According to a recent EUIPO Observatory report, many companies rely on a combination of patents and trade secrets to protect the commercial value of their R&D efforts. But in many industries and under certain circumstances, it seems that the majority of European companies prefer to use trade secrets over patents.

In fact, the study indicates that the use of trade secrets for protecting innovations is higher than the of use patents by most types of companies, in most economic sectors and in all EU Member States. Whereas  patents are more likely to be used (alone or in combination with trade secrets), when the innovative product is a physical good rather than a service, trade secrets are more likely to be used for process innovation and for innovations in services. Notably, the report shows that companies seem to prefer trade secrets over patents in markets with strong price competition.

The study also highlights some of the potential benefits of trade secret protection over patent or other IP rights:

  • broad subject  matter (including  inventions  or know-how that  may  not  qualify for patent protection);
  • lower costs due to the absence of any formal registration requirements;
  • applicability to early-stage innovations (preparatory materials);
  • the lack of a public disclosure requirement; and
  • protection that may exist in perpetuity (compared to other forms of IP which offer only a finite period of protection).

The report confirms the rising importance of trade secrets in the globalized and connected economy; its findings are mostly in line with those in the pilot study the Commission had published prior to the passage of the Trade Secrets Directive.