Trade Secret or Patent? Key Considerations for Technology Startups

By George Likourezos, Esq.

Partner, Intellectual Property Attorney at Carter, DeLuca & Farrell LLP

For technology startups, protecting intellectual property (IP) is one of the most important early-stage decisions. Yet many founders face the same question: Should we keep our innovation as a trade secret, or should we file a patent application?

Both approaches have benefits and risks. Making the right decision requires careful consideration of your technology, business model, and long-term strategy. Below are several key factors that startups should evaluate.

1. Nature of the Technology

• Patent protection is strongest for innovations that can be publicly disclosed without losing their value—for example, a novel device, system, or process that can be reverse-engineered by competitors once on the market.
• Trade secrets are better suited for information that is difficult or impossible to independently discover, such as algorithms, customer data, chemical formulas, or internal processes.

If competitors can easily analyze your product and understand how it works, a patent may be the only reliable protection.

2. Duration of Protection

• Patents provide a limited monopoly (generally 20 years from filing) but require full public disclosure of the invention. After expiration, anyone may use the technology.
• Trade secrets can last indefinitely, provided they remain secret and are adequately protected by the company (e.g., through NDAs, security protocols, and access controls).

Startups should ask: Do we need long-term protection (trade secret), or is 20 years of exclusivity sufficient (patent)?

3. Cost and Resource Allocation

• Patents involve filing fees, attorney fees, and ongoing prosecution costs in each country where protection is sought. They can be expensive, but they create a tangible, enforceable asset that investors value.
• Trade secrets require fewer upfront costs but demand consistent investment in security measures, contracts, and employee training to prevent leaks.

For early-stage companies, the budget for IP protection is often limited, so resource allocation plays a big role.

4. Enforcement and Risk of Disclosure

• Patents allow you to stop competitors from making, using, or selling your invention—even if they developed it independently.
• Trade secrets only protect against misappropriation. If someone else independently develops the same technology, your trade secret protection offers no recourse.

Startups should evaluate the risk that a competitor (or a large corporation) might independently invent the same solution. If that risk is high, a patent offers stronger protection.

5. Business Strategy and Investor Considerations

Investors often prefer patents because they:

• Provide a legally enforceable right.
• Can be valued, licensed, or sold.
• Create barriers to entry for competitors.

However, in some cases—especially in software, data-driven platforms, or processes difficult to patent—investors may appreciate that a startup has strategically chosen trade secret protection with strong confidentiality safeguards.

6. Market Timing and Disclosure Risks

• If your startup plans to publish papers, present at conferences, or launch products soon, filing a patent application before disclosure is critical. Public disclosure before filing can destroy patent rights in many countries.
• If your startup is not planning to disclose details publicly and the innovation can remain internal, trade secret protection may be more appropriate.

7. Geographic Scope and Global Expansion

Patents are jurisdictional rights—they must be filed in each country where protection is sought, which can quickly become costly for startups with global ambitions. Trade secrets, by contrast, are not bound by country-specific registrations and can provide worldwide protection so long as confidentiality is maintained.

That said, enforcement of trade secrets varies across jurisdictions, and not all countries have strong or reliable trade secret laws. For startups targeting international markets, it is important to weigh whether patent protection in key jurisdictions (e.g., U.S., Europe, China) provides stronger and more predictable protection than relying on trade secret laws abroad.

Conclusion

There is no one-size-fits-all answer to the trade secret vs. patent question. For many startups, a hybrid approach works best: keep certain elements secret (e.g., data, algorithms, know-how) while patenting core innovations that competitors could otherwise reverse-engineer.

The key is to align your IP protection strategy with your business goals, funding needs, and competitive landscape. Consulting with an experienced IP attorney early in the process can ensure you make informed decisions that safeguard your innovation and maximize long-term value.

A resource you can consider in advising your startup or portfolio company regarding whether to keep a technology a trade secret or file a patent application is the intellectual property law firm of Carter, DeLuca & Farrell. Carter DeLuca has assisted numerous companies determine whether to maintain a technology a trade secret or purse patent protection in the U.S. and worldwide.

For a free consultation made available through Spotlight Family Office Group, please contact us at Info@SpotlightFamilyOffice.com.