Patent Attorney and Founder
Let’s break this down. We’ve covered patents, and you probably have a basic idea of what they are now. But what about trade secrets? JD mentioned common law, which used to be the main way trade secrets were protected, but now we also have federal law on the matter. The thing is, trade secrets can be a bit harder to wrap your head around.
So, what exactly is a trade secret? It’s a bit like a mystery. Imagine it’s any valuable information that’s not widely known. You could say a trade secret includes things like formulas, processes, or strategies that give a business an edge. There are three main criteria for something to qualify as a trade secret:
- It’s not publicly known. This means it’s exclusive, not something everyone in your industry is aware of.
- It has value. Whether or not you’ve made money off of it yet, there’s the potential for profit. It could be something that, if shared, would make a competitor stronger.
- You take steps to keep it secure. This is where you protect your secret—whether it’s locking files away, limiting access, or using non-disclosure agreements (NDAs).
If you meet these three points, you’ve got a trade secret. Now, you might wonder: should you protect your creation with a patent, or keep it as a trade secret? It’s a big decision, and there’s a test to help make it clearer. It’s called the reverse engineerability test. Sounds complicated, but it’s pretty simple.
Imagine you create a widget. If your customers or competitors could easily figure out how it’s made, then you might want to go for a patent. If they can reverse-engineer it, they’ll be able to replicate it without you stopping them. But, if it’s tough to reverse-engineer—like Boeing’s secret process for airplane wings—you might keep that information under wraps and treat it as a trade secret.
But here’s the risk: if someone else invents something similar and patents it, your trade secret could be exposed. And now, you’re dealing with a situation where someone else is profiting off of something you’ve been using for years, just because they’ve filed a patent. That’s a tough spot.
So, how do you decide between a patent or trade secret protection? Ask yourself: when I sell my product, can anyone figure out how it works? If they can, patent it. If not, maybe keep it secret.
And, it’s not all about the product. Sometimes, the process behind creating it is where the real value lies. Let’s say you’re a plumber who knows a faster, more efficient way of connecting pipes. It’s something only you and a few others in the trade know, and it saves time and money. That’s a trade secret, even though other plumbers might do the same job. The key is that you’ve kept it under wraps—maybe your method is faster because you know a trick, and others don’t. That trick? It’s valuable, and it’s your secret.
But here’s the thing: trade secrets are only valuable if you keep them secret. If you’re leaving papers scattered around or talking too openly, you can’t claim it’s a secret anymore.
Now, if you want to protect your trade secret, consider how to do it in a way that holds up in court. Maybe that’s through employee contracts, or in some cases, NDAs. Just don’t wait too long—companies like California are pushing back on non-compete agreements, and you don’t want to wait until the rules change to figure out how to protect your secrets.
And sometimes, patents and trade secrets aren’t mutually exclusive. Let’s say you’re an oral surgeon. You come up with a new tool, but there’s a specific process that only you know about to use it properly. You might patent the tool but keep the process as a trade secret. It’s a combination of both protections, and it can work really well when done right.
In the end, the choice between a patent and a trade secret depends on your situation. Protect your ideas the best way you can, but remember: keeping things under wraps means you need to take care in securing those secrets.