Using NDAs to Protect Inventions, Creative Works and Trademarks

Trade secrets are part of a family of law known as intellectual property, which also includes patents, copyrights and trademarks. The types of intellectual property protection are not discrete and often overlap. For example, a process of transporting eggs on a conveyor belt can be a trade secret until it is disclosed during the patent application process. Once a patent is issued, the process is public but protected by the patent. A television game show about survivors on a desert island may be copyrighted but the name of the winner may be a trade secret until announced on the air. Below we discuss how NDAs are used when trade secrets, patents, copyrights and trademarks overlap. We discuss these issues below but for more detailed information on trade secrets and related intellectual property issues, consult Richard Stim's Patent, Copyright & Trademark.

Utility Patent

There are three types of patents—utility patents, design patents and plant patents—but we will discuss only the most common, utility patents, which protect any novel and useful invention. (You can learn more about design patents, here. ) The term “invention” is quite broad and includes anything under the sun made by humans except for abstract ideas. Utility patents can be granted for a process (such as sterilizing surgical equipment or a method for collecting sales data on the Internet); a machine (such as a gearshift in a rowing machine); an article of manufacture (such as a pencil or a garden rake); composition of matter (such as Teflon or WD-40); or an improvement on an existing invention.

A patent allows the inventor the exclusive right to stop others from making, using and selling the invention. Patent attorney David Pressman, in his book Patent It Yourself (Nolo), calls the utility patent a “hunting license.” It gives the inventor the right to hunt infringers and sue for damages and other legal remedies.

A utility patent is obtained by filing a patent application with the U.S. Patent and Trademark Office (PTO), meeting the standards of that agency’s examiners and paying the appropriate filing, issuance and maintenance fees. The Patent and Trademark Office will not consider an invention novel if the application for the patent is made more than one year after sale, public disclosure, use or offer of sale in the United States, or if it is patented anywhere in the world. In other words, you have one year from the first sale or public disclosure to file your patent application!

You'll find a lot of free plain-English explanations of patent, copyright, trademark and trade secret resources at NOLO.com Do-It-Yourself Legal Books, Forms and Software From a Trusted Source

To qualify for a utility patent, an invention must be

• useful—that is, be capable of performing its intended purpose;

• novel—that is, it must differ in some way from the publicly known or existing knowledge in the field of the invention; and

• nonobvious—that is, persons working in the field of the invention would consider the invention unexpected and surprising.

Should You Apply for a Patent or Keep Your Secret Information Secret?

Everything that qualifies for a patent also can qualify as a trade secret. However, you can’t have both patent and trade secret protection simultaneously because the patent process requires, at some point, public disclosure of the invention. If you have a patentable invention, you must decide whether to seek the powerful protection of a patent or to maintain the invention as a trade secret. Here are some considerations:

• Patent protection lasts for approximately 17 years; trade secret protection lasts for as long as the material remains secret.

• Trade secret rights can be acquired immediately, but it often takes several years to acquire a patent.

• Trade secrets can cover more information than a patent, which is limited to one general statement of the invention and its details.

• Patent protection allows you to stop anyone from making, using, or selling the invention; a trade secret owner can stop only those who acquire the secret improperly.

• Patent protection generally entails about $5,000 to $10,000 of attorney fees to obtain; trade secret protection is relatively inexpensive.

• If you don’t patent an invention, and someone else legitimately does, that person may sue you later for patent infringement. Patent laws provide some defenses but it is very possible that you could be liable for patent infringement. 

Many companies use NDAS to protect their patentable inventions or processes as trade secrets in the initial stages of development and then seek patent protection. A patent application is published verbatim when the patent issues or earlier, as discussed below, and at that point all of the trade secrets and know-how become public. This public disclosure doesn’t usually hurt the inventor, because the patent can be used to prevent anyone else from commercially exploiting the underlying information.

Every pending patent application filed on or after November 29, 2000 is published for the public to view 18 months after its filing date (or earlier if requested by the applicant). The only exception is if the applicant, at the time of filing, informs the PTO that the application will not be filed abroad. If the patent application is published and later rejected you will be in the unfortunate position of having lost both trade secret and patent rights.

If you file a patent application and want to keep it as a trade secret even if the patent isn’t granted, you will have to withdraw the application before publication to prevent loss of trade secret status. 

You may not need to disclose all your trade secret information when you apply for a patent. For example, you could keep confidential the research method by which you arrived at your conclusions or test results.

Trade Secrets and Copyrights

Copyright protects writing, music, artwork, computer programs, photographs and other forms of artistic expression. Under copyright law, the creator of an original work (known as the author) owns the exclusive right to make copies and to prevent others from copying the work or creating a derivative work (a work that is derived from or based on the author’s protected work).

Copyright and trade secret laws sometimes protect the same kinds of information and sometimes are mutually exclusive. Usually, the same protection cannot exist simultaneously because copyrightable works are commonly distributed to the public or publicly displayed, thereby ending trade secret protection. However, trade secret protection may exist for copyrightable works that are not published or displayed.

Copyrights, Trade Secrets and Software

Trade secret and copyright protection may both be available for works that are distributed on a restricted basis under a copyright licensing arrangement requiring the licensee (user) to recognize and maintain the trade secret aspects of the work. This dual protection is pertinent for computer software because the distribution of a software program does not require disclosing all of the software code. The undisclosed code is a trade secret and is protected because a user commonly signs a license agreement promising not to divulge secrets in the program. Trade secret protection is generally not available for software if the source code is made available to the public on an unrestricted basis—for example, in a computer magazine or on a CD.

You automatically own the copyright for any original work, even if you don’t register your copyright with the U.S. Copyright Office. But because registration offers benefits, most people want to register their copyright, which requires sending a copy of the work to the Copyright Office. Once you do that, your trade secret is out unless you in some way mask the trade secret. For instance, it is possible to deposit samples of source code with major portions blacked out so that the parts of the code being maintained as a trade secret are not disclosed. There are several other methods for simultaneously registering a computer program and maintaining trade secrets. One common way is to withhold the source code altogether and deposit object code, which is impossible to understand when read in the U.S. Copyright Office.

Database Protection

Copyright law protects unpublished and published collections of information such as databases if the material is arranged in a creative manner. For example, a typical white pages phone book will not be protected because there is no creativity in alphabetizing names. Trade secret law does not require creativity in order to protect databases. A database will qualify as a trade secret if the information is not generally known or readily ascertainable.

For more information on copyright, read The Copyright Handbook, by Stephen Fishman (for written works), and Web & Software Development, also by Stephen Fishman. Nolo publishes both books. Also, the Copyright Office, provides free information and copyright forms.

Trade Secrets and Trademarks

Trademark law protects the right to exclusively use a name, logo or any device that identifies and distinguishes products or services. In addition to names and logos, trademark law can be used to protect trade dress and product configuration. Trade dress is the product’s packaging—all the elements that give your product or service’s appearance an identifiable quality, such as the combination of color, geometric shapes, imagery and lettering on a pain reliever bottle. Product configuration refers to the shape or design of your invention—for example, a distinctive oval-shaped stapler.

Trademark rights are not created until the public has been exposed to a product or service and its trademark, usually by its first use in commerce. That means an NDA cannot protect a trademark that is used in commerce or that is the subject of a federal trademark application published by the United States Patent and Trademark Office. An NDA can, however, protect a potential trademark—that is, a name or logo that a company plans to use—that has not been publicly disclosed.

Click to see a chart comparing copyrights, trademarks, patents and trade secrets.

For background on how a trademark can be registered, access the PTO or read Trademark: Legal Care for Your Business & Product Name  by Richard Stim & Stephen Elias (Nolo).