Guarding an Invention Secret or Seeking Patent Protection –
How Are European SMEs Better Off?

By Lilia Heitz

The often-high costs for filing and renewing a patent force business to opt for a smart evaluation when facing the choice of patenting or hiding a valuable innovation. Eventually, after the 20 years term of patent protection, formerly secret information becomes part of the public domain and can be used freely. Within the 20 years where patent protection is granted, the original inventor (often SMEs) has, through the monopoly rights provided, a means to recuperate its investment made into R&D. But companies are not obliged to register their invention as a patent – SMEs might be even better off avoiding it. Patents and trade secrets might present opposing choices. Trade secrets derive their legal protection from their inherently secret nature. Patents, by contrast, can only be protected through public disclosure.
Companies might choose Trade secret because

  • Protection by a Trade secrets might be cheaper, as protected without registration
  • A well-kept trade secret could theoretically last forever, a patent lasts only 20 years – A patent will be invalidated if the inventor refrains from describing important details

On September 28 SME Europe was having a webinar to explore best strategies for EU SMEs to protect their intangible assets, hosted by Ivan ŠTEFANEC MEP, President of SME Europe and moderated by Dr. Horst HEITZ, Executive Director SME Europe of the EPP, our virtual meeting saw experts Dr. Udo BUX, IP specialist, European Parliament Research Service; Yann MÉNIÈRE, Chief Economist of the European Patent Office; Dr. Eva WILLNEGGER, European Patent Attorney; Dr. Paul RÜBIG, Member of the EIT Governing Board, Member of the European Economic and Social Committee.

Ivan ŠTEFANEC MEP welcomed the timely discussion happening in anticipation of the European Unitary Patent System, delayed by Brexit. He reminded of the relevance of this topic for smaller businesses, that are less protected when it comes to cybertheft and are seeking for best and affordable strategies to protect own creative portfolio against competitors.

Dr. Udo BUX gave a detailed summary of some of the IP instruments available. He suggests for companies it may sometimes be smart not to seek full patent protection and opt for a “Trade secret”, an instrument of modern IP right, which preserves the confidentiality of a valuable piece of information that gives entreprise competitive advantage. “Trade secret” doesn’t have a mandatory disclosure period and may equally extend to service sector as to industrial sector.

Yann MÉNIÈRE of European Patent Office explained that often patent and secrecy are not opposing choices but complementary IP rights. Industries that use patents also rely on trade secret. One of the relevant aspects when opting for a patent is that the publication of the invention enables transactions focused on knowledge, which is key in today’s collaborative economy. Similarly it is valid on occasions, when details of a technology must be disclosed and demonstrated for commercial purposes. In such cases trade secret would have less legal flexibility. Another interesting takeaway is the EPO survey finding most SMEs succed in commercialising their inventions through external partnerships, especially within the EU internal market. For those SMEs that rely on third parties to enter the market or organise manufacturing, patenting is instrumental.

Dr. Eva WILLNEGGER focused on practical aspects of how to avoid cost traps for SMEs by using the correct protection mechanism. She supported Yann MÉNIÈRE suggesting that both instruments are complementary to each other as investors often insist on meaningful and enforceable patent protection. Strategies also very from industry to industry. 

Dr. Paul RÜBIG suggested that the well-thought strategy of where to file a patent, either it be the production area or where the largest market/competition for the product are based, is relevant when it comes to the cost aspect. Dr. Rübig reminded how dramatically Europe has lost pace in patent applications when compared to the US or China . The work on IP, he believes, is a key issue where in the future we can place the power game on the global competition.