Open Innovation and IP – Protecting Trade Secrets

A lot has been written about Intellectual Property (IP) and Open Innovation. It’s not surprising, because it’s one of the thorniest problems facing collaborators. In a recent blog I talked about the importance of having a flexible approach to IP policy, ensuring that you can deliver the deal that is most appropriate to the partner and opportunity under consideration. Now I’ll turn attention to a more difficult challenge – how do you protect Open Innovation collaborations where keeping the IP secret is the best way forward?

First, when should you opt for a trade secret as the way forward? Many situations result in commercial potential and the opportunity to protect it using a patent. Often the patent confers narrow protection, or the ability of your competitors to easily invent around it. Even worse, sometimes the patent discloses exactly how you are solving your problems, giving pointers to alternatives that wouldn’t be covered by your patent.

In those situations, the best strategy is to opt for the trade secret. Of course, there is no guarantee how long your protection will last, and it is a much less valuable option than a rock solid patent lasting for twenty years from the date of application. Despite that, it is much better than no protection at all.

So what about the situation where this has arisen from an Open Innovation collaboration? How do two parties keep a trade secret? There are some obvious answers and some a little more subtle. The obvious ones are cast iron Confidential Disclosure clauses in your agreement, and only doing this with a partner you can trust (see this blog for more about Open Innovation and trust). But what if this restricts the ability of one of the partners to fully exploit the opportunity?

Very often a technology innovation in one industry offers potential for exploitation in others. This is also a route for partners to generate incremental revenue that benefits one or both of them. Doing this with a trade secret is a little trickier. Therefore the best way forward is to take note of the following:

1. You need to prevent patent applications in adjacent fields if that will prejudice your trade secret.
2. Any agreements with third parties must have confidentiality clauses at least as strong as those in your agreement.
3. You should have the right of veto over other licensees in those fields if you’re unsure of the reputation of a potential collaborator for your partner.

The spirit of some of these recommendations may seem contradictory to the philosophy of Open Innovation in some respects, by limiting the ability of your partner to fully exploit their opportunity. However one partner should never maximize potential to the detriment of the other, and this principle should predominate.

As always with Open Innovation, approaching the protection of trade secrets requires an understanding of your partner and their interests, and flexibility in the approach. In return, you have opportunities that otherwise wouldn’t exist.

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Kevin McFarthing runs the Innovation Fixer consultancy, helping companies to improve the output and efficiency of their innovation, and to implement Open Innovation. He
spent 17 years with Reckitt Benckiser in innovation leadership positions, and also has experience in life sciences.