Profiting from secrets

on June 9, 2017

What is the value of a secret? The value of some secrets is in their disclosure to the highest bidder, like celebrity gossip and paparazzi photos. Other secrets have a functional value which can be realized indefinitely, like the recipe for Coca-Cola, or a secret manufacturing process that is more efficient than the competitors’. What all secrets have in common, though, is that they lose their value the moment they are inadvertently disclosed.

The value of a secret is in its exploitation. This can be accomplished in two ways: by keeping the secret a secret (and utilizing it), or by disclosing it to someone in exchange for something.

To exploit a secret without any disclosure is to exploit its inherent utility. For example, you can use a secret chemical manufacturing process to cut costs compared to your competitors, or a secret blend of herbs and spices to make better fried chicken than your competitors. In this way, the value of your secret is paid to you in the form of a market advantage.

Alternatively, you might exploit your secret by disclosing it. You can disclose it to a single person in exchange for a sum of money – such as selling your secret chemical manufacturing process to a big industry leader or selling your new shatter-proof glass to Apple. You might instead capitalize on a secret by disclosing it to the public in exchange for a 20-year monopoly on its exploitation (a patent). Patents allow you to have your cake and eat it, too. You can share your secret, which allows you to license it and make money from it, but you have all of the advantages of having never told anyone about it – no one else is allowed to make or sell your invention for 20 years.

There are advantages and disadvantages to each method, the summary of which is below:

  Maintaining the secret Specific disclosure Public disclosure
Time frame Indefinite – a secret exploited in this manner may be exploited for as long as it can be kept a secret. (Think of KFC’s secret blend of herbs and spices) None – once you have disclosed the information and collected your fee, the secret ceases to be profitable to you. Note: licensing its use would actually be considered maintaining the secret. 20 years – If the patent application is successful, the monopoly will be enforceable for a period of 20 years. (Think of any drugs, like Tylenol)
Competitive advantage Your competition does not know your secret, so they cannot use it. Unless you choose to sell the secret to your competition, your competition will not learn the secret. Your competition learns the secret, but is not allowed to take advantage of it for 20 years. However, after the 20 years is up, anyone may use your secret. (When a drug patent period expires, a dozen generic brands immediately pop up and join the market)
Applicability Nearly anything may be kept a secret if done properly – see our article on maintaining confidentiality. Nearly anything that can be kept a secret can be sold in this way. A patent is only an option where the secret is an invention which meets the criteria for patentability.
Other advantages Your competition does not know that there is a secret, so they are unlikely to research it or do research based on it. There is no financial risk moving forward. You have your money already. You don’t need to worry about maintaining secrecy, or enforcing your patent monopoly. A patent protects you even from other people coincidentally researching and inventing the same invention, unlike a secret. If the only way to profit from your invention is to sell the invention itself to the public, a patent is the only option, since it is useless if kept secret.
Other disadvantages Should someone learn your secret either on their own or from the people in your confidence, your secret is out. (If you learn the secret blend of herbs and spices, you no longer need KFC – you can make your own) Attempting to offer your secret for sale can be a problem if the sale does not go through because it is difficult to maintain the secrecy afterward.
Offering the secret for sale could be detrimental to its patentability in the future.
Depending on the product, it could become onerous to actually enforce the monopoly. Certain products are prone to problems with counterfeiters, and illicit production in other countries. Another problem arises where large numbers of ordinary people abuse the patent because it is impractical to go through litigation with each one to recover a small amount of money. (Think of the public 3D printing your product at home)

At WORLDiscoveries, we commercialize products using all three of these methods. For further information, do not be shy to contact us.

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