Patents or Trade Secrets? Analyzing the ROI for Quantum Technology

Quantum technology is evolving quickly, with billions of dollars in private investment pouring into the sector and articles about new developments frequently in the news.

With the growth in funding and potential commercial opportunities, the field has seen a growing number of patent filings in recent years.

Right now, quantum technologies still haven’t reached a fraction of their potential in terms of commercial value. But many tech companies and investors are betting that we’ll get there well within the next 20 years — within the lifetime of a patent.

Companies developing quantum technologies want to protect their inventions in a field whose potential still lies ahead, but not too far down the road. The question is, what is the best way to do that?

Patents are one way to protect an invention, but not the only way. Trade secrets are another option. Copyright and trademark protection will also be relevant for quantum technology companies, and are also part of an integrated IP strategy.

The quantum field has attributes that make it different from other sectors. The collaborative nature of quantum computing, the problems that still need to be solved to make it commercially viable, and its sheer potential are all factors that play into an ROI analysis for an intellectual property protection strategy.

Here’s how companies can begin to analyze the difference in ROI between patents and trade secrets for quantum technologies.

Key Features of Patents and Trade Secrets

When companies assess whether to pursue patent or trade secret protection for an invention related to quantum technologies, the commercialization strategy is the first important question. Unlike a product sold directly to consumers, quantum technologies are often deployed within complex systems, for example, in a cloud-based computing environment with diverse array of computing resources available.

Companies should first determine how the invention will be used by the company.

• Will the company need to publish product specifications or otherwise provide information on the inner workings of the invention?
• Can the invention be observed or reverse-engineered by competitors when it’s deployed or in use?
• Will other companies need to see under the hood to facilitate a joint venture or partnership?

If the answer to any of these questions is yes, it will be more difficult or even impossible to keep the invention secret. And in such cases, a patent may be the preferred mode of protection.

Further ROI analysis continues with two factors: lifespan and costs. At a high level, trade secret has the potential for longer term protection at a lower cost, but enforcement options are more limited.

There are numerous differences between patents and trade secrets, but in a nutshell, here are four key distinctions:

• Time — patent protection gives an exclusive monopoly for 20 years; trade secrets can be perpetual.
• Publishing — patent protection requires public disclosure of the invention; trade secret protection requires strict confidentiality.
• Rights — patents give owners the right to license the invention or enforce against infringers who make, sell, use or import an infringing product; trade secrets give the owner the right to enforce against theft, for example, by a competitor or former employee.
• Enforcement — patent owners can sue anyone who uses the patented technology during the life of the patent; companies with trade secrets are limited to suing people who had access, not companies who reverse engineer or independently develop the same invention.

Each of these distinctions should be taken into account when considering the potential ROI on the type of legal protection you pursue for your invention.

The Up-Front Costs of Patents and Trade Secrets

A tech company’s intellectual property portfolio will ideally consist of a combination of inventions protected by patents and by trade secrets. But for a given invention, you usually have to pick one.

A company should develop an overall IP strategy in line with its business objectives, and have a strong relationship with an experienced IP attorney — ideally, one with a background in quantum technology who can understand and translate the inventions to patent examiners and other relevant parties.

The up-front costs of patent protection — the cost of drafting, filing, prosecuting and maintaining a patent — can be tens of thousands of dollars over two to three years for a single patent. That’s a high price tag, but it’s a relatively small cost compared to the overall R&D investment required for developing quantum technology. In other words, the cost of the patent process is small compared to the losses suffered if the invention is copied or ripped off.

Trade secrets also require up-front legal and procedural preparation, but the cost is much lower. This is because there’s not a formal registration or examination process for trade secret protection, and trade secret status can typically be secured without engaging a law firm or incurring any out-of-pocket expenses.

Companies must carefully draft their legal agreements with employees, collaborators and vendors to ensure trade secret protection for key technologies and information. Confidentiality and non-compete provisions can be important for securing and enforcing trade secret status. In addition, companies should have internal protocols in place to control the trade secret information, such as limiting its access to only certain employees.

The Risk of Trade Secret Disclosure

Trade secret protection requires confidentiality. If the invention can’t be kept as a secret, then trade secret protection isn’t available. For example, if the invention will be visible to your customers or the general public, it can’t be protected as a trade secret.

Many quantum tech inventions can be kept secret. For example, fabrication techniques can often be used without being discovered by a competitor. Any technology that’s being deployed in the cloud, or remote from the user, can often be kept secret.

But if or when the trade secret becomes public, you lose protection. If another company develops the same technology, they can publish or patent it, and you lose trade secret protection. So if the invention is something that a competitor would be likely to develop independently, patent protection would be better.

Many quantum tech companies want to publish their developments and capabilities to gain credibility and attention, making patents on those inventions preferable for marketing.

Once a patent application is published (usually 18 months after it’s filed) or when it turns into an issued patent, the content is public — anyone can see it. However, the patent generally prevents others from using the technology without a license as long as the patent is in force.

The Cost of Enforcement

Litigation is expensive, but unfortunately, often necessary to enforce both patents and trade secrets. There are differences in the types of activities that these two types of legal protection can be enforced against.

Trade secret status only protects you against misappropriation, or the theft of the invention. Across the technology sector, many lawsuits have been filed against employees who left one company and then used their former employer’s trade secret information for the benefit of a competitor. In these cases, companies can ask a court for an injunction to prevent the employee from working with the competitor and the competitor from using the information.

A company can decide to pursue a case all the way to a jury to seek damages in these types of lawsuits.

On the other hand, a patent is a legal monopoly that can be enforced against anyone who infringes upon it. Even if they don’t know about your patent, you can sue an infringer for an injunction or damages. However, injunctions are very difficult to obtain in patent cases; the patent owner is usually awarded a reasonable royalty as damages when they prevail in litigation.

In any event, litigation is always risky and costly, whether for patent or trade secret enforcement.

Make the Most of a Patent

To obtain the most value out of an investment in legal protection, it’s important to choose an attorney who can help assess the inventions that need protection and how to best protect them.

Quantum is a complicated technology that is difficult to understand and explain to non-experts. A patent attorney needs to file a strong patent application and then explain the technology to a patent examiner, who is usually not an expert in quantum technology, either. I’ve been working on patent applications for quantum technologies for well over a decade, and my law firm has drafted and prosecuted hundreds of patent filings for quantum technologies. This experience allows me to understand quantum technology — speak the language — and translate it for patent examiners for a successful patent application process.

Reach out to me to discuss your quantum technology portfolio strategy and assess whether your inventions are suited to patents or trade secrets.