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Trade Secret vs Patent

A trade secret is a type of intellectual property. It is protected mostly by federal laws, but there are some state laws that offer further protection. In general, it is a design, formula, process, practice, pattern, or any similar compilation of information that is not generally known or reasonably discoverable. For a company to receive protection of its trade secret, it must also offer a competitive economic advantage over its competitors.

The Three General Requirements

Although what qualifies as a trade secret often depends on jurisdiction, there is a general consensus for determining whether a piece of intellectual property qualifies as a trade secret.

One, the company holding it receives some sort of economic benefit from it.
Two, the company takes reasonably expected precautions to maintain its secrecy.
Three, it not generally known to most people.

Taking Precautions

In order to meet the standard of reasonable protection, many companies take precautions in various activities and procedures. For instance, when an employee signs a contract with a company, the contract will often include various non-compete and non-disclosure clauses. These clauses guarantee that the employer will not leak the trade secret outside the company or to other employees within the firm who do not have permission to obtain it.

Trade Secret Versus Patent

In terms of intellectual property, trade secret are typically compared to patents. The difference between the two lies in the timing and extent of their protections.

Trade secrets are protected forever as long as the three criteria are met. However, if another company or party discovers the trade secret, then that other party can lawfully use it. For instance, if a pharmaceutical company has one and a competing entity uses reverse engineering to discover it, then the other entity can lawfully use it.

Patents, on the other hand, have a limit. They can only be held for 20 years. However, they have an advantage over trade secrets. No other party can use a patented item or information, no matter how they obtain it.

One of the most popular examples of a patent is the tennis racket developed by Head Sports. When the larger and wider racket was developed in the 1970s, it revolutionized tennis and gave Head a significant competitive advantage in the tennis racket market. Such huge competitive advantages, however, are not typically long lasting because of the rapid rat that technology changes.

Intellectual property is a deeply complex issue. If your company has any questions regarding this matter, contact the Minneapolis business lawyers of Skjold & Barthold, P.A.

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