Intellectual property (IP) is one of the most valuable assets a startup can develop, but it can be easily lost if not protected appropriately. MFN spoke with Nicholas Armington, an IP litigator and counselor at Prince Lobel Tye LLP, to discuss the differences between trade secrets and patents, and what founders should know about safeguarding their innovations and other technology.
Q: What’s the difference between a trade secret and a patent?
Nicholas Armington: Startups should think of patents and trade secrets as complementary tools rather than interchangeable ones.
– Patents give you the right to exclude others from using your invention for about 20 years. But there’s a catch because you must disclose exactly how your technology works when you file, and it’s up to you to enforce those rights through litigation if necessary. It can be quite a time-consuming and expensive process.
– Trade secrets let you keep valuable information secret for as long as you can protect it. A classic example is the Coca-Cola formula, which has remained confidential for over 130 years. As long as no one can reverse engineer or independently develop it, the company retains exclusive value.
Q: How do trademarks and copyrights fit into the picture?
Nicholas Armington: In addition to patents and trade secrets, there are two other major types of IP protection:
– Trademarks protect your brand identity; the names, logos, or symbols that distinguish your company. Registering a trademark with the United States Patent and Trademark Office (USPTO) gives you federal protection and puts competitors on notice.
– Copyrights protect creative works like books, music, artwork, and even software source code. They prevent others from copying your work without permission.
Together, patents, trade secrets, trademarks, and copyrights, form the foundation of a startup’s IP strategy.
Q: For early-stage startups without in-house legal teams, what should come first?
Nicholas Armington: The first step is a discovery conversation: identifying your core technology, value proposition, and differentiators. Once you know what really drives your company’s value, you can decide whether that IP is best protected as a patent or trade secret or a mix of both.
Oftentimes, especially with software-heavy products, patents are not going to be the answer. Startups should also understand that not all patents are equally strong. Roughly 70% of patents challenged at the USPTO after being granted are canceled. That means a patent may not always be the most secure or cost-effective option. A tailored strategy is key.
Many companies, especially startups, aren’t fully attuned to this. Founders are rightfully focused on their product, not the law. They often hear the word “patent” and assume it’s something they need in order to attract investment. But it’s more nuanced than that.
Q: What’s your best piece of advice for founders navigating IP decisions?
Nicholas Armington: Don’t assume patents are the only path to protecting your innovation. A smart mix of trade secrets, trademarks, copyrights, and carefully chosen patents, paired with solid confidentiality practices, will position your startup to keep its edge and signal strength to investors. Customer lists, business strategies, and product roadmaps can also be protected as trade secrets. Consider preparation of a trade secret protection protocol to protect these and other more technical IP assets.
Properly protecting IP is a competitive advantage for businesses. Being strategic can save your startup time, money, and risk. Not every innovation should be patented. If your technology can be kept secret, it may hold value for decades as a trade secret.
The key is to build a balanced IP strategy, using patents and trade secrets where each offers the greatest value.
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