Trade Secrets

There are two ways to protect an innovation. You can choose to patent it or keep it secret. I have been discussing at length the benefits of patents. Some perceived advantages of trade secrets are:

· Trade secrets can protect “abstract ideas” and patents cannot.

· The protection under trade secret remains for an unlimited period of time.

· There are no filing fees for trade secret protection.

· A trade secret creates cache and an aura of mystery.

Coca-Cola

One of the most famous American trade secrets is the recipe for Coca-Cola. The mystique surrounding the formula has lasted more than 100 years. It has been the source of publicity and marketing campaigns. It has also been an enduring intellectual property protection strategy.

In 1886, Dr. John Pemberton created the Coca-Cola formula. Caffeine and sugar are ingredients. Other ingredients have been the source of speculation. One ingredient is the legendary “merchandise 7X”. What the “X” factor is in the original formula has never been revealed. It may contain essential citrus oils of orange, lemon, and lime. Lavender may be another ingredient.

Only a small group of executives know the entire formula. No contractor has the complete recipe and each only makes a part of the famous blend.

The formula would have long since entered the public domain had the company patented it. They would have had only twenty years of exclusive rights to their classic blend.

The trade secret approach locks it up forever, as long as the secret is well kept.

Risks

There is risk of disclosure. It is not illegal to reverse engineer a trade secret and copy it. Patent protection lasts 20 years. During that time the protection is more secure than a trade secret. In a patent lawsuit, independent invention is not a defense.

It depends on the nature of the innovation. You may want to discuss it with potential partners and investors. It may be easy to reverse engineer. In these cases file a patent before disclosing it. If it is a secret recipe like Dr. Pepper or Colonel Sander’s KFC spices, then a trade secret works well.

Want More?

Check out my book on the patent application process and how to do it yourself inexpensively.

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