Business

Saturday December 1, 2007

Patents versus trade secrets

By BENJAMIN THOMPSON



In this article, we share with you a general overview of patents and trade secrets and considerations to bear in mind when deciding on your protection strategy.

WHAT is a patent? Simply put, a patent is the exclusive right (or monopoly) given by the Government to the owner of an invention, in return for the sharing of his knowledge and experiences in the making of the invention.

Once he has obtained the patent, the patent owner is legally the only one who can make, import, offer for sale, sell or use the invented product or process.

Anyone else doing any of these acts would be infringing the patent owner’s rights. The patent owner can therefore sell his product or process in the marketplace without fear of any legitimate competition. As you can imagine, this exclusive right is strong incentive for most patent owners to, in return, share their knowledge with the public.

This shared knowledge, in turn, helps push forward the development of technology, as other inventors and researchers will be able to learn from the patent owner’s disclosure and, hopefully, invent even more useful products or processes, building on the knowledge that has been disclosed.

So, what can be patented? Only inventions can be patented. Inventions are defined as “an idea of an inventor which permits in practice the solution to a specific problem in the field of technology”. Inventions can either be a product or a process.

However, not all inventions are allowed to be patented. You should note that discoveries, scientific theories, mathematical methods and schemes, rules or methods for doing business, performing purely mental acts or playing games are among the inventions which are non-patentable under the Malaysian Patents Act.

Provided your invention does not fall within the categories of invention, which are excluded from patent protection, it will be patentable if:

  • It is new or novel. This means the invention should not have been disclosed to the public anywhere in the world, by written publication, oral disclosure, by use or in any other way, before the date of the patent application.

  • It involves an inventive step. This means that having regard to the relevant knowledge that has been disclosed in the world so far (the technical term is “prior art”), the improvement you want to patent would not have been obvious to someone having an ordinary level of skill in that area of technology.

  • It is industrially applicable. This means the invention can actually be made or used, and is not just a theory.

    The patent owner’s exclusive rights are not forever. They only last 20 years, calculated from the date of the patent application and are enforceable only after grant. The prudent patent owner, therefore, looks out for opportunities to maximise his returns, and steps he can take include assigning or licensing his invention to others.

    Patent rights are also not automatically valid worldwide. They are valid only in the countries in which a patent application has been filed and a grant obtained. Due to the requirement for newness or novelty, it is critical that an application for registration be made before the invention is disclosed to the public.

    Is it expensive to get a patent? Compared with other intellectual property rights, the answer is generally yes. You have the expense of drafting a specification (i.e. reducing your invention to words). Then, you have the costs of making applications and prosecuting them through registration. If there are many countries where you need to register the patent, your costs will go up correspondingly.

    So is it worth it? That depends. Is your invention something that will solidly establish your product and brand in every household in the country? Is your invention something that, without the deterrence of a patent, the competition will easily be able to replicate once they get hold of your product and turn it inside out?

    Are the costs of patenting worth it in comparison with the potential volume of sales generated by 100% market share through monopoly? Will it be easier to generate revenue from worldwide sales by licensing your patent to individual companies that already have well-established distribution channels in the respective foreign countries?

    Sometimes, it may be more worthwhile to keep your invention a trade secret than to patent it. One famous example of a trade secret is the formula for Coca-Cola.

    To be kept as a trade secret, the information you are trying to protect must be secret, it must have commercial value and you must have taken reasonable steps to keep it secret. Obviously, something that is already well known among the public cannot suddenly be termed as a “trade secret”!

    In deciding between protection as a patent or as a trade secret, you should consider:

  • What is the expected commercial life of the product/information? If the invention is not likely to go out of date for a long time, it may be better to protect it as a trade secret rather than limit your advantage to 20 years.

  • How susceptible is it to reverse engineering or independent discovery? While a patent can be used to stop any one else from infringing on your exclusive rights, with a trade secret you cannot take action against someone who independently has come up with the same invention.

  • Is it patentable or registrable? If the invention is not patentable or no longer registrable (e.g. because you disclosed it), you may not have much choice but to try and keep it a trade secret.

    An exclusive right over your brand identifier or product feature is something that is of great value in keeping the competition at bay. The period of exclusivity enables you to build brand loyalty and market share at a rate that you would otherwise have to be very fortunate to achieve!

    Whether you keep it as a trade secret or go for a patent, the aim is the same – to stand out among the crowd for the special features you offer, and to stand out as long as possible.

    Benjamin Thompson is director of Mindvault Sdn Bhd, an intellectual property and intellectual asset management consulting firm. Comments and feedback welcomed at
    enquiry@mirc.org.my

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