Today's startups are mostly technology driven. Many startups are using or
developing their own technology to provide their products or services to the
target market. While some Startups have a good amount of funding and some may
have not, the question remains relevant that how much amount should be spent on
research and IP protection for the technology.
There are two ways to protect the technology, file for the patent protection or
operate under trade secret. Though the earlier requires a significant amount of
money, resources, and attention, the other option is very less complicated and
requires almost no amount of legal work and investment. The only requirement for
the trade secret option is that technology should be known to very less amount
of people, or in other words to the people who are actually involved in the core
development of the technology.
I have interacted with many people recently who are the decision-makers in a
number of startups and many of them were under impression that trade secret
alternative for their product/technology would be a better option. They think
that going with trade secret option would save them a large amount of money and
time and they can focus more on their core objectives.
I wonder what makes these executives believe so. Here I will try to put things
from a legal and entrepreneurial perspective that may help to clear the
While Trade secret option includes no investment and work stress, it is not a
secure option for most of the technology protection cases. It operates on
secrecy. Other requirements are administrative and documented control of the
secret and over the persons who are aware of the secret. The fewer people know
about it, the better degree of protection company owns. However, in today’s
world secrecy is an overrated thing. Every giant company possess a separate R&D
wing to reverse engineer their competitor’s product and if the product is not
protected by means of patents, there is nothing you can do with the trade
A trade secret is good for the cases other than the technology and products
built by hardware components, software programs or any kind of process-based
technology. It is good for the products whose composition is hard to know and
performing reverse engineering on them is almost impossible. One good example of
this is food and beverage industry. No matter how much Pepsi and Coca-Cola taste
same or different, they never go against each other accusing of stealing their
secret. Yeah, they have kept their recipes as trade secrets, completely unknown
to the outer world. Another example of the same is Maggie noodles. The World
still do not know about the recipe formula or composition of the ingredients
(completely) and the company is comfortable in proceeding with trade secret
However, trade secrets option has also been proven useful for some technology
companies. For example, Apple is one company that often goes with trade secret
options when it comes to protecting their technology. Apple’s former executive
Steve Jobs was known for advocating trade secrets. But no one can ignore the
fact that Apple is a leading technology company and developed cutting edge
technologies/products which are hard to break-in or being reverse engineered.
Further, copying their exact design was also hard for competitors. Still, Apple
suffered from this decision to an extent despite the fact that company is not
completely dependent on trade secret option only. Its major smartphones were
reverse engineered and copied in many Asian countries. Today, still going with
trade secrets for many cases, Apple has also become one of the top patent filers
for protecting their products and technologies.
On the other hand, going for the patent protection has many advantages over
going with trade secret options. It may incur some investment of money initially
but ROI of patent protection is much greater than the initial investment.
Executives can have the peace of mind that nobody is going to steal/copy their
technology. They can further offer their technology to other companies and get a
handsome amount of money in return or they can pool their patents with other
companies and be benefited from the competitor’s technology under the
cross-licensing program. For many cases, having a significant patent portfolio
provides an easy path for getting investment. If your technology is significant
to market and protected by patents, other companies will be compelled to license
your patents and thus providing heavy paychecks to your company account.
Security in future from patent trolls is another advantage. Your initial
investment in patents protection will prove vital and significant as your
company grows with time. I had recently worked on a licensing project where the
client company was bankrupt but was able to sell their patent portfolio. It
helped them in settling their debts. Patents have also been proven crucial for
mid-size and large-scale M&A activities.
Further, many countries and jurisdiction have start-up friendly patent systems.
For Europe and America, startup founders can choose the option of filing a
provisional application first and file the complete patent specification after
one year. This arrangement provides enough time-frame for startups to arrange
the money, research more, and taking the decision more effectively. Another
example is India which is running Make in India program under which many
relaxations are provided to start-ups for patent filings.
I admit that Trade secret option is preferable for many cases but the scope of
this option is limited and the whole concept is not right for technology-based
companies. Patent protection is the right step to protect your assets for the
growth of the startup and for future benefits. So do not ignore this crucial
thing which can benefit your current startup in future, in many ways.
Be smart and go for Patent protection, no matter how complex and secure your
I hope you enjoyed reading it. Readers are welcome to share their thoughts on