Do you know how to protect your AI-based invention against your competitors? Does the cost of patents put you off? Do you worry that trade secrets may not be enough? Can you use both? Do you know the difference in terms of the protection they offer?
These questions have never been more pressing than now, as AI-related innovation becomes increasingly prevalent throughout the world. The UK government and the European Commission both recognise the need to incentivise SMEs to invest in research and development. It is also recognised that a robust IP framework is needed, which offers a variety of means by which the output of R&D can be protected. Otherwise, how will innovators in this space achieve an adequate return on their investment?
Nevertheless, according to a study by the EC submitted to the European Parliament in November 2020 [link], only 9% of EU SMEs have registered IP rights, and it is clear that “too many companies, particularly SMEs, and too many researchers, do not make full use of the opportunities offered by IP protection”. Apparently, this is “largely due to a lack of knowledge about IP”.
An even more relevant, but equally concerning, statistic is that although 26% of all high-value research publications on AI come from Europe, only 4 out of the top 30 patent applicants (13%), and 7% of businesses, engaged in AI patenting worldwide are European.
Are the rest simply failing to consider IP protection for their efforts at all? Or are they relying on trade secrets provisions to protect their investment? And, if so, is this reliance part of a sound IP management policy that includes effective trade secrets policies to safeguard their rights? Or is ‘trade secrets’ simply a term used in board level reporting with the hope that the need will never arise to work out, or even if, such a right can be enforced? Alarmingly, the EC reports that cyber theft of trade secrets accounts for an estimated EUR60 billion of losses in the EU, so it seems that relying on trade secrets to protect your innovation could be risky, even if you have a solid IP management and trade secrets policy in place, and without one, they are of even less tangible value.
On the other hand, various parliamentary studies agree that the European economy is dependent on SMEs “to foster a diverse European innovation landscape”, particularly as the Digital Revolution continues to unfold at an unbounded rate. SMEs are expected to play a big role in driving technological advance in Europe, but as an SME, you may not have the resources to patent every small development. It is important that you know how to best protect your interests and ensure that competitors cannot gain an unfair commercial advantage from your R&D investment, without wasting time and resources on expensive patent portfolios for aspects that could be protected by trade secrets or, perhaps, don’t need to be protected at all.
So what is the answer? In short, there isn’t a ‘one size fits all’ solution. The optimum IP strategy for any business is dependent on many different factors, including (but by no means limited to) resources and budget. Read on to see the pros and cons associated with both patents and trade secrets, and how these need to be balanced against the nature of the innovation itself, the technical and commercial implications of the innovation, the applications to which the innovation could be applied, and a host of other factors, including available resources.
Can you have both?
Patents protect technical innovation, whereas trade secrets have, traditionally, been more appropriate for things like algorithms, chemical formulae, processes, business plans, customer lists and even recipes (for example, the original Coca Cola ® recipe, which has been kept secret since 1886), in other words, things that can be kept secret even after the associated product(s) or service(s) have ‘gone public’.
In relation to AI-based innovation, i.e. an AI system configured to do something by ‘learning’ from training data, there has been a lot of debate and discussion amongst legal academics and practitioners about how and where this type of innovation “fits” into the current IP frameworks, and how innovators in this field are to see a fair return on their investment. In relation to the European Patent Convention, a revised version of the ‘Guidelines for Examination’, which will be issued in March 2021, purports to further clarify the patent law and practice in relation to AI, but for now, we are reliant on Patent Office and court decisions to determine what is allowed.
An important recent decision by the European Patent Office is the EPO Technical Board of Appeal decision no. T0161/18, in which a patent application for an AI-based method was refused for lack of disclosure of training data. The Board held that without sufficient disclosure of the input data required to train the neural network, the so-called ‘skilled person’ (a notional non-inventive, but highly knowledgeable, practitioner in the field) would not be able to reproduce the invention and, therefore, the application was refused on the grounds of “insufficiency”.
Whilst we can fully expect a lot more decisions in this field before the legal framework itself catches up with advances in technology, it seems that you probably cannot, ‘have your cake and eat it’ when it comes to patents and trade secrets for protecting AI-based innovation: you must opt either for a patent and describe the innovation fully in return, or you use trade secrets to protect the key aspects of the innovation and trust to your internal IP management and trade secrets policies to preserve them.
Pros and Cons
Patents
Pros:
- patents are more tangible rights with clearly defined scope and ownership;
- they are enforceable against infringers, irrespective of whether or not there is any unfair, non-competitive or illegal intent or knowledge;
- patents claim underlying concepts, rather than specific embodiments, so they tend to be viewed as offering stronger protection;
- customs registration can be readily (and relatively easily) used to formally detain allegedly infringing articles at a border so that bulk exports or imports of infringing articles can be stopped before they enter, and potentially damage, your market;
- patents often take several years to be granted (or finally refused), during which time the “patent pending” status of your innovation can help to deter competitors, irrespective of the ultimate outcome of the application process.
Cons:
- cost;
- patents require full disclosure of the innovation claimed, which could include things like training data and the training process, the structure of the aI model, the setting of the model’s coefficients, iput data (e.g. selection of sources, classification, labelling of data), etc;
- patents only last for a maximum of 20 years from filing the application, which means, after that, the invention you have claimed becomes free to use by others without your consent and without recompense;
- a patent claim must define the innovation in concrete, rather than abstract, terms, i.e. an apparatus, system, process, method, etc. for doing something, which may unduly limit the protection it provides.
Trade Secrets
Pros:
- there is no registration process and, therefore, no tangible cost;
- they can, in theory, last forever (or as long as they remain secret);
- confidential training data, etc. can be kept confidential;
- although the subject of a trade secret must be defined or ‘ring-fenced, they can be somewhat more abstract than patents and, therefore, offer broader protection.
Cons:
- a stringent IP management policy, including a formal trade secrets policy, is needed to ensure that all reasonable steps are taken to keep the information a secret; see some tips here [**link]
- trade secrets are a rather intangible ‘right’ that can be difficult to define and value: it can only add value to a business if it is properly captured and, even then, its true nature and value can be difficult to appreciate in financial terms;
- once it’s gone, it’s gone: you may have the right to sue someone for unauthorised use of a trade secret (if you can identify who is actually liable) but, even so, the trade secret has been lost and the IP ‘right’ with it
Which is better for AI-based innovation?Patents or trade secrets? There is no right answer to this in general terms. As with all types of innovation, both patents and trade secrets (as well as other IP rights) should form part of a balanced IP strategy. Patents should always be considered to protect innovation that could be reverse engineered. If not, you might have a choice to make, and your decision can and should be based on various different commercial elements.
Although from a cost perspective trade secrets may seem an attractive proposition, especially to an SME, there are clear risks involved. A robust IP management strategy and trade secrets policy is needed which, in itself, may have significant cost implications, and enforcing trade secrets ‘rights’ is nowhere near as straightforward as enforcing a patent. Furthermore, trade secrets alone may not be considered by an investor to be a secure enough IP strategy, or they may not add as much value to a business as patents, which may have implications in relation to funding more generally.
On the other hand, trade secrets, if adequately ring-fenced and preserved, can last forever, whereas patents have a limited lifespan. Also, the scope of protection for innovation described in a patent may be narrower than the breadth of knowledge and information required to implement it (and which is likely to have to be disclosed), and this may, in turn, limit your ability to patent alternative implementations later on if they are ‘obvious’ modifications of what is described in the patent application.
There is scope, within the various IP frameworks around the world, for the use of creative IP strategies that make the most of patent and trade secrets (and other IP) provisions, which can allow you to optimise the return on your investment as the world continues to race toward technological leadership, without needing to break the bank. Make sure your IP strategy has the scope to include all of them.
Contact us for more information:
Email: info@strachanip.co.uk
Tel: +44(0)7714797135
