Paper Details Paper Code: RP-CLA-V2-12 Category: Research Paper Date of Submission for First Review: March 28, 2022 Date of Acceptance: July 6, 2022 Citation: Priya Singh & Arshad Pasha, “Patent vs Trade Secret: Detailed Study on Coco-Cola Brand”, 2, AIJACLA, 142, 142-150 (2022).
Author Details: Priya Singh, 3rd Year Student, Alliance University, Bangalore & Arshad Pasha, 4th Year Student, Alliance University, Bangalore
Abstract At the beginning stage of any invention the very first thing to decide is how to protect one’s product. There are only two options available but then which to choose needs to be decided properly. The first option is either apply to register a patent (provided that is patentable) or maintain it as a trade secret. The most appropriate method required to protect one invention will depend on the nature of the work and the product as both patent and trade secret have their advantages and disadvantages. Patent is a right granted for an invention, which may be a product or a process that gives, generally, a replacement way of doing something, or offers a replacement technical solution to a problem. To get a patent, technical information about the invention must be disclosed to the general public during an application. Trade Secret: rights on confidential knowledge which may be sold or licensed. This research paper is going to talk about the comparative study between patent and trade secret; it will also deal with how trade secret is boon for a small business and the protection plan for trade secret along with this a detailed study on coco cola brand. Keywords: Patent, Trade Secret, Coca-Cola, Trademark, Pepsi, Business
INTRODUCTION
Patent is an exclusive right granted for an invention, which is a product or a process that provides, in general, a new way of doing something, or offers a new technical solution to a problem. To get a patent, technical information about the invention must be disclosed to the public in a patent application.
Trade Secret: rights on confidential information which may be sold or licensed. Coco Cola a well-known drinking brand which was invented in May of 1886 by Dr. John Styth Pemberton. Since that period till today it has climbed all the records for the most popular soda, raking in billions of dollars every year in the market. Today we have plenty of variety when it comes to drinks even there are healthy drinks but still coco cola has its position in the market people of every group prefer to have coco cola than the healthy drinks.
Coco-Cola has something uniqueness in it that’s why its recipes have been kept as a trade secret and it has not been patented the major reason behind is just that if they patent the recipes after certain period of time it will be revealed but then once it’s made trade secret it remains a secret. There are many competitors to Coco Cola who tried to copy its taste but then still they just remained as a competitor there was difference with the taste and there has been many cases related to coco cola and other soda drink which is discussed in this paper.
The biggest confusion that every inventor or a company face is what to choose either patent or trade secret as both has their own advantages and disadvantages. Patent and Trade secrets are the two forms of IP rights that protect information. Patents are the one which protects patentable and qualifies patentability criteria while trade secrets can protect patentable information and any of the other information which can add the economic value to the holder. Therefore, the same information can be protected by patents and the trade secrets. And this is the dilemma to choose what should come into play arises. [1]Therefore, based on the confusion this paper will be dealing with the comparison between the trade secret and patent so that it makes it clear which to choose and which on will be better based on the kind of invention done also it will discuss certain criteria for choosing between patent and trade secret.
One important topic that this research paper will be dealing with is that though trade secret is a form of IP Rights but still there is no specific legislation in India to protect trade secret and confidential information therefore this paper will talk about the trade Secret Protection Plan.
COMPARATIVE STUDY BETWEEN PATENT AND TRADE SECRETS
Patents gives the exclusive right to exclude others from making, using, selling or importing a particular product or service in exchange for full public disclosure of your invention. Whereas Trade Secrets are formulas, processes, or other business information that derive their commercial value from being kept secret, and that an organization is making reasonable effort to stay secret. One famous example is Coco-Cola’s secret ingredients which is also discussed in this paper in detailed.
Patent V. Trade Secrets
a) Patents are used to protect all the new and useful invention for a fixed period of time whereas Trade Secret are used to protect the valuable and most secret information which an inventor does not want to disclose it every.
b) If a person gets a patent on his invention, he gets a right to exclude other from making, selling, using, or importing the invention. But in the case of Trade Secret, he can only protect it from misappropriation. [2]
c) A trade secret, however, does not need to be filed or approved. There are not any filing fees, legal fees, or patent translation fees. It need only be designated as secret. In case of a patent application, it could take years.
d) Filing for a patent and not for trade secret it is not risk free as if one chooses for patent his or her innovation will be protected only for a period of 20 years and after the end of this period it will be publicly disclosed whereas in case of trade secret it can only be done after the efforts made for reverse engineering so that to understand the technique and the formula.[3]
e) Patents are governed by the federal law whereas trade secret was governed by each individual state’s adoption of the Uniform Trade Secret Act.
Therefore, after the comparative study between patent and trade secret, it is clear to better go for a trade secret rather than filing for a patient as trade secrets have identified period of protection, especially for organization with a long-term interest. Discussing about the example of the Coca-Cola case suppose that it had filed for a patent when the company began selling classic Coke, its recipe would have been open to the public a long time ago. Competitors could have created generic versions of the drink that would be indistinguishable from the original one. Finally, when it involves to trade secrets, there are not any government agencies regulating them or compliance procedures to follow. As far as the secret is kept from the general public knowledge, the organization continues to benefit from it without any reporting requirements.
TRADE SECRET PROTECTION PLAN
In our country we do not have a proper and specific legislation to protect the Trade secret and all the confidential information. While in India the courts upheld based on principle of equity and common law action of breach of confidence. There have been many cases in which these trade secrets are been disclosed irrespective of lack of protection plan and the knowledge about the same.
Therefore, this research paper talks about the protection plan for the trade secret.
If one has got a secret that needs to be guarded, it's imperative that it's kept a secret. Trade secrets are lost once the key becomes general knowledge. Such disclosure is often made during a sort of ways, including by employees or licensees, by theft, or maybe by a general failure of the corporate to stay secrecy measures in place. Once lost, the protection is gone forever. The best way to protect secrecy is to implement a secret protection plan.
A few of the Trade Secret Protection Plan are as follows:
• Identification of Trade Secrets: The first step is to identify the trade secrets. Get the confirmation done that the relevant information is the only one that needs to be protected so that the competitive does not take advantage of the same. After identifying this, if the result shows that this is the only information which needs to be protected, then one should get a trade secret. In an organization or a company, the list of the customers, suppliers, employees are to be treated as trade secret as it can be a possibility that the competitors try to get the information from them.
• Keeping the Trade Secrets as Secret by Restricting Access: [4]If there is physical evidence of the trade secret say like paper or in computer then one needs to limit the access and keep it safely where no one can reach. It is very necessary that a record of employers or the person who knows about the secret is kept and it should be only shared to them who are required to know about it. Many companies try to mark stamp of “Confidential” on papers.
• Protection through Contractual Obligations: The organization needs to maintain a contractual obligation with the parties who have the access of the trade secret. Employees and independent contractors should sign employment or independent contractors’ agreements or at the very least should comply with simple confidentiality agreements. A tip, invention and non-compete agreement with employees is usually a sensible move by employers. Vendors and licensors should also sign the confidential agreement. Importantly, the terms of confidentiality should specifically stay in situ beyond the term of any agreement.
• Maintain Secrecy by Diligently Policing: Following an initial agreement to a duty of confidentiality over trade secrets, will regularly remind employees, contractors, vendors, or licensees of their duty to maintain the secrecy of your trade secrets. This is especially important when employees with knowledge leave the corporate. In addition, the noticeable disclaimer on any document that has a trade secret that it is confidential.
A BOON FOR SMALL BUSINESS
What is a trademark?
A trademark is a recognisable emblem, phrase, word, or symbol that designates a certain product and legally distinguishes it from all other items of the same type. A trademark selects a product as belonging to a particular firm and acknowledges the company's ownership of the brand.
Trademarks are a type of intellectual property that can be registered or unregistered; it is a distinct symbol or word(s) used to identify a company or its products. Once that identical sign or string of words is registered it cannot be used by any other organisation indefinitely, as long as it is in use and the necessary papers and costs are paid. Not like patents, which are valid for 20 years, trademarks are perpetual.
What is a trade secret?
A trade secret is any commercial activity or method that is typically unknown outside of the company. Trade secret information provides the company with a competitive advantage over its competitors and is frequently the result of internal research and development.
To be considered a trade secret in the United States, a corporation must make a reasonable attempt to keep the knowledge hidden from the public; the secret shall have inherent economic value; and the trade secret should contain information. Trade secrets are one type of intellectual property that a firm owns. A trade secret, unlike a patent, is not widely known.
Why trademark is a boon for small businesses
They Increase Brand Recognition: Trade marking provides entrepreneurs with brand security. By trade marking a firm name, one distinguishes its services and goods from those of competitors, thereby acquiring intellectual property. As a result, it stops competitors from imitating or stealing their brand.
It's a Perk for Employees to Join: When a start-up has a trademark, it is critical that it maintains a positive reputation. People mainly like to work with and for a company that has a strong reputation.
More personnel are required as a start-up if the company expects to grow. This necessitates the creation of a budget, making the trademark an essential asset when applying for a business credit.
It Prevents Future Legal Issues: Failure to register a trademark exposes a company to future claims from companies who did register a trademark under the same name, sign, slogan, or design. If this happens, a company will be obliged to change everything they created, including the campaign, website content, and, to a large extent, their brand identity.
It Provides a Sense of Independence: It's no secret that the market is oversaturated in a variety of different segments ranging in size and function. It's a gruesome scene. Being even the smallest fish in the smallest pond as a start-up is extremely difficult.
In this regard, a trademark might serve as a crutch; once a start-up has established itself, it will want to preserve a solid reputation. Trademarking a brand allows a new company to cushion the blows of the market by wearing a protective blanket; it both directly and indirectly alerts others that the brains behind the company are serious about business.
Why trade secret is a boon for small business
Long-term security: Patents typically endure up to 20 years; however trade secrets have the potential to last indefinitely. The trade secret protection does not expire as long as the trade secret remains confidential and classified. The goal is to keep it "secret," since if the information becomes public, the trade secret is lost.
Protection that is inexpensive: Obtaining trade secret protection is usually faster and less expensive than obtaining a patent. However, you must maintain continuous measures for keeping the knowledge private, such as restricting the number of people who know the secret and requiring those persons to sign non-disclosure agreements.
Notoriety: Obtaining a trade secret has the extra benefit of creating mystique for your company. Marketers capitalise on recipes being a "family secret" for a reason: it generates talk about your firm, which enhances your bottom line.
COCA-COAL CASE STUDY
According to Forbes Magazine Coca-Cola is the 4th most valuable brand in the world with a brand value of 56 billion dollars. It is one of the best-selling carbonated soft drink companies in the world.
A safely guarded recipe has turned Coca-Cola into a billion-dollar company. The entire business of this company revolves around its secret recipe the company's biggest and most closely guarded trade secret (it's kept in a vault!). The formula is closely guarded information that only a few people have access to. To prevent the material from being leaked, these individuals have signed strict Non-Disclosure Agreements ("NDAs"). The formula's value is in its exclusivity; thus, Coca-Cola has not patented it either.[5]
Coca-Cola Company opted for a trade secret to safeguard their recipe instead of patent legislation to protect their business. The company decided to safeguard their recipe and keep it as trade secret to have advantage over its competitors.
The logic behind ignoring patent protection was that if patented, it would have got the protection for only 17 years under the Patent Act of 1836, which was only extended to 20 years, whereas trade secret can be held for generations after generations. If the company would have opted for patent, then they would have been forced to write down the formula and post the expiry of patent protection, the formula would have been easily available to others. [6]Post 20 years other companies could use the same formula and recreate the same drink and sell at their price. Patent would give the company a monopoly only for a period of 20 years. Therefore, the company decided to keep their recipe and formula a trade secret as they saw the growth of the company. The formula is still kept as a trade secret in a vault in US. It is the best kept secret in the world. The recipe is only a trade secret because The Coca-Cola Company keeps it that way. In general, a trade secret is only protected in court if the owner of the trade secret takes reasonable efforts to keep the knowledge private.
PEPSI:
The biggest controversy arose in 2006 when some employees tried to market their secrets to their competitor PepsiCo. Fortunately, PepsiCo immediately notified Coca-Cola of the breach and later reported it to the FBI. PepsiCo received a letter from a person named "Drick" in the official Coca-Cola envelope. Drick states that he has very detailed and confidential information about Coca-Cola's new products and is ready to act on them. As a result of the investigation, the FBI arrested three people involved in the disclosure of trade secrets. Ibrahim Dimson, Edmund Duhoney and Joya Williams were arrested and charged in the case. Williams was found looking for sensitive information while being monitored by video surveillance and was found to have a sample of a new Coca-Cola product in his pocket. Joya Williams was sentenced to eight years in prison, Ibrahim Dimson to five years in prison, and third defendant Edmund Duhoney to two years in prison for stealing trade secrets from the Coca-Cola Company and selling them to rival Pepsi company.
STEALING TRADE SECRET FOR THE CHINESE GOVERNMENT BY A FORMER COCA-COLA EMPLOYEE.
A former Coca-Cola employee Dr.Xiaorong was convicted by a jury in the eastern district of Tennessee for stealing trade secrets related to BPA-free coatings for inside beverage cans for the Chinese Government.
Dr. had worked as a principal engineer at Coca-Cola from 2012 to 2017. She had access to BPA-free trade secret. Before leaving the company, she opened the files containing trade secrets on her computer and took photos on her mobile phone to bypass the security system of the company.
After leaving Coca-Cola Company, Dr. worked for Eastman Chemical Company until 2018 as application development manager. During her employment she had access to the company’s BPA-free related trade secret. Before her employment ended, she copied trade secrets of Eastman Chemical Company and uploaded to her Google drive. [7]
ANALYSIS & SUGGESTION As per the hypothesis set and based on the doctrinal research done, we would like to suggest going for the Trade Secret rather than going for Patent as the secrecy requirement of a trade secret represents one difference from patent law. It is impossible to maintain trade secret if an invention can be reverse engineered. For instance, a new type of mouse trap would be easy for a competitor in the market to copy. They can disassemble it, study about the same and reproduce the same item or product without anyone's assistance. Without any patent protection on the mouse trap, there is no legal right to such copying. For an invention like this, patent protection is the only way to go further about it. Talking about one of the most famous trade secrets of all is the formula for Coca-Cola. The Coca-Cola formula i.e. the recipe has been a secret for almost 130 years and the formula is a trade secret because no one else till today has been able to figure it out. Efforts to reverse-engineered technique failed, and the Coca-Cola Company maintain a great lengths to keep it a secret. Through some unconfirmed reports it has been stated that Coca-Cola actually keeps different parts of the formula in different places and that no one has any idea about the entire formula.
CONCLUSION Designating information as trade secrets or filing for patents are alternative strategies to protecting intellectual property; both offer advantages and disadvantages. Patents, while they'll be expensive and time-consuming to secure, provide extremely effective protection for a limited period: a corporation with exclusive use of a product or process will command the marketplace for 20 years. It can build brand recognition and market leadership during that period so as to stay a top industry player even after the patent expires. While a well-kept secret could theoretically be kept indefinitely, it’s important to acknowledge that it's perfectly legal to reverse engineer or copy a secret. A patent may only last 20 years, but during that era, the protection is stronger: independent invention is not any defence during a patent suit. In order to pick the proper option, a corporation must investigate two factors: Is 20 years a sufficient period of protection? During that period, may be a competitor likely to reverse engineer or independently reproduce the product? Think long-term before determining whether a patent or secret is true for you and make certain to form these determinations independently with regards to every product, process or formula. So when anyone is drinking a Coca-Cola, we aren't only enjoying the refreshing taste of a world famous beverage but also a secret which is that the lifeblood of the corporate and has been guarded for over a century.
[1] Pratibha Ahirwar, India: What to Choose Between Trade Secrets And Patents, Mondaq, ([21 February 2019] URL: https://www.mondaq.com/india/trade-secrets/783558/what-to-choose-between-trade-secretrs-and-patents
[2] Trade Secrets VS Patents: Which Approach Is Right For You?, Morningside, Feb 18, 2021. URL: https://www.morningtrans.com/trade-secrets-vs-patents-which-approach-is-right-for-you/
[3] Pratibha Ahirwar, India: What To Choose Between Trade Secret And Patents, Mondaq, [21 Feburary, 2019], URL: https://www.mondaq.com/india/trade-secrets/783558/what-to-choose-between-trade-secretrs-and-patents
[4] Trade Secret Policy: Everything You Need to Know, Upcounsel,,URL: https://www.upcounsel.com/trade-secret-policy
[5] Maria Cruz, Coca- Cola Never Actually Patented Their Secret Formula- Here’s Why, Cola, [August 13, 2018], URL: https://www.oola.com/life-in-flavour/2455512/coca-cola-never-actually-patented-their-secret-formula---heres-why/
[6] Aparajita Kaul, India: Trademarks and Trade Secret: Know The Difference With Coca -Cola, Momdaq, [August 29, 2018] URL: https://www.mondaq.com/india/trademark/731000/trademarks-and-trade-secrets-know-the difference-with-coca-cola
[7] Raija Horstman, Laura Schwartz, William Pallett & Emily Tucker, Former Coca-Cola Employee Convicted of Stealing Trade Secrets for the Chinese Government, Crowell Morning, [May 11, 2021] URL: https://www.crowelltradesecretstrends.com/2021/05/former-coca-cola-employee-convicted-of-stealing-trade-secrets-for-the-chinese-government/