Protecting Solutions that Incorporate AI: Patents vs. Trade Secrets
by Michael O’Malley, SVP of Strategy
Growth-stage companies have a lot of pre-built toolsets and API options to consider when incorporating artificial intelligence (AI) into their solutions. These open-source AI models and APIs from open-source frameworks and Machine Learning Software as a Service (ML SaaS) providers are available to anyone to evaluate and leverage to build proof of concepts (POCs) and ultimately implement.
The open resources are part of the building blocks used to create a solution and, therefore, cannot be considered an individual company’s intellectual property (IP). It is how a company combines and fine-tunes the AI models and what data is used to train the AI algorithms that make up the “secret sauce” that a company creates for a superior product and wants to protect from competitors.
To protect AI-powered innovations, growth-stage companies may consider two types of safeguards: U.S. patents and trade secrets. There are pros and cons to both approaches to evaluate in consultation with legal counsel to make an informed decision about which is the right fit.
U.S. Patents: Guarding the Public Domain
What is a patent? A patent is a legal document issued by the United States Patent and Trademark Office (USPTO) that grants the holder exclusive rights to an invention for a specific period, typically 20 years from the filing date. In the context of AI, a patent would protect the unique and novel aspects of an AI solution.
The Pros of Patents:
- Exclusive Rights: Patents grant the exclusive right to use, make, sell, and license an invention. This protection can be a strong competitive advantage in the market that prevents others from using patented technology without permission. It also provides an avenue for legal recourse if the patented solution is copied.
- Monetary Gain: Patents can be monetized through licensing or selling to other businesses, providing a potential revenue stream for an AI innovation.
The Cons of Patents:
- Limited Duration and Application: Patents have a finite lifespan (usually 20 years), after which the technology becomes public domain. Eventually, others can freely use your AI invention without any restrictions. But considering the pace of technological advances, it’s likely a solution will be obsolete or updated substantially after 20 years. In addition, a patent may be granted only for a limited application.
- Costly and Time-Consuming: Obtaining a patent can be expensive and time-consuming. It requires legal assistance and the filing of detailed documents, which may not be suitable for growth-stage companies or entities with limited resources.
- Disclosure Requirement: The patent application process requires the public disclosure of detailed information about the AI solution, potentially enabling competitors to design around a patent, particularly for other applications.
Trade Secrets: Keeping it Under Wraps
What is a Trade Secret? A trade secret is a form of IP protection that involves keeping certain information confidential. In the context of AI, a trade secret may encompass the algorithms, data, or methodologies that make an AI solution unique and valuable.
The Pros of Trade Secrets:
- Infinite Duration: Unlike patents, trade secrets have no expiration date. For example, the formula for Coca-Cola has been a secret for over 100 years.
- Cost-Efficient: Establishing and maintaining a trade secret is generally less expensive than obtaining and defending a patent. It doesn’t require formal registration or the disclosure of details to the public.
- Flexibility: You have more control over your AI solution when using a trade secret. You can choose who can access to the information, making it a valuable asset in negotiations and partnerships.
The Cons of Trade Secrets:
- Risk of Disclosure: Keeping a trade secret can be challenging, as it relies on maintaining confidentiality. If the secret is accidentally or intentionally disclosed, it loses its protection. Non-disclosure agreements are a must for anyone who has access to a solution’s code.
- Inability to Prevent Independent Discovery or Reverse Engineering: Trade secrets cannot prevent others from independently discovering and using the same technology. Patents, on the other hand, can offer protection even when others arrive at a similar solution independently.
- Difficulty in Enforcement: Enforcing trade secrets can be complex and costly. If someone does breach your trade secret, proving it in court may be challenging.
Making the Right Choice for Your AI Solution
The decision of whether to protect your AI solution with a patent or trade secret depends on several factors:
- Nature of the Innovation: Consider the uniqueness of your AI solution. If it’s a groundbreaking algorithm that can be reverse-engineered or replicated, a patent may be more suitable. On the other hand, if it relies on a combination of elements that are difficult to ascertain, a trade secret could be the way to go.
- Budget and Resources: Your financial resources and the time you can allocate to protection should also play a role in your decision. Patents are costlier and require more time, whereas trade secrets are more cost-effective.
- Long-Term Strategy: Think about your long-term goals. If you want to maintain control and exclusivity over your AI solution indefinitely, a trade secret is more fitting. However, if you plan to monetize your innovation and allow others to use it in the future, a patent might be the better choice.
- Enforceability: Assess the ease with which you can enforce your protection method. Trade secrets require ongoing vigilance, while patents have a formal legal structure that can be utilized in case of infringement.
In many cases, a combination of both protection methods may be ideal. You can patent specific elements of your AI solution while keeping the broader architecture or data confidential as a trade secret.
In the fast-paced world of AI, choosing the right protection method can be the key to the success and longevity of your innovative solutions. Whether you opt for patents, trade secrets, or a combination of both, it’s crucial to consult with legal experts to ensure your AI creations are adequately safeguarded. By making an informed choice, you can continue to push the boundaries of AI innovation with confidence.
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