Innovation is one of the main ways to stand out in an increasingly competitive market. But beyond creation, a key question arises: how to protect that innovation? At this point, we encounter a common dilemma among companies, entrepreneurs, and technology developers: trade secrets vs patents. These are two legal mechanisms that respond to different needs, each with its own advantages and limitations.
Making the right decision is no trivial matter. Choosing between keeping an innovation under wraps or making it public in exchange for exclusive rights involves weighing up multiple factors: the type of information to be protected, the length of time for which it is to be protected, the risk of imitation or leakage, and the possibilities for economic exploitation.
Trade secret vs patent: what is each one?
Let’s start by understanding what we are talking about. Specifically, a trade secret refers to any information that has value precisely because it is kept confidential. This can include formulas, processes, customer lists, algorithms, business strategies, or any other knowledge that submits a competitive advantage to those who possess it and that is not publicly known or easily accessible. The key is that such information has been actively protected by reasonable measures to prevent its disclosure.
In contrast, a patent is an intellectual property right obtained by registering with official bodies such as the Spanish Patent and Trademark Office (OEPM), the European Patent Office or the World Intellectual Property Organisation (WIPO). By registering, you gain the exclusive right to manufacture, use, or sell an invention for a limited period, usually 20 years, in exchange for making it public. Through a patent, you can legally prevent others from using your invention without your consent, even if they develop something similar independently.
Trade secret vs patent: main differences
In reality, the comparison between the two protection systems can be summarised in three fundamental aspects: exposure, duration and scope.
- Disclosure vs confidentiality
- The most obvious feature that distinguishes them is the public or private nature of the innovation. When deciding on the patent procedure, obtaining rights involves disclosing all the technical details of the invention. Once published, the information becomes accessible to anyone, which encourages technological advancement but also exposes the knowledge.
- In contrast, a trade secret remains hidden as long as it is kept confidential. Confidentiality is its essence: if it is leaked, it automatically loses its legal value as a ‘secret’. Therefore, it requires constant management to prevent its disclosure.
- Duration of protection
- As we said, patent protection has an expiry date: 20 years from the date of application, provided that the corresponding fees are paid. After this period, the invention becomes public domain.
- For its part, a trade secret has no defined time limit. It can last indefinitely, provided it remains confidential. This means that, if managed correctly, it could offer longer coverage than a patent.
- Degree of protection against third parties
- This point is key. A patent offers an exclusive right. In other words, it prevents third parties from manufacturing, using or selling the patented invention, even if they arrived at it by their own means.
- In contrast, trade secrets do not grant exclusivity. If another competitor develops the same solution on their own, or even manages to decipher it through reverse engineering, you would not be protected. So, in the comparison between trade secrets and patents, the former is at a disadvantage because it protects against unfair appropriation or improper disclosure, but not against lawful parallel developments.
How are they legally protected?
In Spain, patents must be formally registered to be legally valid. They are regulated by Law 24/2015 on Patents, and their processing involves meeting a series of technical and legal requirements, including novelty, inventive step and industrial application.
However, trade secrets are not registered with any body. There is no public database where they are recorded, nor is there an administrative procedure that recognises them as such. Their legal protection is based on private agreements and the adoption of internal security measures, such as confidentiality agreements, restricted access policies, staff training, and control of the use of sensitive information. We will expand on these measures later.
Even so, at the regulatory level, Law 1/2019 on Trade Secrets protects this type of information against unfair conduct, such as the unauthorised obtaining, use or disclosure of secrets. This law harmonises the Spanish legal framework with the European Directive on the subject and recognises the strategic value of confidential information as an essential asset for business competitiveness.
Trade secret vs patent: how to protect a trade secret?
When a company decides to keep its innovation confidential rather than register it as a patent, the simple desire to keep it hidden is not enough. For the law to recognise something as a trade secret, apart from having value because it is confidential, the company must have taken reasonable measures to protect that confidentiality. In other words, if it is not adequately protected, there is no legal protection.
Trade secrets, like other intangible assets, can be vulnerable to internal leaks, cyberattacks or unfair conduct by partners and collaborators. Therefore, protecting them requires much more than a digital safe: it involves a comprehensive and proactive strategy that combines legal, organisational and technological tools.
Agreements, protocols and active surveillance: how to shield your trade secret
Firstly, the fundamental step in protecting a trade secret is to establish robust confidentiality agreements with all persons who have access to that information: employees, suppliers, consultants, investors, etc. These contracts must prohibit disclosure, but also clearly define what information is considered confidential, for how long and under what conditions.
Similarly, companies must implement clear internal policies, access control procedures, best practice manuals and registers documenting when, how and who accesses sensitive information. Together, these elements form an effective protection plan that can demonstrate in court that the company has acted with due diligence.
Technical and physical measures also play a key role. These range from limiting access to confidential documents, data encryption and robust passwords to controlling devices and workspaces. In court, it is not considered sufficient to have implemented security measures years ago if they have not been updated. In fact, keeping security “frozen” for 5 or 10 years can nullify protection.
Risk assessment, training and appointment of a responsible person
Another important tool is to carry out regular risk assessments, identifying weaknesses in the flow of information and adjusting security measures. Even for external collaborators, it is advisable to add non-competition and post-contractual non-disclosure clauses, so that their commitment to confidentiality continues even after the commercial relationship has ended.
Protection must also be supported by the human factor. To this end, it is advisable to train employees and strategic partners in information security culture. Understanding the value of trade secrets and knowing how to act in the face of risks is essential to maintaining control.
Finally, it is advisable to appoint a responsible person within the organisation – or a dedicated team – to oversee compliance with all these measures. And last but not least: carry out continuous monitoring and take disciplinary action in the event of non-compliance.
The flexibility of secrecy versus the rigidity of patents
Apart from not requiringto register, trade secretsalso do not have to meet any technical prerequisites such as novelty or industrial application. It is sufficient that the information is not public and that reasonable measures have been taken to keep it confidential. Indeed, this more flexible and less bureaucratic approach makes it the preferred choice for many companies in cases where the process of obtaining a patent is complex, costly or does not guarantee sufficient protection.
Patents, on the other hand, do require compliance with these three essential criteria:
- Novelty: the invention must not have been previously disclosed in any medium.
- Inventive step: it cannot be derived in an obvious manner from the current state of the art.
- Industrial application: it must be capable of being manufactured or used in any type of industry.
Once these requirements are met, the invention can be protected for 20 years, offering legal exclusivity and, above all, facilitating its commercialisation and exploitation.
Trade secret vs patent: how is each commercialised?
Precisely, a critical difference between the two systems is the ease of commercial exploitation.
Patents are transferable, just like any other asset. They can be sold, licensed, mortgaged or assigned. This allows owners to negotiate agreements with third parties without fear that the value of the invention will be compromised by its disclosure: it is already registered to protect it. Patents are therefore not only a legal tool, but also a powerful commercial lever.
However, trade secrets are not so easy to commercialise, precisely because their value lies in their confidentiality. Sharing a secret for commercial purposes increases the risk of loss of control and, therefore, of value. The only situations where their transmission is common are usually in the sale and purchase of companies, mergers or spin-offs, where the know-how is part of the package acquired.
Trade secret vs patent? ISERN advises you on how to protect your innovation
When it comes to safeguarding the value of an innovation, every decision counts. Choosing between keeping a creation secret or registering it as a patent can make all the difference to an organisation’s competitive strategy. In this regard, having the right support is essential.
At ISERN Patents and Trademarks, we offer you a multidisciplinary team with extensive experience in the legal protection of intangible assets. We have been helping companies and entrepreneurs to shield their innovation for more than a century, both nationally and internationally.
We have more than 150 specialised professionals and have assisted more than 40,000 clients in registering patents, trademarks and utility models. Similarly, we provide advice on the implementation of protection strategies for trade secrets and know-how.
Whether you need to register a patent, develop confidentiality agreements or design a comprehensive plan for the protection of sensitive information, at ISERN you will find the partner you need to do so with confidence and strategic vision.