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Featured Article
Trade Secret vs Patent
License vs Sale
The 7 Habits
Letters to the Editor
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 Newsletter - August 2017
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Should You Trade Secret Instead of Patent?

In a recent article which  is linked here, IP Watchdog compares the relative benefits of Trade Secret protection to patent protection.

"On July 13, 2017, while testifying before the House Judiciary Committee, former Federal Circuit Chief Judge Paul Michel testified that the U.S. patent system is "no longer functioning effectively" and is in crisis mode. 

Developments in patent law have caused owners of intellectual capital to evaluate all available means for its protection including considering when appropriate the protection of innovations as trade secrets."

According to the article there are 3 factors driving the increased focus on trade secrets as an alternative to patents-

  1. Supreme  Court decisions which limit patent rights
  2. The IPR  (Inter Partes Review) process initiated by the America Invents Act.
  3. The Increased importance of Trade Secrets stemming from the Defend Trade Secrets Act (DTSA)
Trade secrets are a venerable way of protecting your invention.  They have certain advantages over patents and certain disadvantages. 

 The most famous trade secret is the formula for Coca Cola which has been kept secret for over 100 years.  This illustrates  one advantage of trades secrets (they can last much longer than the 20 year term of a patent),  and also one of the disadvantages.  To  be useful a trade secret must be kept secret  and it must be proved that the secret was carefully protected.

If a trade secret is truly kept secret there is no problem. The problem comes when the secret is disclosed , for example by a disgruntled employee) to competition and the owner of the secret needs to prove the competition is using their trade secret.  Then trade secret owner needs to show that appropriate steps were taken to safeguard the secret.  If a trade secret is easily uncovered (for example by "reverse engineering"  its not a good strategy to use.

One of the classic methods of protecting a trade secret is the Non-Disclosure agreement.  This tactic as well as other methods are covered in the Wikipedia article linked here.

Whether you decide to patent or trade secret depends on 1) whether you think you can get a patent   2) How well you think you can protect a trade secret.  

If you are not sure what the best method to protect your idea is,  give us a call or send us a note.   We are always there to help. 

or  give us a call at  (585) 520-3539  

License vs Sale
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ITTr  will help our clients sell the rights to their patent or arrange a license deal with a prospective  customer.  Which kind of deal we do  is largely the option of the customer.   While our clients often prefer a sale (particularly if the price is high enough),  buyers more often  prefer a license.  For them a license is much more flexible and allows them to reduce the risk of trying out a new technology on their customers.

I like to tell our clients that a license is like a mortgage on a house.   It has a down-payment, an annual fee (or minimums) , a term and a royalty rate.

Licenses can also include such items as trial periods (which could be thought of as multiple terms).

We negotiate a license by starting with a spreadsheet with the key elements identified.   We then ask our clients for their preferences on each of the items to prepare an  asking price worksheet to send to the prospective buyer.   In negotiations the buyer will often counteroffer their terms for the same elements  or they may request additional conditions  or varients on a theme.  

In one example there may be two terms,  a trial period   and a final period .  The seller gets a payment for the trial period during which the patent is off the market.   If the trial is successful the sale moves on to the next phase which may also require different terms.   If the trail is unsuccessful ,  the seller is free to  approach other buyers.

An outright sale brings with it the problem of setting a price on the rights to the clients intellectual property.   This is often a point of significant contention.   While there are valuers who will put a price on a patent using one or more complex econometric formulas and associated software, its  not often that a buyer will believe the results of these analyses.

Again the selling price is a result of negotiations.   How much does the buyer need  this Intellectual Property and what will it earn for them,or how valuable is the intellectual property it can be used to protect.

Whether a sale or license is the end point of negotiations , an attorney will usually be needed to put the decisions of the parties into a binding agreement.   While the attorneys can be brought in at any time we feel its most effective, and most inexpensive if they are brought in after the key decisions are made (unless legalities are an issue).   

When you are ready to sell your intellectual property by whatever means you choose,  contact us at ITTr.   We are there to help.

The 7 Habits

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Now that Opportunity Associates has become a book group,  we  choose a different book to study each period.  The latest book is the venerable 7 Habits of Highly Effective People, by Stephen Covey.

 So far OA has studied the first 3 habits:  1) "Be Proactive"  2) "Begin with the End in Mind" and 3) "First things first."   All members had read the book  previously but most of us had forgotten much of what it was about and certainly the details.

In some ways the book appears a little dated,  particularly  buzz words such as "paradigm shift" in the examples it uses which appear to have been taken from popular business methods  of the past.   However the truths that Covey teaches are essentially timeless,  whatever examples he uses to illustrate them. The 7 habits string together to form a complete strategy , each new habit building on those that came before.

Being "proactive"  is the opposite of being  "reactive".  We all know what it is to be reactive.  Its when you respond to something that is happening.  That's  what happens most of the time in life when we take our directions form circumstances or from the orders or opinions of other people.   Its usually the easy road to follow,  but it seldom leads us where we want to get since the direction taken is the result of people or circumstances outside of our control.

Being pro-active is the result of conscious decisions based on our own personal desires and goals.  To be pro-active requires that you first understand what your goals are and then devise a plan to make them happen.  

Covey begins by talking about different kinds of "centers"  that people build their lives around  including :family, money, spouse, self --etc.   He recommends what he calls a "principal centered" life.

In any case being proactive means knowing who you are, where you are and where you want to go.  So building a personal mission statement as Covey recommends is a good start.

(585) 520-3539

We appreciate your responses to our newsletters.  Please send us your comments.  We are always interested in what you want to know.  See the New Letters to the Editor link in the block below

Richard Blazey
Business Metamorphosis LLC

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Dick Blazey




Please realize that this newsletter contains only our opinions on patent matters.  We are not authorized to give legal advice.  If you are seeking such advice please contact an attorney .


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