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Startups, Secrets and Patents

Should your startup file for a patent or keep its invention a trade secret? A patent essentially grants rights to exclude others in the making, selling, or using of a certain invention.1 Patents are granted for a limited term.2 A utility patent, the most common type, will expire twenty years after the earliest priority date.3 Patent laws are enacted by the federal government and provided for in the constitution.4 Unlike patent law, trade secret law is enacted by individual states.5 Also, contrary to patent law, trade secrets have no expiration date and can last forever.6 Trade secret law will vary from state to state but essentially “in most states, a trade secret is the right to prevent others from sharing confidential information that: (1) is economically valuable; (2) is neither known to others nor readily ascertainable; and (3) is maintained as a secret.”7 Unlike a patent, which must be publicly disclosed, in order to maintain protection for a trade secret it must never be publicly disclosed.8

There are some questions you may ask yourself in order to help make a decision between filing for a patent and keeping the invention as a trade secret.

  1. Will the invention be useful beyond 20 years?
  2. Is it possible for other companies to reverse engineer it?
  3. Is the invention detectable and embedded in the product itself or is it part of an internal manufacturing process?
  4. Is the invention likely to be independently discovered in the near future?
  5. Is the product regularly observed in public settings?9

As a startup, you should take into account other considerations. Does your startup have the budget to take on patent fees? The costs of obtaining a patent can easily rise above an early stage startups yearly budget. Will you have to share any confidential information in order to garner funding? Some investors may want to know more about what they are investing in. This might make it difficult to get protection as a trade secret. For example, the Coca-Cola formula has lasted as a trade secret for over 120 years because only a select few individuals have had access to the formula.10 If you begin pitching your “secrets” to every investor you come by it may be difficult to maintain your trade secret rights. Avoid having to disclose any trade secrets that you believe are vital to the startups success.

A good route for many startups may be a combination of both patent law and trade secret law. If used properly, trade secret law may help an early stage startup prevent its invention or process from being misappropriated. Once the funding for a patent is in place, the startup can then move forward with filing a patent on what the startup previously considered a trade secret. Even if your startup has enough funds to receive a patent, they might not have enough funds to battle in litigation. If you believe litigation may be sparked in conjunction with the filing for a patent, it may make sense to keep the invention as a trade secret for the time being. The downside to that is if someone were to independently create the same information as your trade secret they may be able to protect their independent creation through patents, trade secrets and/or copyright.11

A startup should take a look at both patent law and trade secret law when making a decision on how to protect its inventions. Since many people are so fascinated by issued patents, trade secret law can sometimes be overlooked as an extremely valuable tool. Your startup should think about utilizing the different forms of intellectual property protection in order to diversify and spread the risk of one failing.12

  1. Jeffrey Schox, Not So Obvious: An Introduction to Patent Law and Strategy 8 (3d ed. 2013). 

  2. Id. at 9. 

  3. Id. 

  4. Id. at 8. 

  5. Id. at 11. 

  6. Id. at 12. 

  7. Id. at 11. 

  8. Id. at 15. 

  9. Orly Lobel, Filing for a Patent Versus Keeping Your Invention a Trade Secret, HBR (Nov. 21, 2013),

  10. Ivana Kottasova, Does formula mystery help keep Coke afloat?, CNN, (Feb. 19, 2014),

  11. Jeffrey Schox, Not So Obvious: An Introduction to Patent Law and Strategy 12 (3rd ed. 2013). 

  12. Orly Lobel, Filing for a Patent Versus Keeping Your Invention a Trade Secret, HBR (Nov. 21, 2013),