Do You Own Invention Trade Secrets?

The ownership rules for trade secrets and patents are the same ...

There are several important types of intellectual property that might apply to your business. While patents, copyrights and trademarks often involve formal registration with the U.S. Patent and Trademark Office, trade secrets can be more amorphous, yet still an important source of IP protection.

To learn more about the background of trade secrets, read Trade Secret Basics. This article will give you a sense of whether your company likely has a trade secret, and what protections it might offer.

Have You Developed a Trade Secret?

By its very nature, the person who conceives of or develops a trade secret is its original owner. This is because this person will be the only one who initially knows about it. However, as is the case with patents, the original owner may be legally obligated to transfer ownership to an employer or client. For example, if you develop a new chemical processing method in the course of your work for a chemical laboratory, your employment contract likely assigns ownership of that trade secret to the company.

Unlike patents, you need not be an inventor—that is, the conceiver of an invention that is ultimately reduced to practice—to own a trade secret. This is because trade secret law may be used to protect a much wider array of activities than patent law.

Trade secret law can be used to protect inventions, whether or not they are patentable; it can be used to protect such things as (i) formulas; (ii) designs and specifications; and (iii) methods, processes and know-how. Indeed, trade secrets can protect any information that is generally unknown in the industry involved that provides a competitive advantage.

Moreover, unlike with patent ownership, it is not necessary to reduce a trade secret to practice in order to to own it. That is, you need not write it down or create and test it or file a patent application. Indeed, you will usually lose your trade secret rights if you file a patent application, because the patent will be disclosed to the public (unless the patent applicant opts out of the 18-month publication rule and the patent does not issue).

However, although a trade secret need not be tangible, it must be more than a vague, abstract concept. It must be something concrete that can be used by a business to obtain a competitive advantage.

Are You an Employee or Contractor?

If you are an employee or independent contractor, your employer or client may acquire that it retain ownership of trade secrets you develop through an assignment or through the same default ownership rules that apply to patents. It is very likely that you are not the "owner" of a trade secret if you developed the trade secret while being paid by another person or entity to do a job related to that newfound process or method. That trade secret probably belongs to your employer.

Have You Transferred Ownership in Your Trade Secret?

Just like patents, trade secret ownership may be transferred to others by assignment or by will. (See Assigning Patent Ownership.) Sometimes, folks will assign their trade secret rights before they recognize how commercially valuable they are. Then, they attempt to ask for them back, either verbally or through litigation.

Unfortunately, if you signed a release or transfer document, it will be difficult to "get back" control over the trade secrets that you gave away, particularly if you were well-compensated for them.

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