[Startup Must-Know Laws] Startup Choices for Protecting Technological Innovation

How Startups Can Protect Their Technology:
Patent Rights vs. Trade Secrets

Attorney Ahn Hee-cheol

Startups must gain growth opportunities through collaboration with large corporations despite limited funds and resources. However, in the process, they inevitably have to disclose their technology and ideas, which often exposes them to technology leakage and trade secret infringement. How can startups protect their technology? The answer to this question can be found in two methods: patent rights and trade secrets.

Patent rights are a system that grants exclusive rights for a certain period in exchange for disclosing technology. The filed technology is legally protected, but the technical details must be disclosed in detail during the process. On the other hand, trade secrets protect technology by keeping it confidential without disclosing it externally. Coca-Cola's recipe is a good example of maintaining secrecy for decades to secure a monopoly position against competitors.

Patent rights are protected only in the registered countries and are recognized only within the scope specified in the claims of the invention. In contrast, trade secrets can be protected worldwide as long as they remain secret without restrictions between countries. Trade secrets are more advantageous when the technology cycle is short. In rapidly changing industries such as IT technology or software, maintaining secrecy and securing market dominance is effective. Conversely, if the technology cycle is long or the technology can be imitated through reverse engineering, protecting it through patent rights is appropriate.

Since patent rights require disclosing technology, competitors are more likely to analyze and develop similar technologies. However, this also proves the startup's value and acts as an advantage in attracting investment. On the other hand, trade secrets do not require separate registration procedures or costs, and protection is unlimited as long as secrecy is maintained.

To strengthen technology protection, startups should consider several practical measures. It is essential to sign a Non-Disclosure Agreement (NDA) during collaboration to establish legal measures to prevent technology leakage. Additionally, the number of people who can access the technology should be limited, and internal security systems should be strengthened.

An effective strategy is to use a combination of patents and trade secrets. In Tesla's case, some technologies are disclosed through patents while core technologies are kept as trade secrets to control the pace of innovation. Startups must maintain competitiveness through strategic decisions on technology protection methods. It is necessary to clearly understand how to protect technology and ideas and choose the optimal method according to each situation.