Canada’s Intellectual Property Firm

Keeping a (trade) secret in the oilpatch: mitigating risks with patent protection

Authored byDaphne Lainson

Many technological developments in Canada’s oilpatch are related to new or improved processes. Historically, this is the exact subject matter best suited to protection as a trade secret. There is no settled definition, but trade secrets usually comprise a company’s well-guarded confidential information of a technical nature which, if disclosed, would likely adversely affect the company’s business.

Trade secrets can, in theory, be maintained by a company indefinitely. However, once the information becomes public, then it is free for anyone to use, with recourse – if any – likely limited to the party having misappropriated the secret. It is this risk of irrevocable loss of exclusivity that must be weighed in the balance against other intellectual property protection, like patent protection, in the market forces at play in the oilpatch.

The tremendous economic growth in the oilpatch has created a thriving job market where individuals frequently move from one company to another. It can be very difficult to keep information confidential in these circumstances, despite best efforts through the use of company confidentiality programs.

The risk of disclosure of trade secrets can therefore be very high, leaving a company exposed to the possibility of losing its market advantage in a technology. This exposure might be mitigated with patent protection.

There are some basic requirements that must be met in order to obtain a patent, including that the technological development be an “invention”. Usually, an invention can be identified in a new process or an improvement to an existing process such that some form of patent protection can be obtained, giving the patent owner the exclusive right to prevent others from using the patented invention. This sometimes involves a Court proceeding, but the mere existence of the patent can often deter competitors from adopting the patented technology. Using patented technology without the patent owner’s consent can result in a Court ordering that the infringing user financially compensate the patent owner for the harm done through its unauthorized use of the patented invention. The amount of such compensation can be significant.

However, patent protection is limited to a maximum 20 year term. Also, in order to obtain protection, there must be full disclosure of the invention. It is this requirement for full disclosure with a fixed term of protection that must be balanced against the potential for keeping information secret forever. It may be that the reasonable certainty of obtaining some form of patent protection will outweigh the uncertainty of maintaining a trade secret.

If the balance tips in favour of patenting, then the following points are worthy of note. First, for many countries, entitlement to a patent is determined by who applied for the patent first, and not by who first independently discovered the invention. Thus, it is often prudent to file a patent application at the earliest opportunity, particularly in technological fields that are experiencing competitive growth. Second, public disclosure of the invention before the application for patent is filed is an absolute bar to patent protection in many countries. Steps should be taken to ensure that patent applications are therefore filed before any information is revealed to the public. Finally, patents have only a national scope, such that patent protection must be obtained in each country in which patent protection is of interest. For many inventions deriving from the oilpatch, this is but a few countries, and sometimes it is only Canada that is of any commercial interest. The bonus for oilpatch companies: the cost of obtaining patent protection is often relatively inexpensive compared to other technological sectors.

There is no absolute formula for weighing the benefits and risks associated with trade secrets and patent protection. Each secret/invention must be assessed on its own facts, and ultimately a business decision must be made. However, given the possibility for significant adverse consequences in the event that a trade secret is disclosed, patent protection should be given serious consideration as a means of mitigating the risk of unintentional disclosure of a trade secret.