March 2008 Archives

2003 IPO Survey Results -- No. 17

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In an earlier blog I referred to the 2003 Survey of the Intellectual Property Owners on Strategic Management of Intellectual Property and related that the results showed, according to 88% of the responses, that the really important intellectual assets are skills and knowledge which implicates trade secrets.

Among other specific findings in this IPO Survey anent trade secrets are the following:

All but 6% of responding companies do compete on the basis of proprietary technology.

Loss of trade secret protection would damage 80% of respondents’ ability to sustain their competitive advantage.

All but 3% of respondents build competitive advantage on internally developed know-how.

Only 1/3 of respondents would maintain R&D spending after losing trade secret protection.

Over 2/3 of respondents report that NCAs and NDAs are effective in their industry.

43% of respondents agree that many of their most important ideas cannot be effectively protected with patents due to serious limits to patent protection.

67% of respondents believe that most patents are not thought to be insuperable obstacles and can be invented around.

Two-thirds of respondents agreed that trade secret law is an effective way for them to retain control of important technology.

In light of these results, let no-one treat trade secrets as the “black sheep,” “orphan,” “stepchild,” or “ugly sister” of the intellectual property system, as the members of the “Patent über alles/trade secrets are the cesspool of the patent system” school of thought are wont to do.
In the past — and even today — if trade secrecy was contemplated at all, for example for manufacturing process technology, which can be secreted unlike gadgets or machinery, which can be reverse-engineered, the question always was phrased in the alternative.  For example, titles of articles discussing the matter read “Trade Secret vs. Patent Protection,” “To patent or not to patent?,” “Trade Secret or Patent?,” “To Patent or to Padlock?,” etc.  Anent this choice, the respective advantages and disadvantages, for example, in terms of duration and scope of protection, are considered controlling.  However, on scrutiny the perceived differences are not there.  The patent life may be more or less than twenty years from filing and a garden-variety type of trade secret, far from being indefinite, may last but a few years.  Nor is there a difference as regards the scope of protection with “everything under the sun made by man” being patentable.  And while a patent does, and a trade secret does not, protect against independent discovery, a patent leads to efforts by competitors to design or invent around and a trade secret, properly guarded and secured, may withstand attempts to crack it.

In greater detail, as for the respective duration of patents and trade secrets, it is simplistic to state that the patent life is twenty years from filing and trade secrets last indefinitely and let it go at that.  Patents too can last longer than twenty years. They can be extended by up to five years or longer under the Drug Price Competition and Patent Term Restoration Act of 1984, the Uruguay Round Agreements Act of 1994 and the American Inventors Protection Act of 1999 or by private acts.  Patent coverage can also be extended by a process of “evergreening,” that is, by filing for improvement patents. And of course a patent can have a life of less than 20 years if it lapses for non-payment of maintenance fees or if the patent or patent claims are held invalid or are abandoned, disclaimed or dedicated.

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