Although combining patents and trade secrets in a single transaction can be quite appropriate, hybrid licenses pose certain risks that derive from the vastly different public policies behind these two forms of protection. This paper identifies the major risks and provides practical suggestions for avoiding them. Patents and trade secrets Trade secrets are useful information protected by state law, which is based primarily on respect for confidential relationships. As a result of this emphasis on relationship, the scope of trade secret protection is much broader than patents, and can reach even to trivial improvements over techniques that are broadly known. Trade secrets also include nontechnical information that can be of value, such as marketing studies.
Patents are products of federal statute, with roots in the Constitution.
A patent is exclusive right granted by the government for a limited term of years to exploit an invention. As a result of this tension, the exploitation of patent rights is subject to significant limitations, some of which are discussed below. Licenses are merely a form of contract. Where the subject of a license is exclusively trade secrets, state law will govern its interpretation and validity. In general, parties are free to bargain as they wish regarding trade secrets.