Trade Secrets comprise any protected business information – whether technical, financial, or strategic that is not commonly known; and that affords a competitive benefit to the proprietor. Innovative companies use this form of protection all through their operations, and they consider it to be a method to handle their exclusive information. Trade secrets may induce innovation since they deliver a method for businesses to reap the profits of their innovation. Nevertheless, trade secrets also have demonstrated controversy since they hide, rather than divulge, actual inventions to the society due to the requirement of secrecy. Thus, it is imperative to examine the utility of such protection vis-à-vis Patent Protection and whether it impedes or furthers the development of technology.
Global descriptions of trade secrets have agreed on the criteria laid down in the TRIPS Agreement. Nations are obligated to safeguard a trade secret or ‘undisclosed information’ that is secret; has commercial value because it is secret, and has been subject to reasonable steps to keep it secret. The information should be protected from revelation, procurement, or use by others in a way that is dissimilar to honest commercial practices. The TRIPS Agreement does not stipulate a precise way to protect trade secrets, but, in reality, nations have separate trade secret laws and include trade secrets in their competition laws, contract law, and may also depend on the common law.
Trade Secrets as a Tool for Innovation
The basis of a trade secret is to promote research and development by protecting the originator of business information and maintaining appropriate ideals of professional ethics. Trade secrets may be typically cherished when technology is at an early level of R&D and does not fulfill the criteria for a patent or when the changing laws make the obtainability of a patent uncertain. For instance, ambiguity about the patentability of few biotechnologies, business methods, and/or software under the legal system of a country is allegedly encouraging firms to depend on trade secrets. The creations safeguarded as utility models, industrial designs, trademarks, artistic or literary works are frequently kept as a trade secret until revealed through the process of registration of the respective Intellectual Property Right (IPR). A considerable portion of commercial technology, mainly novel and ground-breaking innovations, are susceptible to reverse engineering, hence, preserved as trade secrets. It means that a trade secret does not offer a definite and perpetual right to use the data, and a third party can even obtain the information through the public domain or by employing fair methods. Therefore, contrasting patented inventions, copyrighted works, or trademarks, trade secrets are not safeguarded for a particular period, and they may be revealed in the day-to-day course of trade.
The modern methods of innovation give great attention to transformation and joint association. A lot of emphasis on secrecy by a company can shift focus from the skills and work of employees to expenditure on secrecy, security systems, and giving information only to a trusted inner circle. Therefore, the legal protection accorded by trade secret laws helps in this regard since it allows the dissemination of sensitive information between parties.
An efficient trade secret regime that affords protection to exclusive information holds numerous benefits. It may permit businesses to seize the profits of the expenditures and time that it takes to create the information without having to share the profits of that information with others. Trade secret law, thus, may be seen as giving incentives to invent. Firms may also create a trade secret effortlessly on their own. Commercially valued information is sheltered once a business makes reasonable efforts to uphold it in secret. There is no necessity for official government participation, as is needed for patent protection.
Trade Secrets vs. Patents or Trade Secrets and Patents?
Every patentable invention starts as a trade secret since trade secrets can be used to protect pre-patented R&D, and both patent protection and trade secrets offer significant inducements for inventions and investments in uncertain projects. Nonetheless, there are significant dissimilarities in the practical operation of these two types of protections. Trade secrets, as opposed to patents, do not need registration, and therefore, there are no government levies or other regulations in most of the countries. They occur upon formation by their potential commercial value and being kept secret. While trade secrets can contain any valuable data, the matter of a patent is technical and must satisfy patentability standards such as novelty, utility, and non-obviousness. Patent regimes provide a temporary exclusive right in return for public disclosure, thereby enabling the distribution of data, decreasing duplication of innovative labor, and allowing creators to build and improve on earlier inventions. This limited right may allow the patentee to recuperate investments and get the worth of his or her invention, simultaneously allowing people to profit from the publication of data about the invention. Since patents are temporary, the invention will eventually come into the public domain. Trade secrets, however, have a possibly unlimited period if they do not get disclosed in public. Patent Infringement is founded on strict liability, meaning that infringement may even happen without someone intending to do so. On the contrary, in trade secret misappropriation, it is usually essential to prove that the respondent used incorrect ways to get the information or had knowledge that it was acquired or used wrongly.
Some have questioned whether or not the safeguard of inventions without revelation, in the form of a trade secret, is an adequate public policy. More precisely, the contrasting justifications of trade secrets and patents bring the issue as to whether the former may affect the dissemination of information sought by the latter. Still, in reality, the two systems co-occur quite adequately. The presence of trade secret legislation inspires technology dissemination via licensing since the substitute may be hoarding. The dependability of patent and trade secret systems was assessed and recognized by the United States Supreme Court in the case of Kewanee Oil vs. Bicron Corp., where it was pronounced that patent protection does not obstruct trade secret protection, and both types of Intellectual Property (IP) systems can exist in harmony. The Court stated that the patent policies of boosting invention and not eradicating things from the public domain are not inconsistent with the presence of trade secrets. The more problematic objective of patent legislation to settle with trade secrets was that of disclosure, i.e., “the quid pro quo of the right to exclude.” Supreme Court characterized trade secrets as protecting: (i) inventions not patentable; (ii) inventions with questionable patentability; and (iii) inventions that are patentable. Then it established that in the first two classes, there is no problem between a trade secret and the patent’s rule of disclosure, and in fact, it is better to have trade secret protection than not have it. For inventions that are not patentable, trade secret law inspires innovation since there is no motivation to innovate otherwise. In the inventions of doubtful patentability, trade secrets play a significant role when it comes to decreasing the amount of non-patentable inventions at the patent offices and consequently in the courts, as it is better to have the invalid patent never issued or disclosed at all. Concerning the third class of patentable inventions, the Court stated that trade secrets present “no reasonable risk of deterrence” from patenting for two causes. Firstly, that trade secret protection gives much frailer protection in many aspects than patent protection. Secondly, for the occasional innovator that picks trade secret safeguard over a patent, there is no obstruction to scientific or technical advancement due to the ‘ripeness-of-time’ notion of invention, wherein others are probable to make the identical discovery in a comparatively shorter time.
Trade secret protection may be a specifically eye-catching means for innovative small and medium enterprises (SMEs), which generally have limited capital and restricted know-how and ability to manage intellectual properties using formal IP protection. Trade secrets can apply to a range of methods used by SMEs to reap the benefits of their inventions. The same does not mean that patents are not just as vital to small enterprises. For indicating the value of an invention to possible allies and the market, an SME may be required to secure patents on crucial characteristics of its creations – especially in areas where reverse engineering is fairly easy and hence exclusivity is necessary. An ideal IP policy of a business combines trade secrets and patents for safeguarding innovation.
Thus, we have seen that in practice, trade secrets successfully complement the patents. Trade secret laws apply to areas that Patent Law doesn’t, thereby permitting the safeguard of commercial strategies, customer lists, and negative expertise. Trade secrets are principally valuable in shielding implicit or knowledge that is not codifiable viz. data indispensable for the operation of a patented invention. Certainly, technology transfer often includes the authorizing of both patents and trade secrets. Therefore, trade secrets allow businesses to share the matching information not only needed to apply but also to commercialize and enhance already patented technologies. In some segments, trade secrets may be the most crucial portion of a technology transfer agreement because a patent license by itself may not permit the full placement of patented technology.
The protection afforded by trade secrets matches the needs of contemporary modes of innovation. Nowadays, innovation is progressively categorized by a high degree of partnership and also by stress on incremental innovation. Trade secrets help to institute safe networks for exchanges of knowledge, serve to build absorptive capability, which is well-defined as the capacity to recognize, integrate, and apply new information. They also deliver a substitute tool for guarding steady growth for which patents may not be obtainable or fiscally possible. To summarize, trade secrets are directly connected in the distribution of proprietary skills and information, motivating larger revelation and use of data. As patent protection inspires the distribution of exclusive technology, trade secret simplifies the distribution of proprietary know-how and expertise. The joint placement of trade secrets and patent protection delivers exclusivity to the innovator while promoting technology transfer through licensing and other dealings.