Patents; Many companies will forgo patents in an effort to safeguard their trade secrets.

A COUPLE who bought their house nearly 30 years ago from Harland Sanders, founder of Kentucky Fried Chicken, learned last week that a handwritten note they discovered in their basement in 1999 did not reveal Mr. Sanders's famous secret recipe.

While the couple, Tommy and Cherry Settle, of Shelbyville, Ky., may have been disappointed that the scribbled list of 11 herbs and spices was not the legendary fried chicken formula, they were probably relieved to escape a lawsuit initiated by the KFC Corporation, owner of the chicken fast-food chain.

The Settles had asked KFC, which is owned by Tricon Global Restaurants Inc., to authenticate the note so they could auction it. Instead, the company sued to stop any sale. But after examining the note, KFC announced it was ''nowhere close'' to the 62-year-old secret recipe and dropped the lawsuit.

If KFC's initial reaction seemed harsh, that is because the Colonel's Original Recipe, as it is known by trademark, is locked in a company safe and treated as a closely guarded trade secret. The ingredients are said to be known only to a handful of employees who have signed confidentiality pledges.

As with Coca-Cola's syrup formula or the McDonald's Big Mac special sauce, the secrecy surrounding the recipe has become an inherent part of its value. And that means a company like KFC has the law on its side in defending its trade secret -- and plenty of incentive to protect the mystery that has become one if its most valuable assets.

The recipe, like many other business practices, resources or products, is intellectual property. But it is the kind of property that is better served as a trade secret than as a patent or copyright. That is because a trade secret can grant proprietary rights in perpetuity, or for as long as the owner is able to maintain the secrecy. A patent, on the other hand, has a shelf life of 20 years from the time an application is filed. And while a trade secret can remain an enigma, a patent application requires the inventor to describe exactly how his invention works.

Trade secrets can include an intangible process, technique or method. A trade secret can be a quantifiable design, composition, formula or pattern. It can be a physical device or mechanism. Chemical formulas, manufacturing processes or business information can be considered trade secrets.

And even if the ingredients in a chemical recipe like a soft drink syrup or fried chicken batter are discovered, the ratios involved or the way they are combined can remain a trade secret.

The KFC recipe is one of the more famous trade secrets. But such intangible assets are an increasingly important part of the United States economy, especially in the areas of telecommunications, software and biotechnology. A source code or biochemical formula can be as valuable to a company today as minerals or real estate were a generation ago.

And while the digital age has revolutionized business practices, it has also created new ways to steal or transfer trade secrets that can be easily scanned, copied and downloaded.

To protect trade secrets, many owners deliberately choose not to patent their ideas, since patent applications must include an explanation of how to make and use the invention.

The advantage of applying for a patent, of course, is that in return for such disclosure the inventor wins a patent that he can use to stop anyone from infringing on his idea.

And until last year, inventors could rely on the Patent and Trademark Office to keep a patent application secret until it was granted. If the application was rejected, the invention remained confidential.

But last year, the United States initiated a new practice of publishing patent applications 18 months after they are filed.

Anyone who makes commercial use of a trade secret and later decides to apply for a patent must do so within a year. After that, the invention is no longer eligible for a patent. An idea can, however, have a copyright and also be a trade secret. The United States Copyright Office allows material to be divided so that some parts can be revealed while others are kept secret.

Since trade secrets are intellectual property, courts have ruled that software algorithms, customer lists, financial data, Wall Street formulas, names of suppliers and even blueprints can qualify. What makes them unique as intellectual property is the economic value derived from their being kept secret, and corporations have been known to spend millions to defend them.

Or forsake millions. In the 1970's, Coca-Cola withdrew from India rather than comply with a law in that country that would have compelled the soft drink manufacturer to transfer technology -- in this case, its syrup formula -- to an Indian-owned company.

There are disadvantages to trade secrets, compared with patents, because just about anything can be analyzed, reverse-engineered and copied. And patents and trade secrets are not equals in a courtroom; patents are accepted as valid, whereas trade secrets must be authenticated first.

To defend a trade secret under most states' laws, the owner has to show that a reasonable effort has been made to maintain the secrecy. Companies can require employees, suppliers and subcontractors to sign nondisclosure, confidentiality or noncompete agreements. They can divide a process or formula among workers, making sure that no one has knowledge of the entire secret.

In most cases, the courts look at how many people inside and outside a business know about the secret, what kind of precautions the owner takes to preserve the secrecy, the value the owner gains against his competitors from holding the secret, and how much trouble and expense someone else would incur to crack the secret.

Patents, trademarks and copyrights fall under federal law, but trade secrets are covered by state law. That practice can be traced to the 19th century, when common law protected trade secrets. Most states have adopted specific laws since then, which differ from place to place, though a few still use common law. In 1996, the Economic Espionage Act made theft of trade secrets a federal crime.

Despite the increasing importance of trade secrets to world economies, there is no global law on trade secrets, or even a universal definition of a trade secret. Patents, copyrights and trademarks are addressed in comprehensive international legal treaties; trade secrets are not included. What can be protected as a trade secret differs from country to country and, in some nations, trade secrets have no legal standing at all.

Global ''harmonization'' of intellectual property laws has been a top American policy priority in recent years, but trade secrets are still at a disadvantage. Germany and Japan require public trials for lawsuits, for example, and anyone seeking redress must first reveal his trade secret. In other countries, confidential data is revealed when submitted for government review of safety or effectiveness.

Back in Kentucky, the Settles said they had not asked KFC for any money, but only wanted the company to authenticate the recipe they found in their basement. But secrecy plays a a substantial role at KFC.

The company most certainly would have persisted in its lawsuit, despite the availability of countless recipes claiming to mimic the fast-food chain's products. An online recipe archive at the University of California at Berkeley has a search category called ''the Kentucky Fried Chicken Copycat Recipes area,'' which features one titled ''The Colonel's Secret.''