Question

In: Economics

Why would you be interested in protecting your chosen business from being copied by others’? Would...

Why would you be interested in protecting your chosen business from being copied by others’? Would you want to patent your idea or would you keep it a trade secret? Explain your choice in detail!

Solutions

Expert Solution

The firms should be concerned about protecting their business from being copied by others because :-

1) Without protecting idea of their business, a firm cannot take full benefits of their inventions and Research and Development.

2) A different production idea for a certain innovation that is protected and cannot be copied by others significantly contributes in increasing the market position of a company as the company can reap higher profits when it works as a monopoly.

3) The company if protects its innovative ideas through patents, it has an incentive to earn profit through selling licences and franchise of its own.

4).Protecting its trade secrets an innovative ideas helps to build a Goodwill for the company which serves as an asset for the company and has a great market value in terms of monetary estimation .

5) Protecting their best selling product which includes premium ranges helps to counterfeit imitation of their products through effective legal actions as it will help the firm to retain its customer base at premium prices that they offer in order to earn high incentives .

Patents are a 20 year protection for an invention or innovation in order to enjoy complete Monopoly over production of a certain product while A trade secret can last forever. There is no legal requirement which binds it to be a secret only for a certain period of time .For obtaining patent it is important that the the person who is demanding patent for its invention completely discloses the whole production of the innovation process so that nobody is able to copy that for the next 20 years, however trade secret is a secret that is kept hidden from everyone except few important executives and thus has a major risk of being replicated and used by someone else. To understand what should a business choose, the firm should make a detailed analysis about whether the invention will be useful beyond 20 years or not. If the invention will prove to be beneficial beyond 20 years of time it is better to keep it as a trade secret instead of getting a patent. If it is possible for the other companies to replicate the process, then it would be a better option to patent of that invention instead of keeping it as a trade secret. It must be noted that patents have a protection advantage of limited time of only 20 years and incurrs high registration cost and requires complete public disclosure of the innovation which can be replicated by anyone after 20 years .However A trade secret has an immediate effect with no cost and legal formality requirement . It can be we used beyond the period of 20 years, however it can be replicated by anyone who could choose to patent it creating a disadvantage for the original inventor . Thus a trade secret can be said to be more difficult in terms of enforcement.

A firm should look at the the nature of its product, it's sustainability over years, chances of replication of its innovative idea, and the budget it has in order to get the the idea patented for deciding whether it should go for the option of trade secret or patent.


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