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Trade secrets and their strategic implications 

Published on: 09/15/2021
By: Erwan Coatnan de Kerdu

Dernière modification le 17/11/2022 à 09:40 par Back Office Update - test



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Trade secrets and their strategic implications 

  by Erwan Coatnoan de Kerdu

Trade secrets are valuable alternatives to patents, and can also complement them. 

Trade secrets 

A trade secret can be a proprietary information, formula, knowledge, method, process or design. Trade secrets are thus distinguished from know-how by their commercial advantage. They are data of various kinds that are not known or identifiable and for which great efforts are made to keep them secret. 

Their advantages over the patent 

Trade secrets are advantageous over patents in several cases: 

  • Supervisory approval is not helpful, nor is disclosure of unique processes and knowledge about them;
  • Competitors have a harder time designing trade secrets than patents; 
  • No patent filing fees;
  • Trade secrets last as long as they are kept secret; 
  • The assets are more numerous and exclusive; 
  • The enterprise value is increased by trade secrets and intangible assets,
  • They generate value and are subject to a non-disclosure clause; 
  • They allow you to obtain damages if they have been illegitimately misappropriated. 

The disadvantages 

There are some disadvantages to preferring trade secrets to patents: 

  • A company can compromise its secrets; 
  • Trade secrets do not protect against independent discovery (reverse engineering);
  • A competitor who has legitimately obtained the secret may file a patent for it; 
  • High costs of protecting secrets, including operational inefficiencies;
  • Obligation to establish employment contracts with confidentiality clauses: review employee publications and speeches; 
  • Need to mark confidential documents; 
  • Etc. 

Using trade secrets and patents 

An effective solution would be to use both trade secrets and patents. In this case, it is sufficient to sequence them in such a way as to patent and then hide the improvements made to the original product or service. However, this solution is much less effective in the opposite direction, and sometimes even impossible. 

Patentees are generally required to disclose the state of the art, methods of practice and references when filing a patent. After the application, improvements are continually made to the product or service subject to the patent filing. If they are not to be disclosed on the application, then they can be used as trade secrets. Therefore, a patent licensing agreement must be accompanied by a trade secret agreement. 

This solution will therefore be a suitable method for several types of companies wishing to limit the risks around their innovations while retaining a significant part of their commercial advantage. 

To conclude 

It is up to the inventor to choose the appropriate method of invention protection: using trade secrets, filing patents only, or combining these two practices in a combined action. A patent, like a trade secret, has its own advantages and disadvantages. It is not possible to generalize a single method for all companies: the right choice depends on their size, their activities and their internal policies. It is really a question of adopting and adapting one’s business strategy according to one’s environment and specificities. 



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