The article has been written by Pravin Kumar Ray, a 3rd Year Law student at Sarsuna Law College, Kolkata
Patents and trade secrets are the only two forms of protection available in the intellectual property regime that protect information. But the same innovation cannot enjoy protection under both forms of rights. Once a particular invention is patented, then the patentee cannot seek to protect the same invention and the information disclosed in the patent as a trade secret or confidential information by using a know-how agreement.
The Delhi High Court has answered this question while discussing the interplay between patents and trade secrets in its latest Judgment in Prof. Dr. Claudio de Simone v. Acital Farmaceuatica Srl:
In this case, the plaintiff was the owner of a patented formula for a drug under US Law. He entered into a patent license agreement with one of the defendant companies to manufacture and import the drug into India. He separately entered into a know-how agreement with the defendant for the information on the strain selection and the blending ratio of the bacteria which was maintained as a trade secret and was not disclosed in the patent. With regard to India, the plaintiff did not have a corresponding Indian patent for the drug formula and just entered into a know-how agreement with the defendant. Once the US patent expired, the know-how agreements were also terminated by the plaintiff due to the cheaper ingredients used by the defendants without his approval. Thereafter, the defendant group manufactured their own product similar to that of the plaintiff claiming it to be the same as the plaintiff’s formula. The plaintiff moved to the court for an injunction of the same.
The Delhi High Court had to now analyze “whether an invention which does not qualify as patented product and has no property right therein, can acquire property rights by the third person entering into an agreement of exchange of Know-How and thus claiming confidentiality”. The plaintiff aimed to protect the information about the strain selection and blending ratio which was not mentioned in the patent as a trade secret in India.
The Delhi High Court held that the information about the strain and blending ratio cannot be protected as a trade secret. The ratio was that once the patent over the invention has expired, all the information related to the innovation has gone into the public domain and hence no information related to the innovation can be protected as a trade secret.
Though both patents and trade secrets are IP rights that protect the information, it has been long established that the decision to choose between patents and trade secrets does not necessarily have to be an “either-or” situation for the inventor. Under the layered approach to the protection of innovations, both patents and trade secrets can be used to protect different aspects of the same invention. It has been understood widely that even after a patent application is published, patent protection and trade secrets are mutually exclusive. Both forms of protection can be pursued and should be considered for protecting valuable innovation.
Difference between Patent and Trade secret
| Basis of Difference | Patent | Trade Secret |
| Scope | A patent gives the exclusive or sole right to the owner of an invention. Such inventions must be new, unique, and technical and provide a solution. | Trade secrets are formulas, processes, or other business information that derive their commercial value from being kept secret, and that a company is making a reasonable effort to keep secret. |
| Duration | Upto 20 years from the date of registration. | Indefinitely until the trade secret is leaked either accidentally or intentionally. |
| Rights | Gives the patent holder the right to exclude others from making, selling, using, or importing the invention. | Protect only against misappropriation. |
| Cost | Expensive to draft, maintain and file patents in countries of interest. | No registration fees but the cost of maintaining the secret may include significant overhead expenses. |
| Disclosure | The inventions are disclosed in the public domain. | The information is kept confidential. |
| Territory | Patent rights are territorial because the protection is available only in countries where the patent is registered. | Not restricted to the territory. |
Similarities between Patent and Trade Secret
Trade secrets and patents constitute two of four types of intellectual property. (The other two types are copyrights and trademarks.) This means that the underlying purpose of trade secret and patent laws is the same: to help inventors and owners protect their intellectual property, the fruits of their labor. Patents and Trade Secrets are the most relevant forms of Intellectual Property Rights that can be used to serve the protection of a product or service with strong confidentiality. A product when patented protects patentable information which can be patented and qualifies patentability criteria whereas a product when protected under trade secret, is used for the economic benefit of the inventor and his company. The same information can be protected under a patent as well as trade secrets. There must be a balance between secrecy and disclosure of the information. Trade secrets and patents are mutually exclusive.
Whenever there are new inventions produced that give a competitive advantage and economic value to its producer, it becomes necessary to protect these inventions from being used in an unauthorized manner by the competitors or the people to whom it is disclosed and thereby causing a loss to the producer. These inventions can be protected with trade secrets or patents and it is important to understand the use of each of these intellectual property rights. Trade secrets are used to protect the information that is confidential and prevent them from reaching the public domain whereas patents help in giving the exclusive right of ownership to the producer and the information is in the public domain and prevents others from producing a similar product.
The intersection of patents and trade secrets can be described as a delicate balance of disclosure and secrecy. What to choose between the patent and trade secret solely depends on the company or inventor or depends on what type of invention is being to be protected.
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