Business and Legal Insights

In a previous post I provided an overview of the Defend Trade Secrets Act of 2016.  But what is a trade secret?

Trade secrets, together with patents, trademarks, and copyrights, are one of the four main types of intellectual property. Unlike the three other types of IP, trade secrets are never made public. Trademarks and service marks are obtainable only through public use that creates an association between the mark and the origin of specific goods or services in the minds of the consumer. Copyrights are generally agnostic to publicity, but most copyrighted material is shown publicly in some form. While public disclosure before filing a patent application can destroy your patent rights, if your patent application is allowed it will always be made public. Public disclosure of your trade secret will destroy it – they’re like vampires, they live in the shadows and any exposure to light will kill them.

So how do these four different types of intellectual property interact? Let’s look at KFC as a case study. Many people around the world are familiar with the initials ‘K-F-C’ and the character Colonel Harland Sanders. The initials ‘K-F-C’ and the image of Colonel Sanders are both trademarks registered by KFC Corporation with the USPTO. These are classic trademarks – most consumers know and associate KFC® and the Colonel Sanders character with the chain of friend chicken restaurants owned by Yum! Brands.

KFC also owns numerous copyrights. While the general concept of ‘The Colonel’ and his likeness are protected by trademark, specific drawings of Colonel Sanders, the television ads in which the character appears, and even photographs of the actual Col. Harland Sanders, are all protected by copyrights.

KFC’s trademarks and copyrights are all associated with the branding and marketing of the restaurants. But what about the product?

The KFC chicken is the product of two major components: the coating of the chicken and the conditions under which the chicken is cooked. On September 26, 1962, Col. Harland Sanders filed a patent application for “[p]rocess of producing fried chicken under pressure.” That application eventually became U.S. Patent No. 3,245,800. In the ‘800 Patent, Col. Sanders claimed a process of making fried chicken involving “coating said [chicken] with a moist layer of breading material” and cooking the breaded chicken in hot fat under pressure. It took 3 ½ years to issue, but when the patent issued the specific process Col. Sanders used to make his famous chicken was made available for the entire world to study. This is the trade-off with patents, you receive a 20 year legal monopoly on the patented invention, but in exchange you are required to disclose everything you know about the invention (35 U.S.C. § 112(a)).

Notice that Col. Sanders did not include the specific composition of the “moist layer of breading material” in his patent. The “moist layer of breading material” is obviously Col. Sander’s famous ‘original recipe of 11 herbs and spices,’ allegedly written down only on a single piece of paper by Col. Sanders himself and known to only a select few people. The trade secret made Col. Sanders a very wealthy person. By not patenting the specific ‘original recipe,’ Colonel Sanders prevented public disclosure of the exact recipe and was able to charge restaurants a fee to send pre-made “breading material” to use on their own chicken (he also required them to state it was original recipe).

Patenting the ‘original recipe’ would have disclosed the formula to the world, allowing competitors to attempt to recreate the recipe and flavor without infringing the patent (a/k/a reverse engineering and engineering around) and that patent protection would have expired decades ago. Instead, Col. Sanders chose to patent the process of making the chicken while protecting the recipe as a trade secret. Col. Sanders thus had a method of enforcement (the patent) to initially squelch competition, plus something to sell to others (the pre-mixed breading) to make money and build his brand, while reserving the trade secret (and arguably most important aspect of his product) to continue to build the brand once the patent protection expired.

When used properly, trade secrets can be the most valuable part of your IP portfolio.

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