Any company that is innovating and developing new products needs to protect its intellectual property, and there are two primary ways to do that: declare a trade secret or file a patent.
Established companies need to have an ongoing protection strategy, the Rose Law Firm’s Adam Hopkins told Arkansas Business, and “even new startups need to have a plan for intellectual property because, if you wait too late, you could miss some opportunities to protect the property and lose that ability. Or you could just not be ready when the time comes, if someone has taken something from you without permission.”
Hopkins, who has been practicing law for 15 years and works from the Little Rock firm’s Fayetteville office, said these companies have to choose early on whether they’ll seek trade secret or patent protection.
“Trade secrets are essentially the inverse of patents in many ways. Patents are granted on the condition that you tell the world about your invention,” he said. “In contrast, a trade secret is only so long as you keep it secret. So, you can’t have a trade secret and a patent on the same invention. You have to choose which kind of protection works best for you.”
The benefits of a trade secret are that it can be perpetual and there are no hard, up-front costs, while applying for a patent costs $10,000 or more, Hopkins said.
A company has to meet just three requirements for trade secret protection. First, the trade secret has to be a qualifying type of information, and that definition is very broad, he said. It includes formulas, programs and more.
“Every business likely has something that could constitute a trade secret. Confidential customer lists are one of the most common examples of trade secrets that apply to a wide range of businesses,” Hopkins said. “But tech companies certainly have more opportunities, more types of information” that qualify as trade secrets.
Second, the trade secret has to have economic value that is derived from the company having information its competitors don’t have, he said.
Third, the company must make a reasonable effort to maintain the secret, Hopkins said. For example, the company can’t publish its trade secret recipe on a website, must have confidentiality agreements signed by employees with access to the trade secret and physically secure or password-protect the trade secret as applicable.
With trade secret protection, his clients have legal recourse if someone unveils information that gave them a competitive advantage.
While patents are more expensive and require more from a client, they offer broader protection. “Patents are the only type of intellectual property protection that gives you a monopoly over an idea,” Hopkins said.
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