, government certified legal filings, allowing you to prove you were in possession of and claiming the invention as of those dates; and you gain additional legal power once your patent is granted by the USPTO. Trade secrets offer more secretive protection without government-certified legal backing, relying on whatever proof you can provide to establish secrecy. While companies can designate internal documents and procedures as trade secrets, this doesn’t guarantee legal protection, particularly if the company does not sufficiently restrict access to the “secret” material.

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Catherine Cavella

Since 1992, Catherine Cavella, Esq. Her focus on Trademark Law and Copyright Law for the last few decades gives her deep insights into the fundamental principles behind the rules. Catherine regularly writes about new developments in trademark law, copyright law, and internet law.

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