Home > Topics > Technology and Product Licensing > Trade Secrets and Trade-Secret Licensing > Editor's Summary, Implications and Best Practices

Everyone knows that trades secrets are secret. Patents, on the other hand, require inventions to be publicly disclosed. But does this mean that these two forms of IP protection cannot be used together? This chapter answers emphatically that both trade secrets and patents should be used together to obtain a form of IP protection that is stronger than either one used alone.

A trade secret is any proprietary technical or business information, often embodied in inventions, know-how, and show-how. The most common definitions roughly agree on three requirements that should be met for enforceable trade secrets to exist. The proprietary information should be:

1. secret, in the sense that it is not generally known in the trade,
2. valuable to competitors that do not possess it, and
3. the subject of reasonable efforts to safeguard and maintain it in secrecy.

Trade secrets have become more and more prominent in business. In fact, patents are only the tips of icebergs in an ocean of trade secrets. Over 90% of all new technology is covered by trade secrets. And over 80% of all license and technology transfer agreements cover proprietary know-how (trade secrets) or are hybrid agreements covering both patents and trade secrets. No wonder Bob Sherwood, an international IP consultant, calls trade secrets the “workhorse[s] of technology transfer.” The stakes involved in the protection of trade secrets are also getting higher. Injunctions are now a greater threat in trade secret misappropriation cases, and damage awards have been in the hundreds of millions of U.S. dollars in recent years.

But how is it possible to use both patents and trade secrets to protect intellectual property? Usually, patent applications are filed early in the R&D stage to get the earliest possible filing or priority date. The patent claims tend to be narrow to achieve distance from prior art, and the specification normally describes rudimentary lab experiments or prototypes and/or embryonic embodiments of an invention; the best mode for commercial manufacture and use are more often than not developed later. These latter trade secrets are not part of the patent disclosure. Thus both patents and trade secrets can be used simultaneously.

In fact, they should often be used that way so that a larger amount of intellectual property can be protected. Moreover, as a practical matter, licenses under patents without access to associated or collateral know-how are often inadequate for taking commercial advantage of the patented technology. Without the collateral know-how, it is unlikely that patented technology can be commercially used. Data and know-how, therefore, are immensely important and should be part of licensing agreements. Hence, effective technology transfer will involve not only patent licensing, but also, and indeed perhaps more importantly, trade secret licensing.

Patents and trade secrets are not mutually exclusive, but actually highly complementary and mutually reinforcing. Developing countries in particular will want to keep in mind that trade secret protection operates without delay and without undue cost. Patents, on the other hand, are territorial and so expensive to obtain and maintain that they can be acquired only in certain countries. Above all, everyone should realize that far from being irreconcilable, patents and trade secrets make for a happy marriage as equal partners: it is patents and trade secrets, not patents or trade secrets.

Key Implications and Best Practices

Given that IP management is heavily context specific, these Key Implications and Best Practices are intended as starting points to be adapted to specific needs and circumstances.

For Government Policymakers

• Patents and trade secret law are not mutually exclusive. Indeed they are complimentary, and can coexist as two viable options for securing IP rights to innovative technologies.

For Senior Management (university president, R&D manager, etc)

• Make sure that policies about trade secrets are clearly understood by employees.
• A written agreement is the safest way to preserve secrecy.
• Public sector organizations should be cautious when accepting trade secrets. In many jurisdictions, there is a significant difference between trade secrets and confidential information in terms of liability and related aspects.
• Similarly, public sector organizations should carefully consider whether it is appropriate for them to protect certain information and term it trade secrets.

For Scientists

• If you believe you have a patentable invention, seek the guidance and advice of your institution’s technology transfer office.
• Be aware of your company or institution’s policy on protecting trade secrets.

For Technology Transfer Officers

• For any given invention, sometimes the best strategy is to seek patent protection, and sometimes the best route is to protect as a trade secret. It is important to know how to evaluate and harvest inventions, so as to make informed, strategic, choices on the best way to secure IP rights for valuable innovations arising in your institution.
• Patents and trade secrets are not mutually exclusive but actually highly complementary and mutually reinforcing
• To help decide whether to patent, use trade secrets, or both, see the questionnaire offered in this chapter.
• Establish clear trade secret policies and communicate them to everyone in your business or institution.
• Applying for a patent doesn’t require disclosing everything. Protect your know-how.
• Hybrid agreements require clauses that not only maintain trade secrecy for the benefit of the trade secret owner, but also provide appropriate limitations for the protection of the trade secret licensee.
• Hybrid patent/trade secret licensing is the workhorse of technology transfer.
• Technology transfer relies on the transfer of both patent rights, but also the transfer of know-how and show-how that are frequently protected as trade secrets.
• Patent specifications typically teach only an early, embryonic, enablement of an invention. Hence, specifications can be difficult to read, and even more difficult to practically implement, all the more reason to seek hybrid patent/trade secret licensing agreements.