The Growing Trend Toward Trade Secret Protection and Away from Patent Protection
By Christopher Simboli
Many assume that patent protection is the most valuable form of intellectual property (IP) protection one can secure in today’s business environment. While this may have been true to a large degree in the past, in today’s market many are questioning this assumption and making a shift towards using trade secret protection instead of patents to guard their valuable IP assets and technology. Why this shift in thinking?
Much of the momentum of this shift is due in large part to the enactment of the U.S. Defend Trade Secrets Act (DTSA) in 2016. Although formal U.S. federal legislation enacted around trademark has existed for decades, and around patent and copyright for centuries, prior to 2016 no formal U.S. federal legislation for the protection and enforcement of trade secret rights and remedies for their misappropriation existed. Part of the incentive for Congress to create a federal act in the form of the DTSA grew out of the dissatisfaction with and inconsistencies caused by the legal patchwork of rights and remedies formed by the trade secret statutes enacted in many states. In just the first year of the DTSA, trade secret litigation in the U.S. increased by more than 25%. This number has grown exponentially since then, and while trade secret litigation is on the rise, the number of patent cases has fallen off sharply.
To understand this shift, it is important to note that a critical difference between trade secret protection and patent protection in the U.S. is the length of time these rights legally subsist: generally speaking trade secret protection can theoretically last forever if these rights are protected in certain prescribed ways, while patent protection ends after 20 years. Also important to note is the difference in the associated costs to acquire and preserve these legal protections: trade secret protection requires no formal application or registration process, whereas patent protection can only be achieved and maintained through a formal and relatively expensive application and grant procedure.
Some of the reasons for this shift are the significant size of jury awards and the specific remedies involved in DTSA trade secret litigation (including the injunctive relief and extraterritorial reach available under the DTSA). For example, in December of 2024, in Insulet Corp. v. EOFlow Co. Ltd., a U.S. jury awarded $424 million USD in compensatory and punitive damages to plaintiff Insulet under the DTSA after finding the defendant EOFlow had willfully misappropriated Insulet’s trade secrets. Also in 2024, in Motorola Solutions, Inc. v. Hytera Communications Corp., the appeal court there affirmed a U.S. jury verdict against defendant Chinese company Hytera ordering it to pay more than $400 million USD in compensatory and punitive damages for misappropriation of plaintiff Motorola’s trade secrets in contravention of the DTSA.
If your business is using or considering using trade secret protection or patent protection to safeguard its IP assets and technology, careful consideration is needed of the impact of this decision on the value of those IP assets and technology. Each of these type of IP rights provide different forms of legal protections, and they vary in terms of the steps that must be taken to secure the desired protection as well as in the expense involved to achieve this protection. At Parsons Behle & Latimer we have the necessary expertise to help our clients be informed about and make these decisions, and we are here to assist in dealing with the legal issues associated with trade secret rights and patent rights. Please let us know how we can help you and your business in this regard.
