24 Aug Protecting Your Startup Innovations – Patent v. Trade Secret
By Matthew R. Burkett
Your startup has hit the ground running. The gang of millennials under your employ is trailblazing and innovation is flourishing. It’s time to consider how to protect your advancements from the competitors you didn’t know you were about to have. It is also important to consider how to protect certain innovations internally. Depending on the field of technology in which your company dabbles, protection from competitors could mean choosing between obtaining a patent and publicly disclosing some innovations, and keeping other innovations private — particularly trade secrets.
Patents are granted by the United States Patent and Trademark Office (USPTO). In exchange for public disclosure of an invention, a patent gives you a limited duration, territorial property right for your claimed invention. Trade secrets generally refer to any pattern, compilation, program, device, method, technique, or process that is generally unknown or not readily ascertainable and gives you a leg up on competitors. To protect your innovations as trade secrets, you must be able to establish, among other things, that reasonable precautions were taken to maintain secrecy.
In order to decide which innovations to patent and which to maintain as secrets, it may be helpful to classify your innovations or intellectual property under two categories: (1) inventions for products or processes; and (2) inventions for internally-used technology. For truly innovative products or processes, the cost of public disclosure from a patent is likely outweighed by the benefit of limited exclusive rights, and vice versa for innovative internally-used technology. The day to day advancement of innovation in today’s technical marketplace may generate a multitude of possible patentable concepts under both categories. However, patent protection for each step in the path to innovation may not be the most efficient or pro-competitive approach. In fields where new technology often renders last year’s cutting-edge advancement obsolete, seeking a patent may not be a cost-effective solution for protection.
In addition, disclosing your innovations in a patent could provide competitors a road map to your unique technological advancements. For example, if your patented innovations can easily be practiced in secrecy, infringement by competitors could go undetected.
On the other hand, there’s nothing to stop a competitor from reverse-engineering your innovative product/process or internally-used technology being protected as a trade secret. Accordingly, patent protection may be a better alternative for technology that is easily reverse engineered.
Whether by patent, trade secret, or both, employees should be made aware of your plan for protecting your IP (“intellectual property”). An IP attorney can help you determine which inventions for products, processes, and internally-used technology are better suited to maintain in secrecy or to patent.
If trade secrecy is an appropriate protection plan, develop a trade secret program which apprises employees of the risks and goals of trade secret law, company information that constitutes a trade secret, the competitive value of the company’s trade secrets, and the respective employees’ role in the trade secret program. Trade secrets now more than ever are vulnerable to misappropriation from competitors or even ex-employees. Factors such as advances in technology, increased worker mobility, and expanded business opportunities through company globalization subject your trade secrets to misappropriation. An effective trade secret program should be tailored to recognize and address the vulnerabilities which exist due to these factors.
Similarly, a successful patent protection plan should inform all employees of the risks and goals of patent law, the innovations you plan on protecting in a patent, and the competitive value of patents. Informing and involving employees in your patent protection plan can prevent accidental public disclosure of products/processes or internally-used technology prior to filing for a patent. Such disclosures can prevent future patent protection, especially when a patent is sought in foreign countries where premature public disclosure or sale can completely bar patent protection outside the United States.
As your startup continues to establish itself and pioneer new innovations in your respective field, it may be important to distinguish which innovations to maintain as secrets and which to patent. Making sure your employees are up to date on your protection plan will go a long way in preventing, or at least mitigating, the potential loss to rights on your innovations.
Matthew is an attorney with Fay Sharpe LLP. If you have questions about the contents of this article or IP law, you may reach Matthew at firstname.lastname@example.org or 216.363.9126.