Written By: Charlotte Tyhurst – IP Lawyer
Both patents and trade secrets offer valuable forms of intellectual property (IP) protection, but they operate in fundamentally different ways. Understanding the strengths and limitations of each can help guide decisions about choosing which form of protection is the most appropriate for your business.
What is a Trade Secret?
Trade secrets include all forms and types of financial, business, scientific, technical, economic, or engineering information. The information is considered a trade secret if the owner has taken reasonable measures to keep the information secret and if the information derives independent economic value from not being generally known to, nor readily ascertainable by, another person who can obtain economic value from using the information.
For example, trade secrets can include formulas and recipes, such as secret ingredients in a soft drink or food product, but can also include software algorithms or code that give the business a competitive advantage.
Disclosure Versus Secrecy
One of the most fundamental differences between patents and trade secrets is disclosure. Specifically, pursuing a patent requires disclosingthe invention to the public. That is, once a patent application is published, the information becomes publicly available to everyone – including competitors. The benefit is that, once granted, the patent owner obtains a legally enforceable right to prevent others from making, using, or selling the invention for up to 20 years.
Trade secrets, in contrast, depend on non-disclosure. That is, to qualify as a trade secret, the information must be kept confidential. Once a trade secret is disclosed, it is available for public use and loses its trade secret protection and the possibility of patent protection. While trade secrets can last indefinitely, they only last so as long as the information remains a secret.
Maintaining trade secrets for a business therefore requires careful operational discipline. Security measures must be tailored to the format and storage of the information, which can include access restrictions, employee confidentiality agreements, and technical safeguards for digital data.
Making the Right Choice
The decision to file for patent protection or to rely on trade secret protection requires weighing several commercial, legal, and strategic factors. For example, in the context of Artificial Intelligence, patent protection for broader processes should be balanced with trade secret protection for specific aspects of those processes (e.g., underlying formulas, model structures, and training datasets).
Certain situations may make patent protection more suitable, such as:
- If you require exclusivity, but not indefinitely;
- If independent development or reverse-engineering of the technology is possible;
- If secrecy is impractical or impossible (e.g., software deployed on third-party systems);
- If the field of the technology relies heavily on patents; and
- If the subject matter of the technology is patent-eligible.
In contrast, the following are some situations that may favour trade secret protection:
- If the technology’s anticipated lifespan is either very short or very long;
- If the technology is difficult to reverse-engineer or independently develop;
- If the subject matter is not patentable (e.g., pure data); and
- If the technology is likely to evolve or change rapidly.
Ultimately, each form of protection offers distinct benefits and risks depending on your specific technology and business goals.
Call to Action
Canadian businesses and innovators must be aware of the distinctions between trade secrets and patents so they can decide how they want to seek protection for their IP.
Our experts can help you assess which forms of protection best support your business and develop a strategy to protect your innovations and technology effectively. Contact us today if you have any questions about developing your IP strategy!
