Seventy-five Years of Conflict

The United States Congress, the US Patent and Trademark Office, the federal courts, and patent seekers have been locked in seemingly irreconcilable conflicts over patent standards and policy for almost 75 years. In the immediate postwar era, Congress became concerned that federal courts were needlessly invalidating patents by failing to find a "point of novelty" reflected in the claims, even when a complete claimed combination represented something new. In response, in the 1952 Patent Act, Congress legislatively overruled the "point of novelty," substituting "nonobviousness" as a more fulsome, comprehensive test of innovation. The federal Circuit Courts of Appeals continued to apply conflicting validity standards, and that, coupled with the perception that America had lost competitiveness relative to Japan, led Congress in 1982 to create the Court of Appeals for the Federal Circuit with the goal of consistent judicial decision-making and stronger patents.

Explosive innovations in semiconductors and miniaturized electronics, personal computers, smartphones, networking, internetworking, cloud computing, and AI followed. Throughout this period, the strength and value of US patents have ebbed and flowed, perhaps reaching their peak at the same time as the dot-com boom of the late 1990s and the Federal Circuit's 1998 State Street Bank decision. A strong volume of patent filings and grants continued into the early 2000s. In 2007, the Supreme Court of the United States decided both KSR v. Teleflex, broadening the permissible scope of obviousness challenges. Congress adopted the America Invents Act in 2011, creating new ways for accused infringers and others to challenge granted patents, most significantly the “inter partes review” (IPR). 2014 saw the Supreme Court decision in Alice v. CLS Bank, opening the way to invalidate scores of software-related patents not based on true prior art, but on amorphous formulations of "abstractness" and unfair monopolization of "fundamental economic concepts." Although the USPTO’s application allowance rate climbed steadily in this period--and it's very high today--the USPTO’s trial division also approved many IPR requests that invalidated patents and rejected many applications for claiming abstractions. The Federal Circuit affirmed those rejections or invalidated arguably meritorious patents on abstractness grounds, perhaps most notoriously the American Axle patent. 

In the view of some commentators, these changes amounted to a perfect storm that steadily reduced the value of US patents. Then, in October 2025, the USPTO's director instituted several fundamental internal policy changes to reverse the agency's approach to ineligibility, especially for AI-related patents, and to limit post-grant challenges to approved patents. The effect of these should be to increase the percentage of applications granted and reduce agency invalidation decisions. However, invalidation decisions in the federal courts have continued apace, signaling a continued disconnect between the executive Administration's policy beliefs or goals and those of the judges.

High-tech companies now wander in a frustrating IP wilderness. The USPTO may grant a meritorious patent, but the courts may well refuse to enforce it. Surely the USPTO grants some valid patents, and some of them are genuinely infringed by others. Yet the costs and uncertainties of the litigation process, along with the flexibility of the rationales courts can use to invalidate or find no infringement, make it difficult to justify a strong investment in high-tech patents, especially for startups. What should startups do?

Answer: Rediscover and embrace trade secrets.

Why Trade Secrets, and Why Now?

With patents carrying uncertain value and imposing high costs of procurement and enforcement, startups need a realistic alternative. Legislative fixes to the patent system are unlikely in the near term and, even if pursued, would require years of negotiation between stakeholders with deeply divergent interests. In the meantime, companies still innovate, still create valuable intellectual property, and still need to protect it. They need an available legal solution. Trade secret protection, which has existed for hundreds of years, offers a powerful, flexible, and cost-effective path forward, one that every high-tech startup should consider as a key component of its IP strategy.

What Is a Trade Secret?

A trade secret is any information that derives independent economic value from not being generally known to, or readily ascertainable by, others who could obtain economic value from its disclosure or use, and that is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. That is the definition under the federal Defend Trade Secrets Act of 2016 and, in substantially similar form, under the Uniform Trade Secrets Act adopted in 48 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands. (Notably, New York has not adopted the UTSA.)

In practical terms, a trade secret can be almost anything: a proprietary algorithm, a unique data set, an aggregation of data forming a company-specific AI training dataset, prompts to AI models encoded in AI agents, a manufacturing process, a chemical formula, a customer list, a business strategy, a pricing model, internal architecture decisions, source code, training data pipelines for machine learning models, the contents of product requirements documents (PRDs) or other specifications, or the particular combination of engineering choices that gives your product its competitive edge. The scope is extraordinarily broad compared to patents, which protect only inventions that satisfy the requirements of novelty, nonobviousness, and eligible subject matter. A trade secret need not be novel in the patent sense. It need not be nonobvious. It need not survive scrutiny under Alice. It simply must be valuable because it is secret, and its owner must take reasonable steps to keep it that way.

Creating and Maintaining Protection

Here is where trade secrets diverge most sharply from patents. There is no government-operated registration or application system for trade secrets. You do not file an application with the USPTO. You do not receive an official certificate. Instead, companies create trade secrets and protect them entirely on their own. This is both the great advantage and the great responsibility of trade secret law. The advantage is that protection arises immediately, costs nothing to "register," and can last indefinitely, far longer than the twenty-year term of a patent, so long as secrecy is maintained. The responsibility is that protection can be lost, permanently and irretrievably, through carelessness, inadequate security, or failure to enforce confidentiality obligations. Consequently, companies committing to trade secrets as a core IP tactic must also develop a comprehensive Culture of Confidentiality. The awareness that trade secrets exist, are continuously created, should be memorialized, and must be preserved, should permeate the company’s personnel and operations.

Rigorous, specific steps are needed to maintain protection. Courts evaluating trade secret claims examine whether the owner took "reasonable measures" to protect secrecy. A company that treats its secrets casually will find little sympathy from a judge or jury. Overall, the company must establish its Culture of Confidentiality through direct, clear, individual communication about the importance of secrecy, information control, and the avoidance of disclosure to unauthorized persons. Posting a policy on an intranet page that no one reads is insufficient. It requires ongoing, active engagement with every person in the organization. To support this overarching principle, the following elements are essential. I will not mince words—many startups will lack the discipline and maturity, across all personnel, to achieve what’s described here, but those who do can reap great competitive rewards.

Identifying and Memorializing Your Trade Secrets

The first step in building a trade secret program is figuring out what you actually have. This sounds simple, but in practice, many startups never do it at any given time or on an ongoing basis. Engineers and product managers generate enormous quantities of proprietary information in the normal course of building a product, and much of it qualifies as a trade secret, but no one ever stops to say so explicitly.

Identification requires a deliberate, cross-functional effort. In a long-established company, technical leadership should work with legal counsel to conduct a trade secret audit: a systematic review of the company's technology, processes, data, and business information to determine what qualifies for protection. The audit should cover not only the obvious candidates, such as core algorithms and proprietary datasets, but also less glamorous assets, such as internal tooling, vendor relationships, go-to-market strategies, and the accumulated know-how of the engineering team.

Once identified, each trade secret should be memorialized in a trade secret registry or log. This is a confidential internal document, or set of documents, that describes each trade secret with sufficient specificity to establish what it is, when it was created, who has access to it, and the measures in place to protect it. The registry serves two critical purposes. First, it forces discipline. The act of writing down what you consider secret compels you to think carefully about boundaries. Second, it creates contemporaneous evidence. If you ever need to enforce your rights in court, you will need to prove that you identified the information as a trade secret and treated it accordingly. A well-maintained registry is powerful evidence of both.

The contents of the registry should be segregated. To prevent a catastrophic loss of protection that could occur if the entire registry were compromised, companies should consider establishing multiple storage repositories with different access credentials and combinations of personnel holding them for different trade secret records.

Furthermore, the processes described above must recur regularly. As part of developing a Culture of Confidentiality, employees should be trained to memorialize trade secrets as they are created, with appropriate internal reporting to ensure that the registry or associated repositories are continuously updated. The trade secret audit suggested above will be costly, and it’s best to conduct it only once, with regular document or registry updates thereafter.

Employee Agreements

Require all officers, employees, and contractors to sign Proprietary Information and Invention Assignment (PIIA) agreements before they gain access to any confidential information. A well-drafted PIIA should clearly define what constitutes proprietary information, assign ownership of inventions and work product to the company, and impose enforceable confidentiality obligations that survive the termination of the relationship. It must also provide notice of whistleblower immunity to employees, contractors, and consultants; failure to do so does not invalidate the agreement, but it does prevent the company from recovering certain damages or attorney's fees in a federal trade secrets case against that individual. Nonetheless, these agreements are foundational. Without them, you lack the contractual framework to prevent or remedy unauthorized disclosures, and courts will view the absence of such agreements as strong evidence that you did not take reasonable steps to protect your secrets.

Secure Physical and Digital Facilities

Physical and digital security must work in tandem. On the physical side, monitor use of the premises through access logs, access systems with secure credentials on smartphones or badges, and security personnel, as appropriate. Establish restricted access to physical R&D areas, allowing only personnel with a legitimate need to enter. Use window concealment in those premises as appropriate, particularly where prototypes, whiteboard discussions, or sensitive equipment might otherwise be visible to visitors or neighboring tenants. 

With digital facilities, invest meaningfully in IT security: encryption, multi-factor authentication, role-based access controls, network monitoring, endpoint protection, and regular security audits. Monitor the use of IT systems to detect anomalous access patterns or unauthorized data transfers. The intersection of physical and digital security is increasingly important as remote and hybrid work arrangements create new vectors for information leakage.

Internal Compartmentalization

Not everyone in the company needs to know everything. Use product and service code names universally, both internally and in any external communications, to obscure the nature and details of projects from those without a need to know. Determine who needs access to what information, and rigorously observe those boundaries. Engineering teams working on different modules of a product should not automatically have access to one another's repositories. Sales teams do not need access to source code. The principle is simple: minimize the number of people who possess any given trade secret, and you minimize the risk of disclosure. Compartmentalization also limits the blast radius of any single breach.

Marking

Mark all documents, files, presentations, and other materials embodying trade secrets with a clear and conspicuous legend: [[Company Name]] Proprietary & Confidential. Marking serves both practical and legal functions. In practice, it reminds everyone who handles the document that it contains sensitive information and must be treated accordingly. Legally, it demonstrates to a court that the company affirmatively identified the material as confidential, which is relevant to the "reasonable measures" inquiry. Marking should extend to digital files, email attachments, slide decks, internal wiki pages, and any other medium in which trade secret information is recorded or transmitted. 

However, marking should not be used for materials that do not qualify for trade secret protection. Over-designating as trade secrets materials that are obviously published or publicly known will allow an adversary to argue, in a dispute, that the company did not discriminate between genuine, identifiable trade secrets and other material.

Memorialization of Policies

Clearly define all applicable confidentiality and trade secret policies in a comprehensive written document that each officer, employee, and contractor receives when beginning their engagement with the company. This document should explain what trade secrets are, why they matter to the company, the specific obligations of the individual, and the consequences of a violation. It should be written in plain language, not buried in legalese, because its purpose is to be read, understood, and followed. 

I consider Apple Inc.'s policy a great example of what this looks like in practice. Apple's Business Conduct Policy, publicly available on its compliance website, demonstrates how a company can clearly, specifically, and seriously communicate expectations regarding confidentiality. Not every startup can match Apple's resources, but every startup can match Apple's commitment to putting expectations in writing and ensuring that every individual in the organization knows them. (Full disclosure: I am a former Apple employee.)

Reverse Engineering and Independent Discovery Limitations

No IP tactic is perfect, and trade secrets offer no protection against reverse engineering or independent discovery. If a competitor can easily discover or reverse-engineer a technological secret, patent protection should be reviewed closely. This is one of the most fundamental limitations of trade secret law compared to patent law. A patent gives its holder the right to exclude others regardless of how they arrive at the same invention; a trade secret does not. For a high-tech startup whose product ships to customers and can be decompiled, disassembled, or analyzed, this limitation is critical to an informed decision about whether trade secret protection is adequate. 

A Final Word

None of this is to say that patents are worthless or that startups should abandon them entirely. For some inventions and industries, patent protection remains valuable and strategically important. High-tech startups still should identify candidate ideas for patenting and pursue some as an additional IP bulwark against competition. But the current environment demands realism. For many high-tech startups, the cost and uncertainty of the patent system make it an unreliable foundation for IP strategy. Trade secrets, by contrast, are available immediately, protect a far broader range of information, cost relatively little to establish, and endure for as long as the company maintains its discipline. The price of that durability is vigilance, and the steps outlined above are where that vigilance begins.