When you have poured time, money, and imagination into a brilliant idea, the next question is often the hardest: how do you protect it?

For many Australian and New Zealand innovators — whether in tech, mining, engineering, biotech, or even food and beverage — the choice comes down to two main paths: patent it or keep it secret. Each option has its own rules, risks, and rewards. And making the wrong call could cost you your competitive edge — or your entire business.

Why It Matters

Intellectual property (IP) is a highly valuable asset for any individual or business — it is so significant, in fact, that Australian businesses attributed over $7.1 billion of income in 2022 to products backed by patents and designs, according to IP Australia. But not every innovation needs a patent. Some of the most valuable corporate assets in the world — Google’s search algorithm, KFC’s spice blend, the Coca-Cola formula — have never seen the inside of a patent office. So what’s right for your idea?

Understanding Patents: Disclose and Protect

A patent is a government-granted monopoly. It gives its owner exclusive rights to make, use, sell, distribute, and import an invention for up to 20 years in Australia. In return, the inventor has to publicly disclose how the invention works. This means that, after the patent expires, competitors and other parties can copy and sell the invention without legal ramifications.

Patents can be costly and difficult to obtain. But for industries where products can be easily reverse-engineered — think pharmaceuticals, med tech, or mechanical parts — a patent may be the only way to keep competitors at bay.

It is noteworthy that pharmaceuticals account for a large proportion of Australia’s patent filings in the chemical sector, largely because public ingredient disclosure is mandatory, making secrecy impossible.

Understanding Trade Secrets: Stay quiet, stay steady

Trade secrets are the opposite: no registration, no disclosure, and no expiry date. Trade secrets consist of private information that is not disclosed to the public and is instead kept confidential to maintain the competitive advantage that the secret provides. Common trade secrets include formulas, business strategies, algorithms, and other knowledge that is considered valuable and advantageous. Two famous examples of trade secrets include the Coca-Cola drink secret recipe and Google’s search algorithm.

The catch? Trade secrets remain protected only as long as the secret is not divulged to the public. While there is no limited term of protection for trade secrets, they can be very high risk to maintain, particularly with growing cybersecurity risks. For example, Google’s search algorithm was leaked about 10 months ago. As reported on https://aioseo.com/google-search-algorithm-leak/, “the leak details over 14,000 attributes Google might consider when ranking a search result.”

Differences Between Patents and Trade Secrets

1. Term of Protection: Patents have a limited term of protection, at the end of which the patent enters the public domain. Once the patent is in the public domain, anyone can copy the invention without ramifications. On the other hand, trade secrets have no limit to the term of protection, so long as they are kept secret. If a trade secret becomes publicly known, there is no legal protection to stop competitors using the formerly secret information. However, there are legal protections that reduce the risk of a trade secret being publicly disclosed. For example, confidentiality clauses in employment contracts deter employees from sharing valuable information with outsiders during and after employment.
2. Disclosure: Anyone who applies for a patent must disclose various information on their invention to the public. In contrast, information treated as a trade secret is not disclosed to the public, thus preventing competitors from using this information. The trade secret however require strong measures to ensure that the information stays secret, as any revelation will mean that the trade secret could be lost.
3. Cost and Time: Obtaining a patent requires funds and time. A trade secret does not cost anything per se, but there can be costs to keep the trade secret secret. Secrecy can be preserved through security measures, such as software authentication and authorisation, and legal measures, such as non-disclosure agreements.

When are Patents the Best Choice?

1. Public Disclosure is Acceptable or Required: If a product can be easily reverse-engineered, a patent is often advisable, because any secret detail of the product probably won’t stay secret for long once the product is taken to market. For example, in the case of pharmaceuticals, since pharmaceutical companies are required to publish the ingredients in their products, copies of those products would proliferate if the originals were not protected by patents.
2. Mass Production Potential: Products that can be mass-produced often benefit from patent protection. This is the case for small mechanical parts and pharmaceuticals. The patent potentially allows its owner to sell licences to multiple manufacturers for profit — something that might not be possible without a patent, if the method of manufacturing the product has to be kept secret.
3. Public Deterrence of Competitors: Patents are a public warning to competitors, effectively telling them to not intrude on the patent owner’s share of the market.

When are Trade Secrets the Best Choice?

1. Information is Not Easily Patentable: The information in the secret could include information that is difficult to patent or is not patentable. This is often the case for food and beverage recipes. It is therefore best to keep this information secret to ensure that it remains a competitive advantage as a patent requires disclosure of said information which may not be successfully patented.
2. Long-Term Advantage: Patents only have a finite term, but a trade secret can be kept indefinitely so long as it remains a secret. This may be preferable for certain information that gives a product a unique identity and makes the product preferred over others. For example, the Big Mac sauce for McDonalds. The release of such information could lead to a rise in competition that would be detrimental to the business. Certain algorithms in technology companies would also be vulnerable to reverse engineering if publicly disclosed, thereby removing the company’s competitive advantage.

When to Use Both

There are situations where the use of both patents and trade secrets can be used to gain the advantages of both simultaneously. An example of this would be where a company patents a product that can be readily reverse-engineered, but keeps certain details of the manufacturing process a secret. This allows the company to dominate the market for this product during the protection period and have a further advantage once the patent expires if competitors cannot determine how the product was made.

How to Choose: A Quick Guide

Choose a patent if:

• Your product is likely to be reverse engineered
• You need to license or sell the invention at scale
• Disclosure is inevitable (e.g., ingredients listed on labels)
• You want clear legal enforcement options

Choose a trade secret if:

• The formula, process, or strategy can realistically be kept confidential
• The value lies in long-term secrecy (e.g., secret sauce, code)
• The product is difficult to reverse-engineer
• The invention doesn’t meet patentability criteria

Or, do both.

Many companies take a hybrid approach: patent the product, keep the method a secret. For instance, Dyson may patent its vacuum designs but keep the exact production process in-house. It’s a way to secure early protection while maintaining long-term competitive advantage.

Final Word

There’s no one-size-fits-all answer. The use of patents and/or trade secrets ultimately depends on the intellectual property that is to be protected and the corresponding business strategy. Patents provide a limited term of legal protection in exchange for public disclosure, while trade secrets provide no legal protection, but are indefinite if the secret is kept. The right strategy hinges on your business model, market, and tolerance for risk. But one thing is clear: failing to plan your IP protection is planning to hand your innovation to someone else.

If you have any further questions regarding patents or trade secrets, or wish to know if you have a product that is patentable, please feel free to contact one of our attorneys.