An important process of intellectual property management is to make the appropriate selection between what to patent versus what to hold as a trade secret. A recent IPO survey indicated that trade secrets are the really important intellectual assets of a company vis-à-vis patents, because patents have limits. Trade secret protection operates without delay and undo cost. This is unlike patents which are territorial and expensive to obtain and maintain. Additionally as a practical matter, licensees under patents who wish to both learn and practice the technology that do not have access to associated collateral know-how, often find themselves in a bind because patents rarely disclose the ultimate details which need to be embodied in commercial products and processes. In many cases, particularly in chemical technology, the know-how is the most important part of a technology transfer agreement as reported by Homer Blair. Peter Rosenberg went further by saying it is common practice in an industry to seek and obtain patents on that part of a technology that is amenable to patent protection, while maintaining related technical data and other information in confidence. Some regard a patent as little more than an advertisement for the sale of a company’s know-how.
In technology licensing, related patent rights are generally mentioned late in the discussion and perceived to have insignificant value relative the know-how as reported by Michael Ward who was Honeywell’s VP of licensing. Melvin Jager mentions that trade secrets are a component of almost every technology licensing deal and can increase the value of a license up to 3 to 10 times the value of the deal compared to if no trade secrets are involved.
Perhaps the best approach is to view the two as not mutually exclusive but mutually reinforcing. They dovetail and work in harmony. In many cases they are inextricably intertwined. Most R&D data and collateral know-how cannot and need not be included patent applications but rather can be held as trade secrets. Tom Arnold asserts it is flat wrong to assume that because of patent law requires a best mode requirement, patents unnecessarily disclose or preempt all the trade secrets that are useful in the practice of the invention. All collateral know-how not disclosed, whether or not inventive, can be retained as a trade secret. All R&D data, including data pertaining to better modes, developed after filing, again whether or not inventive, can also be protected as trade secrets.
Karl Jorda also points out that the best mode requirement doesn’t preclude keeping trade secrets as the best mode requirement applies only to the knowledge of the inventor, only at the time of filing, and only to the claimed invention. Hence the best mode requirement is no impediment to trade secrets because patent applications are filed early in the R&D stage at the earliest possible filing or priority date. The specification normally describes in a few pages only rudimentary lab experiments or prototypes. The best mode for commercial manufacturing remains to be developed later after the patent is filed. As shown by case law, manufacturing process details are, even if available, not part of the statutory required best mode disclosure of a patent.
With respect to technology complex developments consisting of many patentable inventions and volumes of associated know-how, complementary patenting and secreting is tantamount to having the best of both worlds. In summary the best policy is to patent as well as to trade secret. Further the best practical advice is to focus on patenting “chokepoint product functions” that the market will pay a premium for, and which can be well described and claimed, holding all else as trade secrets.