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In exchange for complete public disclosure of your innovation, patents grant you the sole authority to bar anyone from producing, commercializing, utilizing, or importing a certain good or service. Whereas Trade secrets are methods, procedures, or other commercially valuable knowledge that a company makes a good-faith attempt to keep under wraps. Google’s search algorithm and the secret chemicals in Coca-Cola are two well-known examples. The only two types of IP rights that provide information protection are patents and trade secrets. A trade secret can protect both patentable knowledge and any other information that can increase the holder’s economic value while a patent only protects information that meets the conditions for patentability. As a result, both trade secrets and patents may protect the same information and this is where the choice of which amongst both should be given the priority presents a problem.

Brief About Trade Secrets

Trade secrets are proprietary information that is protected by intellectual property (IP) rights and may be sold or licensed. Generally speaking, for information to be considered a trade secret, it must meet the following criteria: be commercially valuable due to its secrecy; be known only by a small number of people; and be subject to reasonable measures taken by the rightful holder of the information to keep it as a secret, such as the use of confidentiality agreements for business partners and employees. Unfair practices and violations of trade secret protection are considered to occur when others unlawfully obtain, use, or disclose such secret knowledge in a way that is inconsistent with honest commercial practices.

Information Protected By Trade Secret

Generally speaking, a trade secret can be used to protect any exclusive business information that gives a company a competitive advantage and that no one else is aware of. Trade secrets cover both commercial and technological knowledge, such as distribution techniques, customer lists, and advertising tactics. Technical information includes information about manufacturing processes, experimental research data, software algorithms, and other data.

• It’s also possible for a trade secret to be composed of a mix of components that, taken alone, are all known to the public yet, when combined, offer a competitive edge.
• Financial information, formulas, recipes, and source codes are more types of data that may be covered by trade secrets.

Differentiation Between Patent And Trade Secret

• Confidential versus publicly known the primary distinction between trade secrets and patents is that the former is frequently made public. As implied by the word “secret,” a trade secret is typically kept private. This secret is only revealed to a small group of carefully chosen employees who are then legally obligated to keep it a secret under a contract that is generally worth millions of dollars.
• New versus priceless protection   An invention that simplifies a task that would otherwise be difficult is an example of the kind of new and valuable invention that a patent is intended to protect. On the other side, the trade secret helps safeguard information that is seen to be valuable and should be kept a secret, allowing the inventor to profit solely from their innovation.
• Misappropriation against Rights Exclusion The rights connected to the innovation are another area where trade secrets and patents diverge. If you have a patent, you have the right to prevent anyone else from using your creation and profiting financially from it, whether through duplication, reproduction, or theft. Legal action can be taken to stop any illegal activities. On the other hand, as trade secrets normally require intricate planning and are guarded, the creator can prevent the theft of their creation.
• formal application versus private protection A formal patent application must be submitted by those who want to patent their innovation. It can take two to three years to file a patent application and then have it approved. Before awarding the patent, the patent office also looks over your application and compares it to other inventions that might be comparable to yours. Trade secrets do not require the filing of an application. It is totally up to you to keep your trade secret safe. Also, if your trade secret becomes known to the public, there is only so much you can do to keep it that way.
• Validity of trade secrets and patents A patent is typically secured for up to 20 years after it has been awarded. Inventors have the option to extend their patent after it expires. There is no set duration of validity in the case of trade secrets. A trade secret may be protected for all time.
• Expenses related to patents and trade secrets as was previously indicated, innovators must follow the correct patent filing procedure, which can take years. Inventors also have to pay a number of costs, which might total several lakhs depending on the type of patent they are applying for. Additionally, because a patent is by nature territorial (limited to the nation in which it is filed), inventors have the option of applying for international patents for the particular nation in which they want to sell their goods. This can result in additional costs. A trade secret, however, does not come at a hefty expense. Only the costs related to internal processes are your responsibility.

Criteria Determining What Can Be Patented In India

• Patentable subject matter

The most important factor is to ascertain whether the invention corresponds to a subject matter that is patentable. The non-patentable subject matter is listed in Sections 3 and 4 of the Patents Act. The invention possesses patentable subject matter if it is not prohibited by Sections 3 or 4 in any way (subject to the satisfaction of the other criteria).

• Novelty: Novelty is a crucial factor in assessing whether or not an invention may be patented. According to Section 2(l) of the Patents Act, novelty or a new invention is “any invention or technology which has not been anticipated by publication in any document or used in the nation or elsewhere in the world before the date of filing of patent application with complete specification, i.e., the subject matter has not fallen into the public domain or that it does not form part of the state of the art.To put it plainly, the novelty requirement essentially implies that an invention should never have been made public. It must be original and unrelated to any past works.
• Inventive step or Non-Obviousness: Inventive step is described in Section 2(ja) of the Patents Act as “a feature of an invention that entails technological advance as compared to the existing knowledge or having economic relevance or both and that renders the invention not evident to a person versed in the art.” This means that the invention must not be obvious to someone with knowledge in the related field. It must be original and obscure to someone with similar knowledge.
• Capable of Industrial Application: Industrial applicability is defined as “the invention is capable of being manufactured or employed in an industry” in Section 2(ac) of the Patents Act. In essence, this means that the invention is not conceivable in an abstract form. The invention must have practical value in order to be patentable, which means that it must be applicable in any industry.

These are the legal requirements for an invention to be patentable. In addition to this, disclosure of an enabling patent is a crucial need for obtaining a patent. An invention must be sufficiently disclosed in a patent draught specification in order for a person of ordinary competence in the relevant field to be able to carry it out without unreasonable effort.

If the patent specification does not disclose an enabling patent, then a patent will most definitely not be granted.

How to protect Trade Secret

A trade secret owner should employ as many precautions as reasonably possible such as:

• Restricting access to confidential information physically and electronically to only those individuals that need to know the information;
• Marking documents that they constitute confidential information;
• Making use of non-disclosure and confidentiality agreements;
• Maintaining information with password protection;
• Disposing confidential information by shredding or other means designed to destroy the information;
• Conducting exit interviews with departing employees to ensure the return of all confidential information in the employee’s possession and to emphasise confidential obligations;
• Ensuring that there is restraint of trade provisions in the employment contracts;
• Establishing due diligence and on-going third party management procedures;
• Instituting and information protection team;
• Make trade secret protection a priority.

How Trade Secret Are Protected In A Non-Disclosure Agreement?

Your company gains a competitive edge in the market thanks to trade secrets. Protecting these trade secrets becomes essential because they set us apart in the market. Many companies are frequently recognized primarily for their distinctive service or way of operation.

Even some restaurants have a specialized dish with a special recipe that has made them renowned. These trade secrets are essential for luring clients and creating a distinctive brand in a crowded industry. Our creative endeavors have produced a variety of products, including designs, inventions, recipes, formulas, and customer information. Our efforts and hard labour are greatly wasted when such material is revealed or used without authorization.

When we engage into a non-disclosure agreement, our trade secrets can be safeguarded, and the receiving party is obligated by law to keep them private and not share them with anyone else. As a result, it is crucial to define the trade secret individually in the NDA in addition to the description of sensitive information. Here’s an example of Coca Cola’s Agreement on Confidentiality, Non-Competition and Non-Solicitation that provides two separate definitions to distinguish between the confidential information and the trade secret.

Conclusion

Patents and trade secrets come together in a delicate balance between disclosure and secrecy. Trade secret protection is seen by the USPTO as “an alternative to patent protection. On the basis of the issues we previously examined, however, trade secret protection is in a better position than patent protection. The lack of a formal law in place makes India’s position regarding trade secrets unclear; therefore, a law pertaining to trade secrets has to be created for clearer understanding in the Indian legal system.

Protecting our trade secrets and confidential information has become essential in today’s fiercely competitive economy.

The non-disclosure agreement provides a legal framework to protect our valuable information from getting disclosed or used in an unauthorized manner. However, it is very important to ensure that all the clauses in the NDA are well-drafted and all the obligations are clearly incorporated in the agreement. Hence, the trade secrets and confidential information must be clearly defined in the agreement to avoid any ambiguity.

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