Research Paper on "Trade Secrets, Patents, Laws, and Compliance"

Research Paper 9 pages (2739 words) Sources: 8 October 1, 2019

[EXCERPT] . . . .

Trade Secrets & Patents

What is a Patent?

A patent is a right to intellectual property for a technical invention. It allows individuals or companies to prevent others from utilizing their invention for commercial reasons for about two decades. The company or owner of the patent decides who is allowed to produce, import or sell their invention in countries where the patent is deemed valid. Patents can also be traded by selling it, or licensing the use of the invention. Processes such as coffee freeze-drying and products such as solar panels can be patented. However, the invention is required to solve a problem in a technical way that is new and non-obvious (Ikenson, 2004).

What is a Trade Secret?

A trade secret is any confidential business information, which give an enterprise a competitive edge over its competitors. Trade secrets include industrial or manufacturing secrets, and commercial secrets. Unauthorized use of the information by third parties other than the holder is considered an unfair practice and trade secret violation. Trade secrets protection is part of business protection against unfair competition, but it depends on the prevailing legal system, or particular provisions or confidential information protection case law. Defined broadly, trade secrets and issues surrounding it involve sales methods, consumer profiles, distribution methods, marketing strategies, client and supplier lists, and processes of manufacturing. The circumstances around specific cases influence what makes up a trade secret. Unfair practices involving secret information encompass commercial (or industrial) espionage, confidence breach and contract breach (Buskop, 2008).

What are the Differences between Patents and Trade Secrets?

Patents are easier to enforce than trade secrets, which are more informal. Trade secrets neither involve disclosure nor formal paperwork or registration to maintain. Unlike filing for a patent, trade secrets do not accrue costs. Patent registration takes lots of money and time to process, making for one of the largest challenges for inventors to overcome. However, trade secrets are more difficult to enforce legally due to the informal nature of trade secrets. A trade secrets misappropriation claims must showcase that the trade secret was acquired improperly, making for sophisticated and vague legal cases. Lawful acquisition of trade secrets require the acquiring party for access to information for personal reasons. However, patent protection is easier to enforce because more documentation to back up the dates, claims and others specifics of an invention and related protection of patents (Bouchoux, 2006).

Different laws and statutes protect patents and trade secrets. USPTO offers patents at the federal level whereas trade secrets do so under state laws. The latter are under the Uniform Trade Secrets Act (USTA) with the exception of a few states. For instance, the USTA has been implemented in Arizona as part of the state’s statutes in Chapter 4, Title 44. North Carolina, Massachusetts and New York are yet to adopt the USTA. However, they have their own statutes on trade secrets and misappropriation. Unlike trade secrets without time restrictions, patents offer limited protection length. Usually, inventors receive up to 20 years of protection from the moment the patent is filed, for most common patent types. After the time period, anyone, including inventors and competing entrepreneurs are allowed legally to make, distribute and/or sell the patented product. On the other hand, trade secrets do not have a specific period within which the product or process is protected. But, as long as the trade secret still meets its unique requirements, it can receive protection over an infinite time period. For instance, Coca-Cola has been having a trade secret for decades. The company has been able to keep the public in the dark regarding its confidential trade information (World Intellectual Property Organization, 1994).

Whereas trade secrets are basically free, patents are costly to file. Patent filing is a good investment in the future of a product, and the cost of filing a critical factor worth looking into prior to opting for legal protection. Legal help is hired to finish an effective patent application. The filing cost can even increase or decrease based on required amendments. However, trade secrets do not require paperwork, meaning no registration or filing fees are charged. The business secrets gain a financial advantage for processes or products relying on confidentiality. The financial benefits of investing in a business patent far outweighs the risks of someone else doing the patenting the invention. Finally, full patent protection can take many years whereas trade secrets become instantly effective. Acknowledgment of a trade secret and taking up several steps to ascertain it is a trade secret, the respective trade secrets state laws offer instant protection (Bouchoux, 2006).

It takes over 2 years for a full patent application to be processed and approved. However, only full patented protection takes effect after patent approval. The protection is important because competing businesses or parties may come up with the same solutions. The competitors may come up with similar or enhanced products, impacting the future of invention (WIPO, 1994).

Evaluate How Your Company Would Patent The New Solar Panels.

As a professional and inventor, the company should patent its invention. First, a provisional patent application is made for patentable inventions. A non-disclosure agreement (patentable or not) of the invention is not patentable. Licensing is not done to make money. File a provisional patent application to obtain a “patent pending” status. Based on 2018 data, the application can cost $65 for micro-entities). It deters infringers because they see seriousness in the entrepreneur’s legal rights to protection. Nondisclosure agreement is effective in protecting the invention if it is not patentable. Get potential licensees to sign the agreement prior to revealing the solar invention. Also known as a “confidentiality agreement” or a “NDA,” the agreement should be signed prior to meeting with a licensee or potential buyer, and before revealing the trade secrets. The company can sue the engineer if she uses their secret without authorization after signing the agreement (Kennedy et al., 2012).

Just like any other contract, the NDA can lead to contractual damages and liability if breached. The agreements also vary in formats. However, they contain a definition of confidential information, roles of the body receiving confidential information, and applicable time periods (WIPO, 2015). The NDA also offers dispute arbitration services because the process is confidential. Suing the engineer can lead to further revelation in open courts. All nondisclosure agreements offer a definition of confidential information or trade secrets. It excludes some information on protection, meaning the receiving party has no obligation to correct it. If information was discovered or created prior to any involvement with the company, it is not protected. The confidential information specific to the solar panels invention or technique qualifies under the NDA. The information should be held in confidence and its usage limited. All parties in the agreement must not breach it, should keep information confidential and comfortable (WIPO, 2015).

Applicable time period is the duration in which the information is kept affordable. Typically, the time period usually ranges from two to three years. Failing to disclose information with an agreement increases the company’s risk to losing the solar panel invention rights to competitors, including the business opportunity. According to the trade secret law, revealing business secrets to the public, can lead to its loss. If the company’s trading secret must be revealed, disclose “around” the secret, and develop confidential relationships (Kennedy et al., 2012).

Analyse The Information That The Company Holds As A Trading Secret To Be Able To Explain How The Company Can Protect Its Trade Secrets.

Identify aspects of the information to determine what requires protection. Label documents containing protected information, monitor information storage, secure computers with passwords, use outside vendors to maintain the secrecy, limit public access, offer enough security and use caution gladly. Finally, setup policies and training for employees to improve performance. The trade secret for the company is how they make the solar panels, including the technology in use. This is what the company should patent and must never disclose.

From A Legal Perspective, Analyse How Fair and/or Enforceable the Non-Compete Agreement Is.

Trade secrets carry a high competitive benefit for businesses. They offer companies with economic benefits, and are not disclosed because competitors may develop similar products and/or services to compete with the original company’s. Even so, some employees and other companies must have access to the company’s trade secret and other sensitive information critical to operating the business. When such employees leave the company, they take company secrets with them and can use it for their personal gain. For instance, they can work for a competitor using the same trade secret or even begin a competing business. Therefore, non-compete agreements are carefully drafted by most companies, including a non-disclosure agreement, to prevent such employees from being misused by the competition. The agreement prevents unfair competition (Lemley et al., 2016).

A non-compete agreement involves employees promising not to work for companies that are directly competing with their… READ MORE

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