What Protections Do Trade Secrets Have Under IP Law?
NDAs, Restraint of Trade Clauses, and Confidentiality Agreements may be convenient in protecting trade secrets, but what protections does IP law confer?
Trade secrets provide competitive advantages to businesses, but they can be difficult to protect. In response to this issue, intellectual property law provides an avenue for businesses to gain exclusive rights and protections for their trade secrets: patenting.
This article discusses how trade secrets can be protected under intellectual property legislation and the benefits, as well as risks, presented by patenting.
What are Trade Secrets?
Trade secrets consist of information ‘not generally known to the public that has some commercial value’. Although, a commercial secret ‘not generally known to the relevant businesses in Australia’ satisfies this requirement.
For example, a restaurant chain’s trade secrets could include secret formulas, processes, and methods used in production.
Protecting Trade Secrets
Several methods exist to protect your business’ trade secrets, outlined in 6 Ways Your Business Can Protect Its Trade Secrets.
Essentially, the forms of protection take place:
- under common law, by way of contract;
- as a result of an obligation arising under the law or equity, such as an obligation of confidence; or
- under the Patents Act 1990 (Cth), by way of patenting.
The only method to protect your trade secrets under intellectual property law is, therefore, to patent the information.
Patenting Trade Secrets
IP Australia considers confidentiality and trade secrets ‘including know-how and other confidential or proprietary information’ as intellectual property.
However, protection is not automatic and requires registering your intellectual property to obtain the legal rights of ownership.
Two types of patents are available under the Patents Act:
A standard patent generally lasts up to 20 years and grants long-term protection and control over an invention.
In order to constitute a patentable invention under the Patents Act, the trade secret must:
- be new;
- be useful;
- involve an inventive step; and
- be able to be made or used in an industry.
The secret must consist of ‘something more than the simple application of published information or standard background knowledge’.
Acquiring a standard patent is difficult in this process and may take six months to several years following filing.
In contrast to the standard patenting process, an innovation patent uses an innovative step rather than an inventive step.
This step presumes that your invention is innovative, requires a quick formalities check and grants a patent within a month.
Innovation patents, however, last up to eight years and require six months of examination to be enforceable.
Weigh Up the Benefits
Patenting your business’ trade secrets imposes a time limit on the protection of the secrets and requires at least six months of examination, so it’s worth determining whether it’s suitable to instead protect your own trade secrets and rely on common law and legal obligations.
Under common law, you are charged with the protection of your business’ trade secrets, which may continue indefinitely as long as the trade secret is not revealed to the public. However, common law protections do not confer exclusive rights and the undertakings are difficult and should be prepared by a lawyer.
It’s worth noting that the decision to patent your trade secret should be made before commercialising the relevant invention as applying for a patent will render your trade secret public.
For example, the High Court, in Maggbury Pty Ltd v Hafele Australia Pty Ltd, invalidated a confidentiality agreement due to a patent application, holding that ‘the law of confidentiality is meant to apply to trade secrets, not to information publicly available’.
The case now serves as a reminder ‘for every inventor who is considering applying for a patent to weigh up the conflicting benefits of relying on patents or confidential information to protect their inventions’.
The Patents Act provides patenting as an option for a business wishing to protect its trade secrets has options.
A patent ensures trade secret protection under statutory law, but limits the duration of protection and leaves your secret vulnerable by rendering it ‘publicly available’.
In contrast, relying on the common law provides the potential for immediate and indefinite protection, but at the cost of exclusive rights and difficulties in enforcement.
It’s important to determine which approach you take before commercialisation. This is because the period between a patent’s application and grant can leave the trade secret vulnerable. An example of this is if an employee with knowledge of the secret leaves.
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Shaheen is a Legal Tech Intern at Lawpath as part of the Content Team. He is in his final year of a Bachelor of Laws with the degree of Bachelor of Information Technology (Major in Information Systems and Business Analysis) at Macquarie University. He is interested in IT Law and Access to Justice.