Trademarks vs Trade Secrets: Choosing The Right IP Protection Strategy For Your Business

INTRODUCTION

Intellectual Property plays a major role in our daily lives, especially with those who have businesses as they require protection for their assets. We have a variety of IP, s through which protection can be given to individual inventions, business. Different kinds of IP cater to the needs of different kinds of subject matter. To protect the business interests, we have trade secrets and trademarks. So, let's start with understanding what is a Trademark and trade secrets, differences, advantages, and limitation and then we will proceed to know which one among these offers a better protection mechanism later in this blog.

What is a trademark?

Trademark are marks of trade which help an individual to identify a certain set of goods and services and distinguish it from the other set of goods and services of some other brand. Trademarks include slogans, brand names, logos, and even distinguished sounds and packaging.

What is a trade secret?

A Trade secret is a confidential information that provides a business an positive edge over others, As it derives its value from being unknown to others and as the businesses takes reasonable steps to protect its work and processes.

Now that we have learnt what a trademark and a trade secret actually is we will move to other aspects governing it that will be crucial to decide which of these two offers a better protection.

Benefits of trademark:

Private Rights and legal protection-

First of all, trademark prevents other users from using the same and confusingly similar mark. Because once the trademark is registered successfully it grants protection up to 10 years and during this tenure the owner has got all exclusive rights to make use of that trademark and no other individual or business house can use the same mark without due permission from the original trademark owner.

If there is a unauthorized use of trademark by anyone who is not the owner then a legal action for infringement can be initiated.

There is a conclusive proof of ownership when the trademark is registered and certificate is granted. Trademark registration.¹

All though the other thing about trademark is it is not made mandatory under Indian trademark Act of 1999 to register a trademark. The trademark can be unregistered and can be protected under passing off action. The owner can prove through (HCPU) test (Honest concurrent prior user). But there is a catch in this whole system though trademark registration is not made mandatory, but if it is done it will surely be a conclusive proof of ownership and for which where the owner in a passing off suit was proving that he owns the trademark because he was a prior and continuous user during which he will spend a lot of financial resources. By getting a trademark registration will bring the owner to a much better place and he will have to prove in an infringement suit that there was an unauthorized use of his trademark without his prior approval and which will cost only for registration and to some extent legal expenses.

The other advantage of brand building would be brand recognition- How do we recognize a brand? We recognize it through trademark only because it helps customers distinguish the products and service of one brand from its competitor's.

There is a strong connection between the goodwill attached with the trademark and the loyalty of the customer. The trademark of a particular business is related to more when we talk about a particular goods or service which we use in our daily lives or occasionally (but one of our favorites). That's how we connect loyalty to a particular trademark. Because the goodwill of the business is such because of the quality of goods and services it provides over the period of years which makes an impression in the minds of general public that whom to visit when they are seeking the same set of goods and services.

If it becomes a respected trademark in the market after several years of existence then it brings a new set of customers along with it and helpful in increasing sales of the business.

Limitations of trademark- Like we have discussed the trademarks and their benefits as we know there are pros and cons of every subject. So, lets delve in the limitations of trademark which is important equally in order to determine whether trademark is a better protection or not.

The first limitation is the registration process of trademark is time taking and at the same time pocket draining also. A trademark registration process has lots of steps and procedures which have to be followed over due course of time and with a uncertainty that it may be opposed in between by any other individual or entity. The other limitation is that if a business believes in keeping its operations a secret. They might not be very fond of trademark registration because details of registered trademark are easily accessible publicly.

More limitations with regard to trademark are also related to geographical limitations in which trademark protection is generally territorial which literally means its only valid in a specific jurisdiction or country in which it has been registered. The other limitation is with regard to global registration if a trademark owner wants its trademark to be registered in any other country, then they have to visit that country and move an application for registration of its trademark to be recognized and protected in that country.

Now we will look at the benefits and limitation of a trade secret in order to determine what sort of protection mechanism it tends to offer.

Let's talk about the benefits of trade secret- If we talk about trade secrets they don't require formal registration unlike trademarks, well trademarks do have a forum for registration which is not mandatory and totally depends on the owner. And the protection is unlimited as long as the information remains confidential. Competitive edge is being with the business that keep their procedures and way of operating a secret.

For example-

Coca cola's secret formula

Special recipe used by KFC for their fried chicken

Unique manufacturing process by a company.

Now if we look at the limitations of trade secret- There is no formal protection in case a trade secret is discovered by means of unauthorized disclosure, espionage and breach of contract then the owner has no legal basis or protection.

There is a constant threat of leakage of the trade secret by employees, partners or competitors or they may do some mismanagement of the trade secret. The other issue with regard to trade secret is there is no enforcement as when we were talking about its benefit, we talked about no formal registration required that would also turn about to be a negative standpoint form trade secret's perspective as there will be challenges in enforcing trade secrets.

Which offers better protection?

After carefully analyzing certain criteria's, we shall look at which offers a better protection after all. At first if we take Brand identity and recognition then we must say trademark are a better option to go for as far as protection and registration are concerned.

Secondly if we consider confidential operational information of a particular business then it will be the trade secrets that will be used to protect special knowledge, formulas or business strategy.

Thirdly if we take into consideration the duration of protection offered then trademark if registered gives a protection of indefinite time if it is properly renewed after every 10 years. But on the other side duration of protection is infinite without a formal need of registration but it takes lot of effort to maintain confidentiality over years.

Last but not the least legal enforceability- Trademarks provide stronger legal protection and recourse if it is registered under trademarks act of 1999, and even if it is not registered one can take the recourse to passing off law and on the other hand one has to rely on internal security measures and with a hope that the parties they are coming in contract with honor the contract and do business in good faith without breaching, spying or stealing the inside information of a business.²

As we have discussed in the whole blog regarding all aspects relating to trademark and trade secrets. Both of them play crucial role in the field of Intellectual property rights, but their usefulness depends on specific needs of the business let's say business which wants to protect the process and internal operation details they would opt for trade secret because that secret is the reason they have a competitive edge over others in the same set of market. On the other hand, if a business by its goodwill is doing well by virtue of its goods and services then they might opt for trademark protection to protect its name, logo and tagline usage from its competitors. There might be a third scenario where business might use both of these combined to maximize their level of protection. After carrying detailed research about strengths and weaknesses of each subject matter informed decision can be made by the businesses.

References

1. Indian Trademarks Act
2. Trade secrets protection in India (legal framework)
3. USPTO- Guide to Trademarks and Trade secrets
4. World Intellectual Property Rights (WIPO) – Trademarks and Trade secrets
5. Case mine – Trade secret and Trademarks case laws
6. SCC online – Case laws

Footnotes

1 Pranav 3^rd year BBA.LLB KIIT School of law, Email-2282073@kls.ac.in

2 Case law – COCO vs AN Clark (Engineers) Ltd. [1969] RPC 41 (Trade Secrets Protection)

Case law- Diyora Bhanderi Corporation vs Sarine technologies Ltd (Trade secret Case law) (2018 SCC ONLINE SC 790, Supreme Court Of India,

Trademark cases

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.