By Janelle M. Lewis, Attorney, Business & Legal Strategic Consultant
Strategically speaking, does a patent provide a company with the competitive advantage it needs?
Protecting Commercially Valuable Information That Provides a Competitive Advantage
From the standpoint of competitive advantage, trade secrets should be considered an alternative for entrepreneurs and business owners who want to protect their inventions. Historically, some companies have considered trade secrets more valuable than patents to protect commercially valuable information that provides a competitive advantage. Examples of such companies are Coca-cola and its formula; KFC and its recipe; and Google’s and its search algorithms. Each of these companies have protected their inventions using trade secret protection. One the of reasons trade secret protection is preferred to patent protection is the fact that unlike patents, trade secrets do not expire. Another reason is that there is no public disclosure requirement for trade secret protection, thus preventing competitors from gaining insights or even making patentable improvements.
Historically, some companies have considered trade secrets more valuable than patents to protect commercially valuable information that provides a competitive advantage.
Legally Strategic Approach to Assessing the Competitive Advantage of a Company’s Invention
Although patent protection excludes competitors from making (including reverse engineering), using, selling, or importing an invention without the inventor’s consent, enforcement against infringement may be difficult to prove. In some cases, enforcing the patent itself (especially cross-borders) can be difficult. Above all, patent enforcement (as well as the patent application process) is costly. This is not to say that entrepreneurs and business owners should not patent their inventions, but from the standpoint of competitive advantage, there are some strategic questions that should be considered when deciding which legal strategy to undertake:
- What are the short-term gains/benefits from patenting an invention?
- What could be lost in the long-term once the patent expires?
- What resources will be needed to defend a patent infringement? Does the company have the resources?
- How does the invention under consideration contribute to the company’s competitive advantage and how sustainable is that advantage over specified periods of time?
- If the trade secret is misappropriated, what are the estimated damages? How do those damages compare to the cost of patent enforcement?
- What are the risks associated with public disclosure vs. inadvertent disclosure of the secret?
- What are the costs and logistics of maintaining secrecy as required under applicable trade secret laws?
This is not to say that entrepreneurs and business owners should not patent their inventions, but from the standpoint of competitive advantage, there are some strategic questions that should be considered when deciding which legal strategy to undertake
Using the Law to Improve the Value and Competitive Advantage Brought By Inventions
Above all, what this strategic exercise highlights is the important role the law plays in developing a business strategy that seeks to establish or maintain a competitive advantage in competitive markets. In other words, it is another example of how the law is a value creating tool when used strategically in business decision-making. Using the law to reframe a business question – in this case to patent or not to patent – provides entrepreneurs and business owners with more information on how to use their inventions to achieve competitive advantage.
Using the law to reframe a business question – in this case to patent or not to patent – provides entrepreneurs and business owners with more information on how to use their inventions to achieve competitive advantage.
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