Should You Use a Patent or Trade Secret?

Posted By The Mirkhan Law Firm || 22-Jan-2018

Protecting your intellectual property to reserve your right to control and monetize it is an extremely important duty for just about any business. However, what kind of intellectual property protection you choose to protect something can make a huge difference as to what you are capable of doing with it over the long term.

Trade secrets and patents are both used to protect things like recipes, patents, and processes, but there’s a distinct difference between these two types of protection and what they’ll mean for your ownership of the property over a long period of time. On this blog, we’ll explain the difference between the two and discuss when each type of protection is likely the best choice.

Patents

While most people think of patents as a right to exclusivity for inventions, what many people don’t know is they extend far beyond physical objects. Recipes for a particular dish, formulas for creating a particular substance, or even unique processes can all be patented. A patent generally gives the holder exclusive rights to monetization and control of use for a period of 20 years, which means you’ll have two decades to decide who can use your invention and how much you can charge them to do so.

However, there’s a pretty big trade-off. In order to obtain a patent, you must fully disclose your invention to the patent office, and this disclosure is released to the public when your patent is granted. Anyone can read it and study it, they just can’t use it for their own purposes without your permission until the patent has expired. Once your patent does expire, you’ll lose all claim to exclusivity, which as a business could be extremely harmful unless you’ve replaced that particular product with something else that’s also protected.

Patents are used fairly commonly with things that companies expect to become outdated after a while, such as electronics. If a cell phone manufacturer invents a new, state-of-the-art processor that makes their phones faster than the rest of their competition, they’ll probably receive the most benefit from a patent because odds are 20 years down the road, the chip will likely have been surpassed in power and outdated, making hanging on to the intellectual right to this particular invention not all that important. However, for the 20 years up until then, the company will retain the exclusive right to use and monetize the design for that particular chip.

Trade Secrets

Trade secrets are not like patents in that there is no registry office, nor is there any sort of control over them at all. Trade secrets derive their value from the fact that they’re a secret, and only those who know the details of the secret have the ability to utilize them, thus making them profitable. When the secret becomes exposed, then its value essentially vanishes along with the profitability any secret holders had in it.

To better understand how these work and figure out when this might be the ideal for your business’ needs, let’s take a look at one of the most famous examples in history. For more than 100 years, Coca-Cola has kept the formula for producing their namesake beverage a carefully-guarded trade secret. Only a select handful of high-level company executives are ever allowed to view it, and the only written copy of it is kept locked away in a massive vault at the World of Coca-Cola in Atlanta, Georgia.

Why go through all this trouble? Simple: the formula isn’t patented. Should it ever be released to the public, Coca-Cola as a company would almost certainly be ruined as their best-selling drink would suddenly find itself duplicated by generic producers everywhere. Instead, the formula for producing this worldwide-favorite beverage is so valuable because of the fact that nobody knows what it is, nor has anyone been able to figure it out. If the company were to patent the formula, Coca-Cola would have to completely disclose the formula and they would only be able to maintain profitability with it for another 20 years before they’d lose their claim to ownership.

While trade secrets can potentially be profitable for an indefinite amount of time (as long as the secret is kept closely-held), they do carry a lot of added risk, and that’s what makes them less popular with businesses in some instances. However, as we’ve seen with Coca-Cola and many other examples, it can be done and as a result a business can keep the rights to a particular piece of intellectual property for many years beyond the 20-year limit for a patent.

If you need help securing your business’s intellectual property, talk to a Los Angeles business attorney from The Mirkhan Law Firm today! Dial {F:P:Site:Phone} to request a case evaluation.

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