Whatever the Report Says: Can Trade Secrets Really Be That Important?

We all rely on anecdotal evidence to help form our understanding of the world, but it seems to this Kat (anecdotally, as it were) that there is little discussion about the robustness of relying on anecdotal information in our daily IP practice. His complacency over the role of anecdote in IP was shaken several weeks ago, when the IPKat briefly reported here on the initial results of a survey from the National Science Foundation here and the United States Census Bureau on the importance of intellectual property rights to businesses located in the U.S. This Kat decided to dig down deeper, so he tracked down a copy of the report ("Business Use of Intellectual Property Protection Documented in NSF Survey", National Center for Science and Engineering Statistics, Infobrief, February 2012 here.

The brief report (the full report will apparently be published in due course), authored by John E. Jankowski, discussed the survey results of businesses located in the U.S., which were asked to report on the importance of six categories of IP rights (utility patents, design patents, trade marks, copyrights, trade secrets and mask works) as "very important", somewhat important" or "not important". The data were weighted for industry size and category as well as for whether the business surveyed was with, or without, R&D activity. The results of the survey can be summarized as follows:

1. "...[T]rademarks and trade secrets are identified by the largest number of businesses as important forms of IP protection, followed by copyrights, and then patents. However, the level of reliance on each of these forms of IP protection varies considerably across industry sectors....[A] very large fraction of businesses within the "all industries" totals did not report using most forms of IP protection."  

2. This rank of order of importance of IP rights held true when the results were broken down by "Non-manufacturing", "Infomation" and "Manufacturing" categories. For all three of them, trade marks, trade secrets and copyright far outweighed both utility and design patents as being either "very important" or "somewhat important" to the surveyed businesses. 

 This is where this Kat's sense of the anecdotal kicked in. In particular, he was struck by the significantly greater "importance" (whatever that means in the context of the survey) attributed by businesses to trade secrets than to patents. This seems contrary to his anecdotal experience. True, for years this Kat has tried to track down, without success, a supposed report produced by the OECD here which concluded that more technology is transferred in the form of trade secrets than patents. In the main, however, trade secrets and know-how have played a much smaller role in his daily IP practice than the other major categories of IP rights. An NDA here, a "know-how" appendix to a share purchase agreement there -- but when was the last time that he was asked to consult a client on a comprehensive policy for identifying and protecting the client's trade secrets? This conclusion is reinforced by the consistent reaction of students in my MBA class whenever trade secrets are discussed. Consistently, the students are a bit mystified by the entire treatment of trade secrets and they are usually hard-pressed to discuss how trade secrets play a role, whatever business they are in and whatever role they play within that organization.

The anecdotal evidence against the importance of trade secrets, in comparison with the other IP rights, goes on. Consider what proportion of the posts on IPKat (or any other blog devoted generally to IP rights) actually consider trade secrets. My anecdotal impression is that trade secrets lag significantly behind patents, trade marks and copyright. Reflect on the course offerings for intellectual property law. How many courses are devoted to trade secrets, in whole or even in material part? Here, as well, my anecdotal understanding is that there are few such courses. And yet -- staring directly in this Kat's face --  here are the findings of the NSF report that point to the centrality of trade secrets in the way that businesses view their actual conduct (at least for those businesses for which IP is important). How can we account for this disjunction?

A few thoughts--

1. There is simply a fundamental disconnect between the legal and business worlds when trade secrets are concerned. For whatever reason, businesses do not see a role for their lawyers with respect to trade secrets as opposed to patents, trade marks and copyrights.  

2. IP lawyers are less versed in trade secret law and protection and therefore are less likely to include trade secrets as part of their mainline practice.  

3. The protean nature of the trade secret right allows businesses to use as a type of "catch-all" category for anything that smacks of an intellectual property right, but cannot be housed under any of the other forms of intellectual property right.  

4. The meaning of "importance" within the context of the NSF survey does not necessarily mean that trade secret protection contributes more to a business than other types of intellectual property rights.  At the most, it means something like--"whether or not I protect intangible assets by patents, trade marks or copyright, for sure I keep some of intangible assets secret." 

Whatever the explanation, this Kat cannot shake free of his anecdotal skepticism about the role that trade secrets play. And whether or not his skepticism is appropriate, what is certain is that we as a profession should be paying more attention to trade secrets as part of our IP practice.