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19 July 2017Patents

Trade secrets more popular than patents in the EU, study finds

A study released by the European Union Intellectual Property Office has found that trade secrets are more popular than patents, particularly for large companies, in most EU member states.

It showed that 52.3% of the firms surveyed use trade secrets, while patents are adopted by just 31.7%. For large companies the figures were 69.1% (trade secrets) and 52.8% (patents), and for small and medium-sized enterprises, 51.2% (trade secrets) and 30.4% (patents).

The study, released through the European Observatory on Infringements of Intellectual Property Rights, was based on data from an earlier report called the “Community Innovation Survey”, which looked at nearly 200,000 firms in manufacturing and service industries.

On top of the headline figures, the latest survey showed that trade secrets are particularly popular in Finland, with 78.1% of companies using them, while just 33.2% have patents. Trade secrets are also popular in Germany, where the trade secrets figure of 74.1% compares to 47.8% for patents.

The report, titled “Protecting Innovation through Trade Secrets and Patents: Determinants for European Union Firms”, was released on July 13.

It also found that trade secrets are more likely to be applied to process innovation and innovations in services, and where the innovative product is a physical good rather than a service, patents are more likely to be used.

The report added: “There is a propensity to favour trade secrets over patents in markets with strong price competition. There is a propensity to use both trade secrets and patents in markets with strong quality competition.”

It claimed that trade secrets are poorly studied and their relationship with patents is often misinterpreted.

“Particular emphasis is placed on preferences for either patents or secrecy, and the factors affecting the choice of a protection strategy. While previous analyses have often treated the two as substitutes, this study emphasises the complementary role of the two protection methods.”

The study is aimed at providing a basis for policy makers to further develop the trade secrets framework following the implementation in 2016 of the  trade secrets directive, which seeks to standardise national laws in this area.

The report added: “In carrying out future studies of this type, panel data and information on innovation-specific protection strategies of multiple innovators would make it possible to widen the understanding of the role of secrecy and patenting for increasing the returns to innovation.”

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