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Trade secrets

An alternative to patents?

Some new technologies can be put in to action and kept secret at the same time. Coca-Cola’s original recipe and Colonel Sanders’ secret herbs and spices are notorious examples and, alarmingly, obstetrical forceps were kept as an effective trade secret for more than 100 years (see here).

Unfortunately it doesn’t follow that trade secrets are often an advisable form of intellectual property protection. These examples are famous because they are remarkable; that is, they are unusual. More usually, secrets are leaked, competitors independently develop similar technology and/or the technology is ‘reverse engineered’ (leaving the original innovator with no effective recourse).

Whilst in theory the law protects confidential information (secrets) the practicalities of that protection are often questionable. What happens if an employee publishes important details of your secret technology on the web and those details are taken up by competitors? You might have a strong legal case against the employee, but effective action against the competitors may well be difficult.

Don’t underestimate the chances of competitors independently developing similar technology. Like convergent evolution, it has a way of happening. As patent attorneys, we talk to people regarding their latest developments every day. It’s not unusual to find that others in the same field of technology have been working on very similar projects at about the same time.

Trade secrets do not protect you against independent development. If a competitor concocts a recipe that just happens to be the same as Colonel Sanders’ secret herbs and spices, the Colonel couldn’t stop them using the recipe or selling the chicken.

In this case trade mark registration might be especially valuable. The competitor could sell the chicken but couldn’t sell it as Kentucky Fried Chicken.

Likewise, trade secrets do not protect you against reverse engineering. If a competitor could work out the recipe by studying Kentucky Fried Chicken they could use the recipe.

Patents are usually a better option for new production processes.

Patents can be enforced against competitors who use the patented technology, regardless of whether the competitor learnt of the technology from a dishonest employee, by reverse engineering, or just happened to develop the technology for themselves.

Under Australian law, a patent to a production process can be used to stop competitors importing product that has been made overseas using the patented process.

Whilst patent protection is usually the better option, it is not always appropriate. Applying for patent protection carries the risk of publishing details of your technology without securing effective protection:

  • not all technologies qualify for patent protection; indeed we’ve used the Colonel’s herbs and spices as an example whereas in Australia a ‘mere mixture of known ingredients’ is not patentable; and
  • to obtain valid patent protection, the technology must be clearly disclosed in a patent specification that is typically published about 18 months into the process.

And finally, you can’t have it both ways: As general rule, you cannot commercially use an invention in secret and then apply for a patent, although there are some exceptions to the rule:

  • Australia has a 12 month grace period that excuses recent secret commercial use; and
  • Australia allows reasonable trial and experiment.

Intellectual property specialists. Melbourne based. International reach. WADESON