Why would a creator opt to use the trade secret law rather than patent protection to protect an idea.

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M.P. Ossa eNotes educator| Certified Educator

Trade secret law is protects intellectual and other types of appropriations from being used commercially by others. It actually is part of state common law and branches out of the Uniform Trade Secrets Act (UTSA) and the Economic Espionage Act of 1996.

The reasons behind going with Trade Secret law versus applying for a pattern depend on

  • a)    The amount of money that the inventor is willing to invest in the protection of the creation
  • b)    The type of creation
  • c)    The timing of the creator
  • d)    The exact plans that the inventor has for the creation.

If an inventor does not have too much money, then trade law is the solution. Patents cost anywhere from $5,000 to even $30,000 dollars. Moreover, if the product is worth altogether less than its pattern (for example, a formula, substance or other object that costs relatively nothing to make) then it is really not worth the risk.

The type of creation is also a factor because its usage or purchase will depend entirely on the market and how much promotion it gets. For example, notice how every time an “As Seen on TV” product is “invented” there is an influx of similar items also for sale. These faddish items might sell for a while, but they will likely die in the market within two years after exposure (think Beanie Babies, for example). Hence, if you have spent $5,000 on a patent that will protect your product for 20 years, you would have wasted a lot of money since your product’s life is significantly shorter than the life of the patent.

Timing plays a significant role as well. It takes up to 3 years for a patent to finally get issued. If you sell your product prior to taking a patent, you only get one year to solicit one after putting your product in the market.  Your product better be selling very well if you only get 12 months to come up with the money. However, if the creator decides to patent after a few years of selling the product, and then the sales decline, once again the patent will end up costing more than the product itself.

Therefore, if the creator wants to create something to be used by a major company, he is immediately protected by trade secret law without the 20 year limit that patents have. In fact, trade secret law covers the creator without limits. One of the most famous trade secrets is Coca-Cola, whose “secret recipe” is said to be only known to two people in the entire corporation. It is a fact that, in order to protect the secrecy of the trade, the organizational leaders must require employees to sign a Non Disclosure Agreement. Without this, a creator may actually lose its right to trade law especially if it involves a trade secret in particular.

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