Trade Secrets

A trade secret is a secret with an economic benefit to the company that holds it. The recipe for Coca-Cola® is an oft-cited example, the source code for a proprietary software program may be another.

Trade secrets are protected by Non-Disclosure Agreements: contracts that forbid you from sharing them with anyone. In The Netherlands, there is no specific law on trade secrets, so these contracts are all that protect them.

In particular, that means that if someone spills your trade secret, then you can sue that person, but you can’t do anything against the recipient of the secret. In the US, this is different: there it is a criminal offense to make use of a leaked trade secret, and you can go to jail for doing so.

Patents

From a societal point of view, trade secrets can be considered damaging. Progress can be made much more quickly if competitors can build on each other’s inventions, but that is impossible if everyone keeps their inventions a secret. Patents (“octrooien” in Dutch, “patent” means that you’re looking good) are intended to remedy this situation.

A patent is the exclusive right to make, use and sell an invention, in exchange for publication of a description of it. Patents have a limited duration, which varies from place to place but is usually around 20 years. Patents cover devices that are new, inventive, and applicable to some problem. Discoveries, designs, business models, software and visualizations can not be patented (but see below).

Getting a patent

Patents are obtained by writing up a description of the patent, with a list of claims that describe the claimed invention, and submitting that description to the patent office of the country where you want protection, together with a hefty fee.

The patent office will then do a (often very cursory) check to see if the patent meets the requirements, and grant it. Once you have a patent, you are the only one allowed to use or sell the claimed invention; anyone else will need to buy a license from you, or prove that the patent is invalid when you sue them.

Software patents

While software cannot be patented because it’s not a device, a computer is a device. Some time ago, clever lawyers (especially in the US) therefore started filing patents for a machine that performs certain computational steps. While a piece of software or an algorithm therefore technically cannot be patented, anyone using that software or algorithm would still infringe the patent.

The main problem with software patents is that there are a huge number of them out there, and they’re written in obfuscated legalese. Many are likely invalid due to not being new, being too obvious, or being overly broad (the patent office’s checks are minimal), but defending against someone with a lot of patents is very expensive unless it’s completely obvious that you’re not infringing anything.

It is therefore quite easy to extort money from people by collecting a pile of patents, and threatening to sue them. Meanwhile, the benefit to society is long lost, because no one uses patents to figure out how to solve programming problems.

Unfortunately, there’s not much we can do to remedy this situation. In practice, just avoid using things that you know are patented, and hope for the best.

Trademark acknowledgements

Coca-Cola® is a trademark of The Coca-Cola Company, registered in the U.S. and other countries.