MODULE 6: WAYS TO PROTECT INNOVATION

Study Note: This module should take approximately one hour to study

Learning outcomes

After completing this module, you should be able to:

1. describe the essential rights of patent holders;

2. indicate three ways, other than patents, for protecting inventions;

3. explain the main differences between utility models and patents;

4. list the main features of trade secrets; and

5. identify the main differences between trade secrets and patents.

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INTRODUCTION

As you have learned in the previous modules, a patent is essentially a right which governments grant
to an inventor permitting him/her ‘to exclude others from making, using, or selling the invention’ for a
certain period of time provided that the invention and the application meet certain criteria. In other
words, patent does not grant patent owner a positive right to commercially practice the invention but
only to exclude others. After the term of the patent expires, the inventor loses this exclusive right to the
invention. An invention must meet several criteria to be eligible for patent protection. Most significantly,
it must consist of patentable subject matter, the invention must be new (novel), it must exhibit a
sufficient “inventive step” (be non-obvious), it must be industrially applicable (useful) and the
disclosure of the invention in the patent application must meet certain standards. In this module, you
will learn briefly the other types of protection of intellectual property for inventions.

Starting point: Is a patent the only mechanism for protecting an invention?

This course focuses on patents as a method of protecting your inventions; however, it is important to
note that there are other types of protection for inventions depending on the strategy of the inventor.
The exclusive right conferred to the inventor under a patent protection allows for excluding others from
using, for a certain period of time. It should be noted that obtaining a patent does not give right to
practice the patented invention. A patent, in fact, grants only a negative right (i.e., the right to exclude
others). Please note that there may be other patents in force which cover the background technology,
so that your patent could not be exercised without infringing those other patents. Therefore, in order to
commercialize a patented technology, we need to ensure (through Freedom to Operate studies) that
we are not infringing others' rights. A strategy of exploiting this right is often needed if the patentee is
to benefit financially from the invention.

Competition in the marketplace is one of the engines of inventions and the speed with which new
improvements on existing prior art (patent) come about. Getting new products that improve on an
existing product (without necessarily infringing an existing patent right) has become a common activity
practiced by many businesses, in particular by small and medium size enterprises (SMEs) which often
lack the financial strength to acquire dominance in a specific area of invention. The legal practices in
many countries, while responding to the need of the market under patents, has also absorbed other
methods of protecting intellectual property through protection of ‘utility models’, ‘trade secret’ and
through confidential ‘know-how’ agreements between a supplier and a recipient.

Utility models, trade secrets and know-how are described here below. You will have already used
products such as Coca-Cola and others in your daily life but might not know how these methods of
protecting the composition of such products as Coca-Cola work. It is also important to understand why
companies chose methods other than patent to protect and exploit their product.

To facilitate the comparison, let us review some of what you have learned about patents.

1. Patents

Patents are territorial rights. As such, a patent granted by the Russian Patent Office will only give the
holder rights within the Federation of Russia.

Patents may be granted by national patent offices or by regional offices that work for a number of
countries, such as the European Patent Office (EPO) or the Eurasian Patent Office (EAPO). Under
such regional systems, an applicant requests protection for the invention in one or more countries.
After the grant of the regional patent, the applicant must observe any relevant national provisions, like
for example, the requirement to furnish a translation in the official language of the country and to pay
annual fees, in order to validate and maintain the patent.

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The WIPO-administered Patent Cooperation Treaty (PCT) provides for the filing of a single
international patent application, which has the effect of as many national applications as countries are
designated in the PCT application. After a so-called international phase during which the application is
searched, published and, at the applicant’s request, also examined as to substance, the applicant
must decide before which national and regional offices he wants to proceed in order to obtain a patent.

The patent owner has the right, for a period limited to the duration of the patent term (which is
normally 20 years from the filing date) to protect his/her brainchild. The patent system stops others
from making, using or selling the invention without his/her permission or requires others to use the
invention under agreed terms with the inventor.

The patent holder also has the right to take legal action in case of infringement. The available
procedures for such legal action depend on the national law of the country where the infringement
occurs. Since a patent right is a property granted by governments for a limited time-period (i.e. less
protection when compared with tangible property such as a house or a car), most national IP offices
provide clear and supportive procedures on how a patent holder can protect infringements. These
include actions against the infringing party in court, before the government and through business
negotiations. There are also procedures for filing against infringement when it occurs during the
examination phases of a patent application (when the relevant IP Office is examining).

SELF-ASSESSMENT QUESTION
SAQ 1: What are the essential rights of patent holders?

Type your answer here:

Model Answer SAQ 1:

A patent is essentially a negative right that governments grant to an inventor permitting him/her ‘to
exclude others from making, using, or selling the invention’ for a certain time provided that the
invention and the application meets certain criteria. After the term of the patent expires, the inventor
loses this exclusive right to the invention.

SELF-ASSESSMENT QUESTION
SAQ 2: Can you list three types of protection for inventions other than patents and why other
methods of protecting an invention have been developed?

Type your answer here:

DL170 Essentials of Patents – Module 6 page 3 / 16

Model Answer SAQ 2:

In responding to the need of the market under patents, the legal practice in many countries has also
absorbed other methods of protecting intellectual property through protection of ‘utility models’, ‘trade
secret’ and through confidential ‘know-how’ agreements between a supplier and a recipient.

Competitions in the marketplace for special products and the speed with which new improvements on
existing prior art (patent) come about are some of the reasons why other methods of protection of IP
came about.

2. Utility models

In a number of countries, inventions are protectable through registration as a “utility model,” which
may also be called “short-term patent,” “petty patent”, “innovation patent’, “incremental innovation”,
“certificat d’utilité” (FR), or “second-tier protection” (UK).

Under such protection, the invention standard is lowered to an ‘innovative step’. For example, an
innovation patent or a utility model could apply to the use of products or inventions that have already
been invented in a new and innovative way to solve a particular problem.

Utility model applications may be prepared and filed at local patent offices in countries where utility
model protection is available. Alternatively, an international patent application may be filed in a country
belonging to the Patent Cooperation Treaty. Most countries party to the Treaty and having utility model
laws permit utility model applications to proceed as national phase applications of the international
patent application.

The requirements are somewhat less strict than for patents, in terms of a lower inventive step. In
addition, utility models have lower fees and provide a shorter term of protection relative to patents,
although the rights under the utility model or short-term patent are similar.

It is common to find countries that explicitly exclude certain subject matter from utility model
protection. For example, methods, plants and animals are often excluded from protection under this
domain. In some countries, utility model protection can only be obtained for certain fields of
technology, such as mechanical devices and apparatus, and only for products but not for processes.

Many SMEs make use of utility model protection due to financial and time constraints. Consequently,
utility models are considered particularly suited for SMEs that typically make “minor” improvements to,
and adaptations of, existing products.

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Since the registration period is significantly shorter than for patents, this kind of protection might be
useful in for technologies with short time span. However, as mentioned earlier, only a small but
significant number of countries and regions provide the option of utility model protection.

Here are some examples of what is currently found on the public information sites of some countries
regarding utility models. This is provided to enrich your understanding:

Czech Republic: http://www.upv.cz/en/ip-rights/utility-models.html

“Patent protection does not necessarily have to be the unique best way to protect technical solution. So called
utility model protection may be more appropriate for the subject-matter of the lower inventive level or less
economically important, being simpler, faster and less costly. Utility models are new technical solutions
susceptible of industrial application, exceeding the common technical skill. As follows from above stated, utility
model protection assumptions are different from the patent procedure by the inventive level. Anyhow all the
production processes or work activities and biological reproduction materials are excluded from the utility model
protection. As to the right to be protected by the utility model, the application requirements of the utility model are
analogical to those of patent application. The procedure of the utility models applications represent the major
difference. The procedure is based here on so called registration principle, e.g. the Office examines if the basic
conditions are fulfilled and shall record the utility model in the Register without any examination on novelty and
creative level, whether it falls under the protection. As opposed to patent protection the registration of utility
model can be carried out very fast, usually after three up to four months after the filing of an application. Under
certain circumstances a utility model application can branch off the original patent application maintaining its
original priority. The protection time of utility model lasts just for four years, but if requested by the owner it may
be twice extended in each case for another three years. The maximum validity term of the utility model is 10
years. As compared with the patent we can observe this protection is not appropriate in cases, when the
protected object should be used in more remote future. On the other hand it suits perfectly the object with the
shorter life, as the effects of utility model registration are equal to those of patent. But as the utility model is
recorded in the register without novelty and inventive level examination, its monopoly is much more fragile
compared with patent and the safety of his owner's position is lower. The fees for the utility model on the other
hand are much lower.”

Kenya: http://www.kipi.go.ke/index.php/utility-models

“Utility model means any form, configuration or disposition of element of some appliance, utensil, tool, electrical
and electronic circuitry, instrument, handicraft mechanism or other object or any part of the same allowing a
better or different functioning, use, or manufacture of the subject matter or that gives some utility, advantage,
environmental benefit, saving or technical effect not available in Kenya before and includes micro-organisms or
other self-replicable material, products of genetic resources, herbal as well as nutritional formulations which give
new effects.”

Argentina:

“Patent Law also regulates utility models in Argentina. Utility Models are any disposition or new form applied or
introduced to tools, working instruments, devices or objects that are designed as tools, as long as this new
disposition or form implies an improvement on the utility or performance to which they are destined (art. 53 Patent
Law - https://wipolex.wipo.int/en/text/454627). Thus, Utility Models deal with the way elements are combined to
increase its performance.

The certificate of utility model allows its holder to prevent third parties from exploiting a model within the territory
of Argentina during a non-renewable ten-year period, counted from the date the registration petition is filed with
INPI. After the 10 years have passed, the invention becomes public, which means that any person can benefit
from it” (source: http://www.sanchezlupi.com/libreria/UTILITY.doc).

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Example of a utility model:

Case Study taken from IP Advantage: https://www.wipo.int/ipadvantage/en/details.jsp?id=2696

Name: CRD Herbal Products

Country: Philippines

The Gugo Queen: an Inventor's Tale

Carlita Rex Doran is a scientist and entrepreneur from Quezon City, in the Republic of the Philippines
(Philippines), who established CRD Herbal Products Inc. (CRD) in 1996, a company which develops and
markets her inventions. The commercial success of her inventions has made her one of the most revered
entrepreneurs in the country.

Inventions

In 1980, the scientist created Siroca, one of her most renowned inventions. Siroca
was an instant solid fuel used for cooking (a replacement for liquefied petroleum
gas, or LPG) which was contained in a tin. The fuel was portable and designed to
ignite into flames when its lid was opened and the flames would go out when the
lid was shut.

Following her fuel invention, in1987 the inventor made scientific experiments with The neem flower, from the
indigenous raw materials such as bark from the gugo tree (Entada phaseikaudes K Azadirachta Indica tree (Photo:
Flickr/Ton Rulkens)
Meer, a large, woody climber), extracts from tropical fruits (coconuts and papaya,
for example) and ingredients such as saponim (a natural, lathery substance found
in many plants, such as the soapwort plant, and traditionally used as soap). Combining these ingredients into a
secret recipe, Mrs. Rex Doran created – in less than a month - the first gugo shampoo in the Philippines. “I was
a chemistry graduate and, by nature, I love to conduct experiments during my spare time at home because I am
really passionate about chemistry…that is how I invented the gugo shampoo…” she said. The entrepreneur’s
shampoo success led to her being referred to as the “Gugo Queen” and encouraged her to develop and market
several other personal care inventions.

In 1995, Mrs. Rex Doran’s creativeness turned to neem (Azadirachta Indica), a tree in the mahogany family. Also
known as the “wonder tree”, neem is a large tree native to Asia and Africa. Its fruits and other parts have been
used as remedies and antiseptics to treat various ailments including skin infections and sores. The scientist used
neem in order to develop a range of personal and home-care products. Bioneem – as her invention was called –
was the first insecticide in the Philippines to use the biodegradable properties of the Azadirachta Indica tree.

Mrs. Rex Doran’s other innovations include beauty bars made of natural ingredients with antifungal properties, a
kind of soy sauce, banana vinegar, and ampalaya (or Momordica charantia, a bitter melon) concoctions for
ameliorating the symptoms of both HIV/AIDS and diabetes mellitus (a metabolic disease related to high blood
sugar).

Branding and Commercialization

In 1979 the entrepreneur used 5, 000 Philippine pesos (₱) as capital to established CRD (formerly CRD
International Philippines Inc.), a small-scale company that manufactures and commercializes her inventions.
When asked for her advice to aspiring entrepreneurs, Mrs. Rex Doran said: “When you want to sell a product,
you don’t need a lot of funds because you can start small. And when you have a product, make sure that it is
effective and has quality.” Indeed, the inventor created her famous gugo shampoo with a budget of only ₱1,000
and the help of family and friends.

From humble beginnings, Mrs. Carlita Rex Doran has developed a wide variety of brand names and marketed
her goods based on natural, biodegradable ingredients. The inventor is known in the Philippines for the “Tatak
Pinoy” product brand. Another leading brand is the scientist’s famous gugo shampoo which is marketed as a

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treatment for thinning hair and can be used as a conditioner, anti-dandruff, and a remedy for psoriasis (an
autoimmune disease of the skin).

Also a well-known brand, Bioneem is a product that has received wide attention in the country for its ability to
control disease-causing insects (including mosquitoes which cause illnesses such as malaria) without having
adverse effects on humans or animals. Bioneem products also include ointments (against itchiness from insect
bites), liquid concentrate (a three-in-one insecticide, deodorizer and disinfectant), and a natural body soap.
Other CRD brands include: Forest Magic, Rocalflor, Chin-Up, Magayon and Siroca.

In order to compete against well-funded multi-national competitors, the inventor markets her products based on
quality of production procedures and their natural content. Rather than spending large amounts of money on the
packaging, the entrepreneur has invested in working with natural, high quality goods that are rigorously tested.

In collaboration with local farmers (for her ingredients) and the Department of Science and Technology (DOST)
in the Philippines (for product safety tests), CRD goods not only meet industry standards for safety but also
satisfy customer expectation for quality.

Despite stiff competition from well-established corporate competitors, the inventor has been able to market her
products at trade fairs and expos, both at home and abroad, and via direct marketing and a network of
distributors and manufacturers.

Utility models and trade secrets

With a wealth of brands and inventions to her name, the scientist relies on utility models and trade secrets to
protect her intellectual property (IP). Mrs. Rex Doran first filed a utility model registration in 1981 for her “cooking
fuel composition” at the Intellectual Property Office of the Philippines (IP Philippines). Twenty years later she
also decided to protect her “herbal base composition for cosmetic applicator”, by filing a utility model registration.

However, Mrs. Rex Doran decided not to patent her Bioneem products because to do so would require full
disclosure of its processes and ingredients. Registering the product with the Department of Environment and
Natural Resources in the Philippines would also require money, which the inventor could not afford to do as of
2008. Mrs. Rex Doran therefore protects the recipes of the Bioneem products as well-guarded trade secrets.

IP Infringement and IP management

Since producing her gugo-based shampoos, other manufacturers have ridden the coattails of its popularity by
creating their own versions of the product. Mrs. Rex Doran, however, is sanguine about it; she said: “Everyone
can sell gugo shampoo because gugo is a natural ingredient and no one owns it. But I am not threatened
because the extraction process I have is unique and which gives high efficacy to my product.”
Working with IP Philippines, the inventor has taken advantage of tax incentives available via a ten year tax
holiday under the Inventors’ Incentives Act of the Philippines (RA 7456). The incentive provides duty-free
importation of materials needed for the commercial production of inventions.
By using a combination of trade secrets, utility models and IP tax incentives, the inventor has been able to
manage her IP assets, keep down costs, market her inventions and remain competitive.

Business results

Since her first experiments with the Siroca fuel, Mrs. Carlita Rex Doran has
become a celebrated inventor and business woman, winning several national and
international awards and citations.

Because of her famous fuel, in 1983 Mrs. Rex Doran won third prize during the
17th Annual National Inventors’ Week, in the Philippines. Only six years later, the
scientist was recognized by her peers by being chosen as the Outstanding Filipino
Woman Inventor by the Filipino Inventors’ Society. Moreover, in acknowledgement
of her imaginative and novel uses of raw and natural ingredients in her products, Siroca Solid Fuel. Mrs. Rex
Doran's first commercialized
in 1990 Mrs. Rex Doran received the Best Use of Indigenous Raw Material award invention (Photo: CRD Herbal
by DOST. Products)

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Shortly thereafter, Mrs. Rex Doran’s fame spread onto the international stage. In both 1989 and 1991, the
entrepreneur won the Gold Medal Award by the World Intellectual Property Organization (WIPO), a specialized
United Nations agency. Six years later, Mrs. Rex Doran was being recognized for her line of gugo-based
products by winning Une Medaille d'Argent at the 25th Salon International des Inventions in Geneva,
Switzerland. With her name and reputation celebrated at home and abroad, the inventor won the Golden
Millennium Award (2003), in the Philippines.

As of 2010, Mrs. Rex Doran’s success had continued unabated. CRD, moreover, had become a multi-million
pesos company and produced Bioneem and gugo-based cosmetics and other products for sale to countries
such as the Independent State of Papua New Guinea, Japan, Thailand, and the United States of America.

The gugo queen and her tree of wonder

Carlita Rex Doran’s inventiveness, reliance on natural, good quality products, and strategic management of
CRD’s IP have allowed her to compete against well-funded corporations while marketing her inventions
successfully. The scientist’s constant ingenuity and innovation also shows that money can grow from (gugo)
trees.

2.1 What are the main differences between patents and utility models?

Currently, a small but significant number of countries and regional offices provide utility model
protection. These include: Albania, Angola, Argentina, ARIPO, Armenia, Aruba, Australia, Austria,
Azerbaijan, Belarus, Belize, Brazil, Bolivia, Bulgaria, Chile, China (including Hong Kong and Macau),
Colombia, Costa Rica, Czech Republic, Denmark, Ecuador, Egypt, Estonia, Ethiopia, Finland, France,
Georgia, Germany, Greece, Guatemala, Honduras, Hungary, Indonesia, Ireland, Italy, Japan,
Kazakhstan, Kuwait, Kyrgyzstan, Kenya, Kyrgyzstan, Laos, Malaysia, Mexico, OAPI, Peru,
Philippines, Poland, Portugal, Republic of Korea, Republic of Moldova, Russian Federation, Slovakia,
Spain, Taiwan, Tajikistan, Trinidad & Tobago, Turkey, Ukraine, Uruguay and Uzbekistan 1.

• The requirements for acquiring a utility model are less stringent than for patents. While the
requirement of “novelty” is always to be met, that of “inventive step” or “non-obviousness” may
be much lower or absent altogether. In practice, protection for utility models is often sought for
innovations of a rather incremental character which may not meet the patentability criteria;

• The term of protection for utility models is shorter than for patents and varies from country to
country (usually between 6 and 15 years without the possibility of extension or renewal);

• In most countries where utility model protection is available, patent offices do not examine
applications as to substance prior to registration. This means that the registration process is
often significantly simpler and faster, taking, on average, six months;

• Utility models are much cheaper to obtain and to maintain;

• Conversion of a utility model into a patent is usually possible under certain circumstances;

• In some countries, utility model protection can only be obtained for certain fields of technology
and only for products but not for processes;

1 https://www.wipo.int/sme/en/ip_business/utility_models/where.htm

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• The utility model registration system is therefore more suitable than the patent system if you
require protection for a product with a short life cycle or are eager to avoid a long waiting time.

Some countries allow you to file both a patent application and a utility model application at the same
time so that you can reap and enjoy the fruit of your invention first while you wait for the relatively
longer process of patent prosecution. However, if there is a decision to grant a patent to you, you are
generally required to select only one of the two rights for protecting your invention.

SELF-ASSESSMENT QUESTION
SAQ 3: What are the main differences between utility models and patents?

Type your answer here:

Model Answer SAQ 3:

The main differences between utility models and patents are the following:

• The requirements for acquiring a utility model are less stringent than for patents. While the
requirement of “novelty” is always to be met, that of “inventive step” or “non-obviousness” may
be much lower or absent altogether. In practice, protection for utility models is often sought for
innovations of a rather incremental character which may not meet the patentability criteria;

• The term of protection for utility models is shorter than for patents and varies from country to
country (usually between 7 and 10 years without the possibility of extension or renewal);

• In most countries where utility model protection is available, patent offices do not examine
applications as to substance prior to registration. This means that the registration process is
often significantly simpler and faster, taking, on average, six months;

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• Utility models are much cheaper to obtain and to maintain;

• Conversion of a utility model into a patent is usually possible under certain circumstances;

In some countries, utility model protection can only be obtained for certain fields of technology and
only for products but not for processes.

3. Trade secrets

In certain circumstances, an invention can be protected by keeping it secret. The subject matter that
can receive trade secret protection is usually defined very broadly and can range from manufacturing
processes to lists of suppliers and clients. Depending on the circumstances, trade secrets may be
used to protect inventions that do not meet the patentability criteria, and therefore a patent cannot be
granted, but they may also be a choice for protecting inventions that could as well be protected by
patents, or they may be used to protect certain technical aspects of a product (such as know-how) that
are not covered by a patent.

Article 39 of the TRIPS Agreement, with the purpose of ensuring effective protection against unfair
competition as provided in Article 10bis of the Paris Convention, requires countries to protect
undisclosed information given that some conditions are met, namely, that the information:

(a) is secret in the sense that it is not, as a body or in the precise configuration and assembly of its
components, generally known among or readily accessible to persons within the circles that normally
deal with the kind of information in question;
(b) has commercial value because it is secret; and
(c) has been subject to reasonable steps under the circumstances, by the person lawfully in control of
the information, to keep it secret.

The legal framework for protecting trade secrets might differ depending on the country. For example,
in some legal systems, protection may be available through a separate law on trade secrets, under
legislation against unfair competition, by specific provisions of one or more laws, by case law on the
protection of confidential information, by contractual provisions in agreements with employees,
consultants, customers, and business partners, or a combination of the above. Nonetheless, the
criteria for protecting undisclosed information under Article 39.2 of the TRIPS Agreement are found in
most jurisdictions.

For instance, in the US, under the US Uniform Trade Secrets Act (drafted by the National Conference
of Commissioners on Uniform State Laws, as amended in 1985) 2, trade secrets are defined as follows:

“Trade secret” means information, including a formula, pattern, compilation, program device, method,
technique, or process, that:

(i) derives independent economic value, actual or potential, from not being generally known
to, and not being readily ascertainable by proper means by, other persons who can obtain
economic value from its disclosure or use, and

(ii) is the subject of efforts that are reasonable under the circumstances to maintain its
secrecy.

2 http://www.wipo.int/wipolex/en/details.jsp?id=3934

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Similarly, in Europe, the EU Trade Secrets Directive of June 2016 3 defines trade secrets in its Article
2(1) as follows:

(1) ‘trade secret’ means information which meets all of the following requirements:

(a) it is secret in the sense that it is not, as a body or in the precise configuration and assembly
of its components, generally known among or readily accessible to persons within the circles
that normally deal with the kind of information in question;

(b) it has commercial value because it is secret;

(c) it has been subject to reasonable steps under the circumstances, by the person lawfully in
control of the information, to keep it secret.

Trade secrets can be licensed to others: a trade secret holder can allow a third party to use the secret
information under the mutually agreed terms and conditions.

In essence, the main differences between the protection granted by patents and the protection offered
by trade secrets are the following:

• Patents provide the exclusive rights for a limited time and require sufficient disclosure of the
invention. Trade secrets, however, must be kept secret, and the protection may continue in
perpetuity or for an unlimited period of time.

• Trade secret protection is only enforceable against improper acquisition, use or disclosure of the
confidential information. In other words, if your competitor independently created the technology
that you have been keeping secret, the competitor does not infringe your right conferred by the
trade secret protection. If the competitor publishes the technology, your advantage of having the
technology being kept secret will be lost. Even worth, if the competitor obtains patent protection on
his creation (note that since you have kept your invention secret, it does not destroy the novelty of
the competitor’s invention), you might be accused of infringing the patent.

• Gathering evidence to prove misappropriation of trade secrets by third parties is usually difficult,
because they would most likely use them under secrecy.

• Trade secrets can be “reversed engineered” or developed independently by competitors without

infringing trade secret rights.

• Filing a patent application and maintaining a granted patent usually entail significant costs, whereas
trade secret protection does not involve registration costs.

• Non-technological information, which falls outside the scope of patents but still provides a
competitive advantage to its owner, such as customers list, a market survey, a price list etc., can be
protected under the trade secret system as long as it meets the required conditions.

• Trade secret protection has immediate effect, whereas the grant of a patent may take a long time.

As noted above, sometimes, even though a patent has been granted, the associated knowledge may
be protected as a trade secret. This is very often the case in the field of software technologies where

3 Directive (EU) 2016/943 of the European Parliament and of the Council of 8 June 2016 on the protection of

undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and
disclosure, https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32016L0943

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computer-implemented inventions are protected by patents and the source code as a trade secret. In
business, it is essential to conclude confidentiality agreements, also called non-disclosure
agreements, in which two or more parties agree to keep information conveyed in secrecy. In general, if
it would be difficult for competitors to reverse engineer your marketed product and to copy your
innovative process, construction or formulation relating to that product, trade secret protection for such
process etc. may give you a longer protection than patents.

However, trade secret protection does not stop anyone from inventing the same process or product
independently. Therefore, in such a circumstance, the effectiveness of trade secret will be
substantially undermined. Thus, a careful assessment of what can be more optimally be protected by
trade secrets than other IP rights, is important to guarantee a company’s competitive advantage and
success in the marketplace. This is particularly so in the current information-economy, where on the
one hand, information and big data are considered to more economic value than before, and on the
other hand, development of digital communication technologies makes such information more
vulnerable against misappropriation.

A well-known example of a trade secret is the chemical formula for producing Coca-Cola, which is still
kept secret after decades and has largely exceeded the patent term of 20 years. Other well-known
examples which can be cited are the McDonald’s Big Mac Special Sauce or the Google search
algorithm.

4. Know-how agreements

When an owner of a patented invention or other industrial property is also the developer and holder of
the specific knowledge, he or she is considered to have the know-how of the particular intellectual
property.

It is possible to include provisions concerning know-how in a license contract. It is also possible to

record the know-how in a separate document from a license contract. In the case where the know-how
relates to a patented invention or a registered trademark or industrial design, the provisions are
usually included in the license contract that deals with that patented invention or other object of
industrial property. For a variety of reasons, however, even in such a case, the provisions concerning
the know-how might be placed in a separate or distinct writing or document. Whenever provisions
concerning know-how appear in a separate or distinct writing or document, that writing or document is
normally called a “know-how” contract.

Through such provisions, one party, the supplier of the know-how, undertakes or promises to
communicate the know-how to another party - the recipient of the know-how, for the use by that other
party.

The know-how may be communicated in a tangible form. Documents, photographs, blueprints,

computer cards and microfilm, among others, are illustrations of tangible forms.

Examples of know-how that could be transmitted in such forms are architectural plans of the factory
buildings, the diagrams of the layout of the equipment in the factory, drawings or blueprints of
machines, lists of spare parts, manuals or instructions for the operation of machines or the assembly
of components, lists and specifications of new materials, labor and machine time calculations, process
flowcharts, packaging and storing instructions, reports on stability and environmental aspects and job
descriptions for technical and professional personnel. Such know-how in tangible form is sometimes
referred to as “technical information or data.”

The know-how might also be communicated in an intangible form. Examples would be an engineer of
the supplier of the know-how explaining a process to an engineer of the recipient or the manufacturing

DL170 Essentials of Patents – Module 6 page 12 / 16

engineer of the recipient witnessing a production line in the enterprise of the supplier. Another
example would be training in the factory of the recipient, or at the enterprise of the supplier, of
personnel of the recipient.

Know-how in intangible form relating to the demonstration of, or advice on, manufacturing and other
operations is sometimes referred to as “technical services.” Know-how in intangible form relating to
training is sometimes referred to as “technical assistance.” Where the know-how in intangible form is
to consist in the actual direction of manufacturing operations, or other operations such as planning, or
financial and personal administration, or marketing, it is sometimes referred to as “management
services.”

Suppliers of know-how are often really concerned by the possibility of the know-how being disclosed
to third parties, accidentally, during communication between the supplier and the recipient. As a
result, the provisions concerning know-how in the contract will often cover various measures to
safeguard against the disclosure of the know-how to unauthorized persons.

DL170 Essentials of Patents – Module 6 page 13 / 16

 SELF-ASSESSMENT QUESTION
SAQ 4: Can you state the main difference between patents and trade secrets?

Type your answer here:

Model Answer SAQ 4:

The patent granting process requires full information about the method or product that has been
supplied to the Patent Office. When the patent is granted, the information will be available to the
public as a quid pro quo (in return for the disclosure). After the expiration of the patent, anyone
wishing to exploit the method or the product for commercial reasons may do so legally.

Trade secrets are by definition not disclosed to the public and remain in the owners hands in a manner
he or she wishes to safeguard it. Owners of trade secrets keep their knowledge of the particular
invention out of the hands of the public.

SELF-ASSESSMENT QUESTION
SAQ 5: Can you give examples of know-how both in tangible and intangible form?

Type your answer here:

Model Answer SAQ 5:

• Intangible know-how could be for e.g., training in the factory of personnel (of the recipient
company) by the provider of the special machines used in the company.

• Tangible know-how could be for e.g. architectural plans of the factory buildings, the diagrams of
the layout of the equipment in the factory, drawings or blueprints of machines.

DL170 Essentials of Patents – Module 6 page 14 / 16

 Summary of Module 4
This module has introduced the different protection types for inventions, namely:

• Patents
• Utility models
• Trade secrets
• Know-how agreements

Patents

• Are territorial rights.

• The patent owner has the right, for a period limited to the duration of the patent term, which is
normally 20 years from the filing date, to stop others from making, using or selling the invention
without his permission or to let others use the invention under agreed terms.

• The patent holder also has the right to take legal action in case of infringement. The available
procedures depend on the national law of the country where the infringement occurs.

• Patents may be granted by national patent offices or by regional offices that do the work for a
number of countries. Under such regional systems, an applicant requests protection for the
invention in one or more countries.

• The WIPO-administered Patent Cooperation Treaty (PCT) provides for the filing of a single
international patent application, which has the effect of as many national applications as
countries are designated in the PCT application. After a so-called international phase during
which the application is searched, published and, at the applicant’s request, also examined as to
substance, the applicant must decide before which national and regional offices he wants to
proceed in order to obtain a patent. In a number of countries, inventions are also protectable
through registration under the name of “utility model” also called “short-term patent,” “petty
patent” or “innovation patent.”

Utility models

The main differences between utility models and patents are the following:

• The requirements for acquiring a utility model are less stringent than for patents. While the
requirement of “novelty” is always to be met, that of “inventive step” or “non-obviousness” may
be much lower or absent altogether. In practice, protection for utility models is often sought for
innovations of a rather incremental character which may not meet the patentability criteria;

• The term of protection for utility models is shorter than for patents and varies from country to
country (usually between 7 and 10 years without the possibility of extension or renewal);

• In most countries where utility model protection is available, patent offices do not examine
applications as to substance prior to registration. This means that the registration process is
often significantly simpler and faster, taking, on average, six months;

• Utility models are much cheaper to obtain and to maintain;

• Conversion of a utility model into a patent is usually possible under certain circumstances;

DL170 Essentials of Patents – Module 6 page 15 / 16

• In some countries, utility model protection can only be obtained for certain fields of technology
and only for products but not for processes.

The utility model registration system is therefore more suitable than the patent system if you require
protection for a product with a short life cycle or are eager to avoid a long waiting time.

Some countries allow you to file both a patent and a utility model application at the same time so that
your invention can benefit from the fruits of your invention, by while you wait for the relatively longer
process of patent processing. However, if there is a decision to grant a patent to you, you are
generally required to select only one of the two rights for protecting your invention.

Trade secrets

• In certain circumstances, an invention is protected by keeping it secret.

• While inventions protected by patents provide a kind of monopoly for a limited time and require
full disclosure of the invention, trade secrets must be kept secret, but they may continue in
perpetuity or for an unlimited period of time.

• Sometimes, even though a patent has been granted, the associated knowledge may be
protected as a trade secret.

• In business it is essential to conclude confidentiality agreements, also called non-disclosure

agreements, in which two or more parties promise to keep information conveyed in secrecy.

• A well-known example of a trade secret is the chemical formula for producing Coca-Cola, which
is still kept secret after decades and has largely exceeded the patent term of 20 years.

Know-how agreements

• It is possible to include provisions concerning know-how in a writing or document that is

separate from a license contract.

• Whenever provisions concerning know-how appear in a separate or distinct writing or document,

that writing or document is normally called a “know-how” contract.

• Through such provisions, one party, the supplier of the know-how, undertakes or promises to
communicate the know-how to another party - the recipient of the know-how, for the use by that
other party.

• The know-how may be communicated in a tangible and intangible form. Examples of the first are
documents, photographs, blueprints, computer cards and microfilm. An example of the second
would be an engineer of the supplier of the know-how explaining a process to an engineer of the
recipient or the manufacturing engineer of the recipient witnessing a production line in the
enterprise of the supplier.

• The possibility that the know-how to be communicated by the supplier to the recipient might be
disclosed, accidentally or otherwise, to third persons, is a very real concern to the supplier of the
know-how. Thus, the provisions concerning know-how in the contract will cover various
measures to safeguard against the disclosure of the know-how to unauthorized persons.

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