Introduction

[Relationship with trade secrets law] The previous chapter discussed how the law assists commercial actors to preserve secrets, including innovative products or processes. But relying on trade secrets law leaves the innovative firm exposed to two major risks of subversion: by independent invention and by reverse engineering by competitors. The law of confidence recognises neither property rights nor anything approaching a monopoly in secrets. It has particular drawbacks for a firm investing substantial resources in innovation, where commercial exploitation exposes it to the risk of reverse engineering and subsequent imitation.

Trade secrets law is also beset by problems of demarcation and by uncertainty. Patents law addresses these problems by ex ante demarcation of subject matter and grant of exclusive rights, more akin to a real monopoly: neither reverse engineering nor independent invention nor publication gives competitors the right to use a patented invention – even if and when in genuine ignorance of the patentee's invention or the patent. This absolute right to prohibit commercial exploitation has potentially serious implications for competitors, so a patented invention needs to be carefully identified, demarcated and circumscribed, and a system devised to alert others of the existence of legal rights (a public register). Furthermore, some quality assurance is essential to ensure that whatever attracts such extensive rights meets certain standards of innovativeness, so that the system induces dynamic competition and is potentially welfare-enhancing.