Newly formed start-ups, particularly in the technology sector, rely heavily on the protection of intellectual property (IP) to establish a foothold in their industry and to provide leverage with larger, established companies. The two most common ways a company protects its IP are patents and trade secrets.
Choose One or the Other Carefully
Patents and trade secrets are often referred to as “two sides of the same coin” in that, for any specific IP, you have to choose one or the other. However, the decision on which form to use for particular IP is critical, and making the wrong choice can be devastating.
Are Patents Good or Bad?
Patents have both their upsides and downsides. A patent is a creation of statute – based in the Constitution – that grants a limited monopoly to the inventor to exclude others from “practicing the invention.” The monopoly is considered limited because it expires 20 years from the earliest claimed filing date of the patent.
This monopoly comes at a cost. In order to enjoy exclusivity, one must also teach the invention to the world. So, while a patent holder may be able to exploit their invention for many years, others can read the patent, understand how the invention works and, as is often the case, come up with improvements on (or workarounds for) the patented invention and obtain patents themselves. Further, the day after the patent expires, anyone can practice the invention. For many technology companies, this may not be an issue as technology changes so rapidly, but pharmaceutical companies strive to use every day of a patent’s term to exclude generic drug manufacturers from a lucrative market.