Should I Patent My Invention or Keep It a Trade Secret?
So, you’ve got an invention and you’re ready to take on the world with it.
But before you charge in guns blazing, here’s a big question that you, and every other savvy business owner, need to answer:
Should I patent my invention or keep it a trade secret?
For some technologies and industries, this isn’t some simple decision. The stakes are high and your decision can make or break your competitive edge.
So which path should you take? Read on and you’ll have a much clearer idea of which strategy will work best for you.
What Is Patent Protection? (And When to Use It)
Patents: The Basics
Patents are exclusive legal rights granted for new inventions. Think of it as a government-backed “nobody can copy you” card.
With a patent, you’re protected from competitors swooping in and stealing your idea. But here’s the catch: you have to publicly reveal every single detail of your invention. In return, you’re granted protection for up to 20 years if you file for a standard patent here in Australia.
Why Patents Can Be Worth It
Let’s look at the pros here because patents can be powerful:
Legal Exclusivity: When you patent something, you hold the monopoly. You control who can make, use, or sell your invention. Competitors have to sit on the sidelines without your permission.
Added Value to Your Business: Patents can skyrocket your business’s value. When you hold IP, investors know you’ve got something unique and protected. Companies generally secure larger funding rounds when their tech is safeguarded by patents.
Potential Revenue Streams: If you’re not looking to produce or sell the invention yourself, you can license it out or even sell it. That means potential passive income—what’s not to love?
The Downside of Patents
But let’s not get too excited. Patents have their drawbacks, and they’re significant:
Public Disclosure: By filing a patent, you’re publishing your “secret sauce” to the world. When the patent expires, anyone can take what you’ve created and copy it.
High Costs: Patents are not cheap. Between filing fees, legal fees, and maintenance fees, you could be looking at tens of thousands. And if you’re patenting in multiple countries, the costs just multiply.
Long Application Process: Don’t expect a quick win here. Filing a patent can take years before it’s granted, and if you’re in a fast-moving industry, that lag could be a problem.
What Is a Trade Secret? (And Why It Might Be Your Best Bet)
Trade Secrets: Hidden Gems?
A trade secret is exactly what it sounds like: confidential information that gives your business a competitive edge.
Unlike patents, there’s no need to disclose your invention to anyone outside the company.
If you can keep your invention locked down, you could theoretically have exclusive control over it indefinitely. Think Coca-Cola’s formula or KFC’s “secret” herbs and spices.
The Upsides of Trade Secrets
Trade secrets offer a unique kind of freedom that patents don’t. Here’s why they might be your secret weapon:
No Public Disclosure: Nobody outside the trusted inner circle knows the specifics. This means you hold onto that information as long as it stays confidential.
Lower Costs: Compared to patents, maintaining a trade secret is practically free. You might spend a bit on security and NDAs, but there are no filing or maintenance fees.
Immediate Protection: Unlike patents, trade secrets don’t require a formal application process. The moment you’ve got something worth keeping secret, you’re good to go.
The Risks of Trade Secrets
Trade secrets come with risks that can keep you up at night, and for good reason:
Risk of Disclosure: If someone leaks your secret or it’s reverse-engineered, you’re out of luck. Once it’s out, there’s no going back and you can’t then turn to patent protection.
No Legal Protection for Independent Discovery: If a competitor comes up with the same idea independently, they’re free to use it. A trade secret gives you zero protection in that scenario.
Patent or Trade Secret: You Can’t Have Both
You have to choose: do you want your invention patented and thus publicised (e.g., in your patent specification), or secret and only as safe as your ability to keep it under wraps?
If you patent protection, you’re trading secrecy for a period of exclusivity (up to 20 years). After that, the world can exploit your invention freely.
If a trade secret is more your style, you could potentially have exclusive rights indefinitely. However, it will depend on your team’s ability to stay quiet, your legal power to keep people from leaking it, and sheer luck that a competitor doesn’t figure it out.
Why the Law Says “Pick One”
The system isn’t going to let you double-dip.
Imagine if you could keep something under wraps as a trade secret for years, raking in the profits, and then just decide to slap a patent on it once it’s about to be exposed. That’d be like getting a lifetime monopoly, and patent laws aren’t here for that. They want you to make a choice.
Plus, patents are about advancing innovation. You put it out there, the government gives you a limited monopoly, and then eventually it becomes free for anyone to use. That way, other people can build on what you’ve done. They don’t want people holding back secrets and then going for a patent later.
Choosing Between a Patent and a Trade Secret
Below are some critical factors that should guide your decision on whether to patent your invention or keep it a trade secret.
Nature of the Invention
Imagine an engineer who’s developed an in-demand device for use in the mining sector.
Suppose the device is relatively simple and thus easy to reverse-engineer.
In such cases, patent protection makes most sense because it is not the kind of thing that can be easily kept secret from competitors.
In contrast, consider a boutique skincare company with a unique, natural product blend.
If they chose to patent this formula, every ingredient and its proportions would need to be publicly disclosed—essentially handing over the recipe to competitors.
For this type of product, keeping the blend a trade secret can be a smarter route, especially if it’s challenging for others to accurately replicate the blend.
Budget and Resources
Patents are costly, there’s no two ways about.
If you’re on a tight budget, ask yourself if you can justify the costs associated with patents.
I’ve seen startups take a punt on keeping their tech a trade secret simply because patents would have eaten up too much capital.
Tolerance for Risk
Trade secrets rely on your ability to keep things under wraps.
If you’re in a small team and trust your people, maybe that’s not an issue.
But if you’re in a larger company with high employee turnover, it’s tougher to control information leaks.
Key Takeaways and When to Call a Patent Attorney
When to consider patent protection:
you’re okay with an exclusivity term of up to 20 years
your invention is relatively easy to reverse-engineer
you’re not worried about publicly disclosing your invention
you can afford the patent costs
When to consider keeping it a trade secret:
your invention is very difficult (if not impossible) to reverse-engineer
you can keep it under wraps
you’re okay with the risk of losing protection if it leaks
Time to Decide
In the end, the choice between a patent and a trade secret comes down to the nature of your invention, your market, and your goals.
This decision has the potential to shape the future of your business, so don’t cut corners. Make an informed decision and play to win.
And if you need help? Give me a shout.
