Patents vs Trade Secrets

Veröffentlicht am 17. Apr. 2018

The beginning of 2018 witnessed one of the most significant trade secrets trials in history: the high-profile lawsuit between Google’s self-driving car company Waymo and ride sharing giant Uber, which was settled for $245 million, less than 10% of what Google were initially claiming in damages. Apart from the lengthy legal wrangling prior to the trial and its dramatic settlement, this case is notable for shedding light on IP protection and innovation

To disclose, or not to disclose

It serves as an object lesson on the risks that companies face when an important engineer or a high-level executive departs to start his or her own company or work for a competitor. Jeanne Fromer, a professor of law at New York University who specializes in IP, pointed out that when it comes to cutting-edge technology like AI and self-driving cars, as individuals with relevant expertise are rare, the line between an engineer’s knowledge and a company’s trade secret is thinner than usual, and “figuring out what’s on one side of the line and what’s on other side is incredibly complicated.” Therefore, companies need to rethink their management of trade,secrets and hiring practices to make sure that they don’t become the losers in highstake trade secret litigation.

Secondly, the case sparked once more the long-standing discussion around patents and trade secrets, both valuable ways of protecting a company’s IP assets. Confidential, unlimited in time, costless and immediately effective, trade secret protection may be favorable when the benefit of the technology is of very short duration, eg. when the invention will be obsolete in less time than it would take for a patent to issue (which can take several years), or when the competitive advantage is gained by being the first on the market. However, as demonstrated once again by the Waymo v. Uber case, the level of protection granted to trade secrets is generally weak, particularly compared to patents, and other companies may be able reverse engineer the secret and be thereafter entitled to use it.

The best of both worlds

These choices are strategic, and companies must conduct comprehensive analysis depending on their own situation. More often than not, the best type of protection is a combination of both patent and trade secret, as different forms of protection have the potential to spread risk for the overall intangible asset portfolio that a company owns.

Finally, the case reminds us of the potential harm to innovation when the pace of regulation reform lags behind that of technological development. Because of time and budget constraints, companies may keep inventions as trade secrets instead of patenting them – and trade secrets give a perpetual monopoly on new technologies – so long as the invention remains secret.

J.Y.

Find more analysis, articles & interviews in our 2018 Innovation, Technology & IP Report to be released in May.