Over my career of fifty years in industry and academia I have assembled quite a few credos, insights and truisms about trade secrets, in general, and three salient trade secret issues, in particular, namely:

1. the importance of trade secrets;
   
2. the complementariness of patents and trade secrets; and
   
3. the criticality of trade secrets in technology licensing and tech transfer.
   

This blog shares these with you as well as my impressions from the many professional meetings I attended around the globe. These blogs let us look at the above three broad topics in much greater detail and question deep-seated misconceptions about Trade Secrets and the Patent/Trade Secret interface in an attempt to demonstrate that,
•    Know-How and Trade Secrets are not synonymous,
•    Trade Secrets are not secrets,
•    Patents and Trade Secrets dovetail inextricably,
•    the “Best Mode” requirement is no impediment,
•    touted differences between Patents and
•    Trade Secrets are not there,
•    a Trade Secret owner has de facto prior user rights
•    as well as others.

Karl Jorda

I would now like to share my conclusions about Trade Secrets, and thereby dispel some serious misconceptions about them that still linger and lurk around but should be eradicated once and for all.

My views would strike you as iconoclastic, if not heretical, should you believe, as does a noted professor in Washington, that Trade Secrets are the “cesspool of the patent system.” Nothing, of course, could be further from the truth! Trade Secrets are not only the oldest but also the most prevalent form of IP protection.

Over 90% of all new technology is grist for Trade Secrets. Patents are but tips of icebergs in an ocean of Trade Secrets. All technical and business information, including inventions, know-how and show-how can be maintained as Trade Secrets. Thus, Trade Secrets are not just for early-stage and subpatentable developments and manufacturing processes at best, as some believe.

All companies and institutions have tons of Proprietary Information, whether or not they appreciate it. In an IPO survey awhile back, 88% of the participating corporations rated Trade Secrets as their most important intellectual assets. So it’s no surprise that Trade Secrets are often referred to in industry as “crown jewels.” And, especially internationally, Trade Secrets are the “workhorse of technology transfer.” (Bob Sherwood)

Further proof of the importance of Trade Secrets is the fact that in recent Trade Secret litigation, Walt Disney, Cargill, and Toshiba each had to shell out several hundred million dollars in damages for Trade Secret misappropriation.

Regarding the Patent/Trade Secret interface, let’s keep in mind that all Patents are born as Trade Secrets, and that Trade Secrets also accompany Patents and outlast Patents. Patents and Trade Secrets are not mutually exclusive, but highly complementary and mutually reinforcing. In other words, they dovetail.

“The co-existence is well established,” according to Don Chisum. Hence, the question is not whether to patent or to padlock, but rather what to patent and what to padlock simultaneously. There is much overlap between Patents and Trade Secrets that can and need be exploited for synergistic dual protection.

The IP Handbook is a comprehensive resource on current IP management issues and approaches. The book offers information and strategies for utilizing the power of both IP and the public domain for a diverse audience including policy makers, technology transfer professionals, licensing executives, and scientists. Chapter 11.5 is now FREE for your enjoyment at the Pierce Law IP Mall. home page in the lower left display box.

Congratulations to Professor Karl F. Jorda, one of nine individuals to be selected for induction into the Intellectual Property Hall of Fame. He was recently chosen from a field of over 300 nominations solicited from members of the global intellectual property community. The Intellectual Property Hall of Fame was established in 2005 by Intellectual Asset Management magazine and is designed to honor those who have made an outstanding contribution to the development of intellectual property law and practice, thereby helping to establish intellectual property as one of the key business assets of the 21st century. He will be inducted into the Intellectual Property Hall of Fame on October 24 at gala dinner at the Field Museum in Chicago, hosted by Ocean Tomo, the Intellectual Property Merchant Bank of intellectual property auction fame.

[A]nent the criticality of Trade Secrets in technology licensing (also in franchising), let’s be mindful that over 80% of technology licenses cover Trade Secrets or are hybrid licenses covering Patents and Trade Secrets. Furthermore, it is indisputable that licenses under Patents without access to the associated or collateral know-how are often insufficient to practice the patented technology commercially. A patent specification is often too brief and too general and discloses only embryonic or rudimentary R&D results rather than the ultimate scaled-up commercial embodiment.

I have authoritative quotations from experts about the overarching role of Trade Secrets in technology licensing. For starters, let me recite just one from Mel Jager.

“Trade Secrets are a component of almost every technology license … (and) can increase the value of a license up to three times to ten times the value of the deal if no Trade Secrets are involved.”

Thus, as a licensor you would leave money on the table, if you did not include Trade Secrets in the transaction.