Protection of trade secrets vs. intellectual property protection
Every company, regardless of its size or level of technological progress, possesses important information that is essential to its business and competitive position in the market.
Although the main associations of a trade secret are the recipe for Coca-Cola or the secret ingredient in KFC, a trade secret protects a wide range of information such as test results, technology plans, marketing strategies, source code and more, which further highlights their importance.
Much information that is valuable to a particular company does not meet the criteria for protection under some intellectual property right and can only be protected as a trade secret. However, there is information that meets the requirements for, say, patentability and therefore could be protected as a patent. In that case, a dilemma arises: should certain information be patented or should it be kept secret as a trade secret?
How Formula 1 solves the dilemma
Did you know that although Formula 1 is one of the most technologically advanced sports in the world, where modern research and development is key to achieving results on the track, and it would be reasonable to assume that patents play a key role in protecting innovation, Formula 1 teams rarely file claims for patents? Why is it so?
Firstly, the process of registering a patent can be time-consuming, and the speed at which Formula 1 teams innovate and modify their cars means that the technology can already be surpassed before a patent is examined, let alone approved.
In addition, it is not always easy to align the innovations of Formula 1 teams with the requirements for obtaining a registered patent, especially with regard to the criteria of “inventiveness”.
Finally, the requirement to publicly disclose information about an invention also acts as a deterrent to patent applications, because if the patent application is ultimately not granted, competitors are free to use the invention.
When all this is taken into account, these factors provide some explanation as to why patents do not appear to be a leading part of the intellectual property strategy of Formula 1 teams, and the question arises, how are Formula 1 inventions and innovations protected? The answer is like a trade secret.
Advantages of protecting information through trade secrets
The main advantage of trade secret protection is its unlimited duration. Therefore, unlike intellectual property rights, which have a limited duration, a trade secret lasts as long as it brings commercial value to its holder and as long as the holder manages to keep it secret.
Second, unlike patents, trade secrets have no registration costs.
Third, trade secret protection is immediately effective, while on the other hand, intellectual property rights require time to provide protection to their holder.
So why doesn’t everyone protect the information as a trade secret?
Despite its advantages, trade secret protection has its disadvantages.
Namely, information can be stolen, that is, it can be deliberately “leaked” from the company, and once that happens, it is usually impossible to recover it. Even if there is no theft or deliberate disclosure of information, a competitor can legitimately obtain the same knowledge and thus have the right to use it, because trade secrets do not prevent others from using the information, they only prevent others from knowing the information in an unauthorized way.
Even if potential competitors, who came up with the same invention through legitimate means, patent it, the company that came up with the invention first, but decided to protect it as a trade secret, will no longer be able to use that invention for the duration of the competitor’s patent protection.
Conclusion
When certain information cannot be protected as intellectual property, there is no dilemma, but when information can be protected in two ways, the company is faced with a choice, whether to protect certain information as an intellectual property right or as a trade secret?
Although intellectual property protection is safer for its holder, trade secret protection makes sense when there is a high probability that the trade secret can be effectively kept secret for a long period of time and bring commercial value to its holder, as in the case of Coca-Cola.
Then, protection by trade secrets instead of intellectual property has advantages when technological progress in a certain area is extremely fast, that protection by intellectual property loses its meaning.
Finally, the mix of protection for a specific invention is best when it is possible to protect the production process with a trade secret, and the product itself with intellectual property.
