Michael D. Moberly August 18, 2008
Typically, a patent starts life as a trade secret, or so it should! While this often cited adage makes for an interesting ‘reading bite’, it doesn’t always reflect reality. And, even though 75+% of most company’s value, sources of revenue, and future wealth creation today lie in intangible assets, intellectual property, and proprietary know how, many still do not have the practices, procedures, or culture in place to regularly assess ‘in-house’ know how as (a.) it evolves from being initially recognized as proprietary, (b.) designated a trade secret, and ultimately (c.) deciding to proceed with the ‘patent election’ process to determine its patentability potential.
Respectfully, most companies do not have formal R&D units, but they do have-hold vast amounts of proprietary know how and institutional memory (often developed in-house) that genuinely produce – deliver competitive advantages and value by, among other things, facilitating – extending services that enhance customer/client goodwill and reputation, etc. Unfortunately, for a variety of reasons (as described in several previous posts on this blog) these ‘assets’ are routinely overlooked, dismissed, or go unrecognized altogether with respect to their value or contribution to revenue. Consequently, there’s seldom a straight line or timely evolution between the development of good, in-house ideas and recognizing – assessing their potential relevance and contribution to the company, or, more specifically, continuing to use them in a proprietary (trade secret) status or seek other forms of intellectual property protection such as a patent, trademark, or copyright.
One thing is painfully clear however, if that know how (trade secret) has already been (inadvertently, intentionally) disclosed, compromised, or becomes in-defensible in terms of meeting the six requisites to trade secrecy, it cannot be ‘re-secreted’! In other words, the ‘genie is out of the bottle’ and the probability of recovering much of its original (projected) value is, to say the least, slim, even following litigation.
This doesn’t necessarily mean that proceeding with patent election is a waste of company time, money, or resources. What it does mean however, is that if a company wishes to proceed to the next level, that is, the patent election process, it should do so in an objective manner by first undertaking the necessary due diligence to identify and assess the extent and nature of any compromise, particularly in terms of its impact. For example, (a.) can the trade secret be successfully (legally) defended should challenges and/or disputes arise, and (b.) can the projected value and revenue still be efficiently extracted?
If, on the other hand, the due diligence finds (a.) effective safeguards have been in place (since inception) to sustain (protect, preserve) control, use, ownership, and value of the know how (trade secret), and (b.) there are no indicators or evidence of asset compromise, value erosion, or competitive advantage undermining, then the patent election process could proceed.
Patent election is, as eluded to above, a process to determine whether the subject matter (i.e., the original proprietary know how, trade secret) is potentially patentable, i.e., sufficiently (a.) novel, (b.) useful, and (c.) non-obvious. Of course, if patent election is favorable, there are numerous additional business-financial decisions that must be made (many of which have been addressed in previous posts on this blog).
(Adapted for the Business IP & Intangible Asset Report and Blog by Michael D. Moberly using references and concepts from ‘Trade Secret Asset Management’ authored by R. Mark Halligan and Richard F. Weyand. Aspatore Books, 2006 p. 131, 132)