A recent study performed by the School of Economics and Management at the Technical University of Lisbon concluded that, contrary to perceived conventional wisdom, only 10 percent of innovative products in the marketplace are patented. The study was based on an analysis of 2,802 inventions from 1977 to 2004 that won Research & Development magazines R&D 100 Award, which annually recognizes the top 100 technologically significant products of the year. The results were particularly surprising in light of the fact that, to win the award, the products must have been available for sale and licensing and therefore represent full-developed R&D efforts. Typically, these types of products would be the most ripe for the patent process. Yet, for some reason whether patent protection was simply unavailable or innovators are opting out of the patent process the vast majority of innovation is taking place without resort to patent protection.
One lesson from this study, however, is clear. Trade secret law, as an alternative to patents, may be one of the most important ways to protect and develop new and cutting-edge ideas for up to 90 percent of innovative products. As the U.S. Supreme Court pointed out in Kewanee Oil v. Bicron, 416 U.S. 470 (1974), trade secret law will encourage invention in areas where patent law does not reach, and will prompt the independent innovator to proceed with discovery and exploitation of his invention. Though trade secret law is generally related to contract, tort, property and even criminal law, most legal scholars and courts now firmly consider trade secrets to be a form of intellectual property. (See Mark A. Lemleys The Surprising Virtues of Treating Trade Secrets as IP Rights, published in the Stanford Law Review.) Trade secrets are generally defined as an exclusive right to valuable information not generally known in the industry or readily ascertainable by competitors.
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