Can You Keep a Secret?
The competitive landscape can be a dangerous place for an early-stage entrepreneur, and even the best business plan can fall prey to imitators unless the entrepreneur is able to protect her business with some type of exclusive rights. Patents can provide powerful protection, and provisional patents are often a good choice for creating early-stage exclusivity. However, no business should overlook the potential value of trade secret protection.
There are two key issues to consider when evaluating trade secret protection: what type of information can an entrepreneur protect and what does she have to do to protect it? In general, any information can be a trade secret if (1) it is non-public information that has value because it is not publicly known and (2) the holder of the information is taking adequate steps to hold it in confidence. Trade secrets can include things as diverse as business plans, business contacts, financial analysis, inventions, formulas, designs and methods.
Non-public Information. The first prong of this test may seem obvious. Publicly available information cannot be a trade secret. And even non-public information does not qualify as a trade secret if there is no value in keeping it secret.
However, the requirement that trade secrets be non-public can actually present difficult choices in choosing between the maintenance of a trade secret and the public disclosure of information in a patent application or issued patent. Assume for example that an inventor develops a novel and complex method of making genomic sequencing more efficient. Whether the entrepreneur should pursue a patent or trade secret approach—or even a combination of the two—will depend on the specific nature of the invention and the commercial realities.
The first question to ask is whether secrecy will really be an option. Would the novel method have to be disclosed to commercialize it or could the entrepreneur practicably commercialize the development by keeping the method secret while using it to provide sequencing results to customers (including researchers, individual consumers or patients, and healthcare providers)? Would users, payors, regulators or other stakeholders demand to review and understand the method to confirm its validity? Even if secrecy is a viable option, is it a better option than patent protection? It is important to remember that there can be a wide gap between the relative ease of filing a patent application with broad claims and actually obtaining a meaningful patent. Is the new method unique enough that the entrepreneur has a chance of obtaining a broad patent or would any granted patent likely be so limited that competitors could avoid the patent by “inventing around it”? Does the entrepreneur have the resources to pursue and maintain patent protection?
Even if it is clear that patent protection is the best long term choice, there may be twists and turns in developing the best strategy. In some cases, trade secret protection may be a useful way to augment patent protection. For example, if an inventor files a patent application in the United States, there will be a limited period of time (generally eighteen months) during which information in the application is not publicly available and can be treated as a trade secret. If this provides a meaningful head start for the business, it may be able to have the best of both worlds: short term trade secret protection and long term patent protection. In other cases, trade secret protection may be a necessary first step in obtaining patent protection. A patent is barred if the invention is in “public use” or “on sale” for more than a year before the patent application is filed, so it may be essential to keep any early stage prototypes and customer testing confidential to avoid losing the patent option.
The “no public information” requirement will also limit trade secret protection for information that can be easily “reverse engineered” by legal means. For example, an inventor may view the design of her product as confidential and proprietary. But if any purchaser of the product can reconstruct the design merely by measurement and observation, that trade secret will be lost.
Adequate Protection. The second prong of the trade secret test is often the undoing of entrepreneurs: the requirement that the trade secret owner take reasonable steps to maintain the secrecy of the trade secret. Much of this is common sense. Confidential information must actually be held in confidence. This means the trade secret owner should keep the written or electronic documentation of the trade secret in a secure place, limit copies and avoid unnecessary disclosure. It accomplishes nothing to stamp documents as “CONFIDENTIAL” and then carelessly leave them lying around accessible to anyone who takes the time to look, and the entrepreneur will run an unnecessary risk that the trade secret will be lost if it is stored in unencrypted form on a laptop that is not password protected.
Confidentiality agreements are critical. The starting point should be enforceable agreements with every employee and contractor involved in the business. Beyond that, it is important to require third parties to sign confidentiality agreements whenever they need access to the trade secret. This can encompass a diverse group of people, including potential investors, suppliers, customers and service providers.
Finally, timing is everything. In trade secret law, it is important to remember the oft-quoted adage that “you can’t shut the barn door after the horse escapes.” Once a trade secret has been publicly disclosed, the trade secret protection is permanently lost and cannot be resurrected by tardy attempts at secrecy. There is no substitute for the entrepreneur paying careful attention to trade secret protection at a very early stage of the business’ life.
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[...] the original here: Can You Keep a Secret? tags: complex-method, entrepreneur, exco-member, how-scientifically-sound, [...]
How can I take my new invention- trade secret to the DOE without making it public knowledge.