Just as the U.S. Patent and Trademark Office has shown a keen interest in better understanding policy concerns and the needs of business stakeholders in the area of trade secrets (see our coverage of both USPTO symposia here and here) against the backdrop of a new federal law, the EU’s IP office is also stepping up its focus on trade secrets following the EU Trade Secrets Directive in 2016 (our coverage here).
According to a recent EU IPO Observatory publication, the majority of European companies prefer to use trade secrets over patents, but many companies rely on a combination of patents and trade secrets to protect the commercial value of their R&D efforts. Here are some of the key findings of the study:
- Throughout the EU, trade secrets are used more than patents in most types of companies and in most industries.
- Innovating firms rely on both patents and trade secrets.
- Trade secrets are preferred where the innovation is new to the firm.
- Patents are more likely used when the product is a good rather than a service.
- Trade secrets are more likely to be used for innovations in services and processes.
- Trade secrets are more likely used to maintain a competitive edge in the context of open innovation and research partnerships, especially when non-EU partners are involved.
- Trade secrets are preferred in markets with strong price competition (commodity markets where product differentiation is uncommon).
So why do EU companies on the whole prefer trade secrets over patent protection? The study goes on to highlight the benefits of trade secret protection, which include:
- broad subject matter, including inventions that may not qualify for patent protection;
- lower costs due to the absence of any formal registration requirements;
- applicability to early-stage innovations;
- the lack of a public disclosure requirement; and
- protection that may exist in perpetuity (compared to other forms of IP which have finite registration periods).
The passage of the DTSA and the EU Directive last year were nothing short of seismic shifts in two of the world’s biggest markets, and, on the whole, both are welcome news for trade secrets owners.
Although there’s a fundamental dilemma in trying to gather data and study information that, by definition, must be kept secret, TSW applauds the efforts of policymakers on both sides of the Atlantic who are navigating these uncharted waters and providing useful analysis for those interested in the increasingly important role that trade secrets are playing in today’s economy.