As an intellectual property lawyer and patent agent, I am regularly approached by clients or prospective clients who want to know if they should protect their new widget with either (a) a patent or (b) a trade secret. The driver behind the question (supported in many cases by vague online information that may or may not be relevant to Canadian law) is the notion that patents and trade secrets are roughly equivalent in terms of protecting your widget, and you just need to choose between them in a way most advantageous to your business goals. Nothing could be further from the truth – patents and trade secrets are very different things, definitely not alternatives – but itcanbe instructive, useful, and sometimes extremely important to at least consider both options as you determine how best to protect the new widget.
To be clear (and to briefly digress), I am not a fan of "protection" language. The patent system doesn't protect anything – it provides a mechanism for governmental recognition of a defined and time-limited monopoly that can be enforced in the courts. Likewise with trade secrets, what you are doing is controlling access to your sensitive information, and by maintaining its secrecy you maintain (or enhance) its commercial value. In a very real sense, both legal concepts are about controlling access to your widget and are thus similar to that extent, but what they can rightfully be said to protect is the commercial opportunity inherent in a novel technology.
Getting back to the question – patents or trade secrets? – it is helpful to get a clear idea of what each system is and isn't.
The Patent System
A patent system is a national (or in some cases regional) system allowing a governmental authority to grant clearly-defined monopolistic rights, and in our case that authority is the Canadian Intellectual Property Office (CIPO). Monopoly is the key concept to keep in mind. A patent is not a license to practice an invention; you don't need it to practice the invention yourself. Rather, a patent affords the right to stop others from copying your invention in the jurisdiction that granted the patent. Again, it is a way to control access. A patent does not validate a technology, nor does it value a technology; it defines a conceptual fence around your CIPO-recognized property, a fence which must be clear and concise enough for others to know when they would be trespassing. That fence, that monopoly, lasts for twenty years from the patent application filing date (assuming, of course, that annual maintenance fees are paid to CIPO), and the granted rights are exclusivity for making, using, and selling the invention in Canada and importing the invention into Canada. The scope of the monopoly – the invention – is defined by a series of numbered paragraphs called the claims. Once the patent is granted, those claims define your fence.
There is a quid pro quo involved in the patent system, though, which is one of the aspects of the system that inventors understandably do not care for. To obtain your time-limited monopoly of national scope, you must disclose the invention, and it must be disclosed in detail sufficient to allow skilled persons to recreate your invention without the exercise of their own inventive ingenuity. On top of that, there is no guarantee you will obtain the granted patent at the end of the day...and you still had to tell everyone how your invention works!
Further, the patent system can be ponderous, time-consuming, archaic at points (some even say arcane), and relatively costly especially for individual inventors and start-ups bootstrapping their business venture. If your technology has an obsolescence window of a few years, the lengthy patent process might make little sense. By controlling access using your patent monopoly, you can block competitors from copying you, allow licensees to use your invention, and if desired potentially attract investment to keep the venture rolling, but it is not surprising that inventors may look askance at the negatives of the patent system and wonder if the grass is greener on the trade secrets side.
Trade Secrets (Note: Not a System)
Trade secrets, as the name indicates, are directed to information or materials that are maintained as a secret and are generally (though not always) commercial in nature. Think of the most famous trade secrets such as carbonated beverage formulations or fried chicken coating recipes, and you get the gist.
Unlike some jurisdictions, Canada does not have a statutory trade secret regime similar to patents or trademarks – it is judge-made law, based on fact-specific cases that come forward for adjudication. It is actually most helpful to view trade secrets as a subset of confidential information with some unique requirements that have arisen through judicial decisions, though even some cases acknowledge that the term "trade secret" is often viewed as synonymous with confidential information.
Because trade secrecy has evolved in Canada through case law, the facts of those cases and the specific issues being litigated have resulted in inconsistent pronouncements regarding what exactly is required for something to be a trade secret. Even looking to Supreme Court of Canada decisions reveals variable (though not necessarily conflicting) definitions. While acknowledging the inconsistent treatment, following are the main factors considered:
- whether the information is confidential and treated as such
- the measures taken to guard the secrecy of the information
- the value of the information in a commercial sense (hence "trade" secret)
Other factors may be important, such as the resources invested to generate the information, the ease with which the trade secret could be duplicated by others, how much access control there is internally within the organization, and the like.
You don't need to register a trade secret like you do with a patent. You need to enact suitable measures to keep the information confidential and control access even within your organization. Given this, it will be clear that the costs involved in maintaining a trade secret will usually be significantly less than pursuing patents in multiple jurisdictions, and no public disclosure is required (by definition!). Further, to obtain a patent the invention must be new, useful, and non-obvious (involve an inventive step), but trade secrets have no such requirements. Trade secrecy can also be used for non-patentable subject-matter such as some copyrightable works including software code.
Trade secrets have value if remain a secret – hence their inherent fragility. If a disgruntled ex-employee discloses your trade secret, you may have grounds to sue the ex-employee but the cat is out of the bag – no more trade secret. And if your commercial product can be reverse-engineered to reveal the trade secret, the access control is lost as well as the commercial advantage. But if you have a true "black box" technology then trade secrecy may very well be a powerful tool. If someone else independently creates the same thing and discloses it (and maybe even patents it) – again, no more trade secret.
Patents, Trade Secrets...Maybe Both?
Let's be very clear – you are not comparing apples to apples. Patents are statutory monopolies that are national in scope and time-limited, and you must disclose the inventions, whereas trade secrets are only as strong and effective as your ability to control access to the information and maintain it as a secret. Whether the patent system or trade secrecy is the best course for your creation will depend on numerous factors, including the importance of the creation for the business, the budget available for controlling access, whether it is black box technology or easy to reverse-engineer, and the obsolescence window.
A combination strategy of patenting some aspects of your technology while keeping other aspects secret may be attractive, as long as you're not keeping aspects secret that are required to establish the utility of the invention under the patent system. For example, you may have a widget that can be patented (as it could be reverse-engineered) but you can keep the manufacturing process a trade secret where that process provides a commercial advantage (e.g., reduced costs, faster manufacturing, etc.).
The patent system can provide certainty and reliable enforceability (at maybe undesirable costs and disclosure requirements), while trade secrets may provide longer access control without jurisdictional limits or disclosure (though with greater fragility and risk of loss). Or you can look at combining the two if appropriate. It all comes down to your own situation, the nature of the technology and its importance to the business venture, how risk-averse you are, and the business realities you're facing.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
