Written by: Ephraim Zachary Heiliczer, Ph.D
The economics of modern warfare have fundamentally changed – and with them, the entire intellectual property landscape for defense contractors. In the current war with Iran, the U.S. and Israel face a devastating cost equation: In less than two weeks of fighting, the U.S. expended dozens of THAAD interceptors, representing a large amount of a stockpile that took years to accumulate and will require several more to replenish. The math is stark: each interceptor costs over $10 million to destroy an Iranian “Shahed” drone worth $20,000 in commercial aircraft parts. Iron Dome missiles ($50,000 each) chase Hezbollah rockets ($500 each). David’s Sling interceptors ($1 million) and Arrow missiles ($3+ million) face similar asymmetric threats. This new reality demands that innovators carefully evaluate which IP protection strategies best serve their competitive position.
A critical reality faces defense innovators: patents remain the essential foundation for protecting technology and establishing legal rights, but in the defense sector, they are insufficient on their own. Filing a patent provides enforceable intellectual property rights, enables licensing opportunities, and establishes your innovations in the public record – all critical advantages. However, patents also publish your system’s blueprint to the entire world, including adversaries who may reverse-engineer it in jurisdictions where IP rights lack protection. The solution is not to avoid patents, but to combine patent protection with complementary strategies – particularly trade secrets – to create multi-layered defense of your competitive advantage.
The challenges compound from there. When combat equipment is captured, physical possession reveals design specifications and source code. Yet patents offer irreplaceable advantages: they provide offensive legal weapons against infringers, enable licensing revenue streams, establish prior art, and protect innovations even after public disclosure. The key is building additional protection layers on top of your patent strategy – combining patents with trade secrets, technical protections, and collaborative licensing frameworks to create comprehensive IP protection that no single mechanism can provide alone.
LUCAS Drone. Reverse engineering of the Iranian “Shahed”
Consider what happened to America itself. In late 2025, the U.S. military – the world’s technological superpower with a trillion-dollar defense budget – announced it had developed the LUCAS drone by reverse-engineering a captured Iranian “Shahed.” American engineers analyzed Iran’s low-cost design and built an improved version with advanced guidance systems. When the Pentagon resorts to copying Iranian technology assembled from commodity parts, it raises critical questions about which IP protection strategies deliver genuine competitive advantage in asymmetric warfare scenarios.
The Method Ukraine Developed
Ukraine grasped this reality faster than anyone. After four years of war with Russia, Ukraine developed the Sting interceptor drone, costing thousands of dollars per unit with exceptional interception rates. By early 2026, Ukraine’s production capacity reached thousands of interceptor drones daily, hundreds of thousands annually. The paradigm has shifted: instead of one centralized factory producing dozens of interceptors per year, hundreds of distributed small and medium manufacturers now produce hundreds of thousands to millions of drones. This production model demands fundamentally different IP protection strategies than traditional defense manufacturing.
Ukraine’s decentralized production architecture is reshaping global defense procurement. Local teams across the country assemble drones from commercial components, open-source software, and 3D-printed frames. Industrial parks and university labs have converted to drone production centers, creating near-total supply chain independence. Most components are domestically sourced; some drones use 100% local parts. The result? Gulf states facing Iranian and Houthi drone swarms are now bypassing Western contractors entirely, turning to Ukraine instead. They recognize that traditional high-cost defense systems cannot economically sustain mass drone warfare.
However, there is a strategic risk few are discussing: while Ukraine’s low-cost, decentralized model dominates today’s conflict, it may create a dangerous innovation deficit for tomorrow’s war. As military technology evolves between conflicts, over-reliance on inexpensive distributed production without simultaneous investment in advanced R&D could leave countries technologically obsolete when the next generation of threats emerges. The real challenge is balancing today’s production economics with tomorrow’s innovation imperatives.
How to Still Preserve Innovation
How do defense innovators protect their competitive advantage in this transformed landscape? The solution requires a strategic approach combining multiple IP protection mechanisms, each tailored to specific technologies and competitive requirements:
- Deploy trade secrets for core proprietary advantages. For technologies where competitive advantage derives from confidential processes, algorithms, or formulations not discernible from the final product, trade secrets offer superior protection to patents. Unlike patents, trade secrets never expire and require no public disclosure. Critical manufacturing processes, software algorithms, material compositions, and supplier relationships should be protected as trade secrets. This protection is particularly effective for innovations that competitors cannot reverse-engineer from examining or capturing the final product.
- Implement rigorous trade secret protection protocols. Trade secrets only receive legal protection when you take reasonable measures to maintain their secrecy. This requires: (a) comprehensive non-disclosure agreements (NDAs) with all employees, contractors, and partners accessing confidential information; (b) physical and digital access controls limiting exposure to need-to-know personnel only; (c) clear confidentiality policies and regular training on identifying and protecting trade secrets; (d) secure storage systems with audit trails tracking access to confidential information; (e) exit procedures reminding departing employees of ongoing confidentiality obligations and recovering all confidential materials; (f) contractual provisions in supplier and manufacturing agreements protecting proprietary specifications. Without these protocols, courts will not enforce trade secret rights when misappropriation occurs.
- Build a robust patent portfolio as your foundation, then layer additional protections. Patents should be your primary IP strategy for all innovations. They establish enforceable legal rights, create defensive portfolios that deter competitor litigation, generate licensing revenue, and establish prior art protecting your design freedom. File patents aggressively and strategically across your technology platform. However, recognize that patents alone leave gaps: they disclose technical details publicly and provide limited protection against reverse-engineering in jurisdictions with weak IP enforcement. Therefore, while building your patent portfolio, simultaneously protect non-disclosed elements through trade secrets. Patent the innovations that define your product’s capabilities and architecture; protect as trade secrets the proprietary processes, algorithms, material formulations, and supplier relationships that provide competitive manufacturing advantages. This layered approach delivers the legal enforceability of patents plus the confidentiality advantages of trade secrets.
- Utilize technical protection systems as industry standard. Encryption, remote kill-switch capabilities, and modular architecture must become non-negotiable requirements, rendering captured equipment useless to adversaries. Technical protections complement legal IP strategy – whether patents or trade secrets – by preventing reverse-engineering from physical possession. These protections serve as the last line of defense when legal protections prove unenforceable across borders.
Policy Reform: Expand Classified Patent Systems to Enable Defense Commercialization with Maintained Secrecy
The recommendations above address how companies can protect their innovations within the current legal framework. However, a critical policy reform is needed to fundamentally transform defense IP: expanding classified patent protection while simultaneously enabling commercialization despite secrecy.
Currently, classified patents allow IP protection without public disclosure, but severely restrict commercialization opportunities. This creates a false choice: either protect national security through secrecy (classified patents) or enable commercial markets through public disclosure (standard patents). This binary framework is obsolete.
Modern defense requires a hybrid system: classified patent registrations providing full IP protection and legal enforceability while enabling controlled commercialization to vetted defense contractors and allied nations without public disclosure. This mechanism must extend to all dual-use technologies. Every standard patent registration currently exposes detailed engineering specifications to adversaries. Aggressive deployment of classified patents with commercialization frameworks eliminates this exposure while preserving both innovation incentives and market opportunities.
The policy reform should establish:
Classified patent registrations with tiered access levels – allowing patent holders to commercialize technologies to security-cleared manufacturers and allied governments without publishing specifications publicly;
Streamlined classified patent prosecution – reducing the current multi-year delays that make classified patents commercially impractical;
International classified patent cooperation frameworks – enabling allied nations to recognize and enforce each other’s classified patents without requiring public disclosure;
Fair compensation mechanisms for government use, ensuring that classified patent holders receive equivalent licensing revenues to what standard patents would generate, preventing the financial penalty that currently discourages classified patent election.
If your technology the any defense application, defaulting to classified protection with commercialization access should become standard practice. This policy change would preserve technological advantages while enabling the rapid scaling that modern conflicts demand. Without this reform, defense innovators face an impossible choice between protecting national security and building sustainable businesses.
Additional reforms should eliminate patent exhaustion in the defense sector. Current IP law allows “patent exhaustion” – once you sell a patented product, you lose control over subsequent transfers, and buyers can freely resell to anyone, including adversaries. This is catastrophic for defense technologies. Eliminating patent exhaustion in defense creates legal liability throughout the supply chain: anyone enabling component diversion to embargoed nations faces direct litigation exposure.
Further, implement collaborative licensing pools and compulsory emergency frameworks now – the COVID-19 model for defense. The pharmaceutical industry demonstrated during COVID-19 how competitors can rapidly collaborate through licensing pools while protecting each company’s IP rights and maintaining confidentiality. Companies shared patents and know-how through structured agreements with fair compensation mechanisms, enabling multiple manufacturers to produce vaccines simultaneously without eliminating IP protections or exposing trade secrets. The defense sector must adopt this model immediately. Establish industry-wide licensing pools where participating companies contribute patents to a common framework, receive fair licensing fees based on utilization, and can access other members’ patents during emergencies – all while maintaining strict confidentiality protocols for trade secrets and proprietary processes. Compulsory licensing allows governments to authorize third-party production of patented technologies during conflicts with guaranteed compensation to patent holders. Instead of single-source bottlenecks, multiple contractors could simultaneously produce interceptors, dramatically scaling capacity during conflicts while preserving IP rights and revenue streams. This enables the Ukrainian distributed-manufacturing model without destroying innovation incentives. The question is whether you establish these collaborative frameworks proactively – protecting confidentiality and ensuring fair compensation – or have them imposed during the next crisis under terms you cannot control.
The stakes have never been higher: Patents remain the indispensable foundation of IP protection in defense, but they are no longer sufficient alone. The defense sector needs sophisticated IP frameworks that strategically layer patents as the legal foundation, trade secrets for competitive manufacturing advantages, collaborative licensing pools modeled on COVID-19 pharmaceutical cooperation for rapid wartime scaling, and technical protections as the final barrier against reverse-engineering. Companies and nations that master this comprehensive, multi-layered approach – where patents provide the legal framework, trade secrets protect confidential advantages, licensing pools enable collaboration with fair compensation, and technical measures prevent unauthorized access – will dominate the next decade of defense procurement. Those relying exclusively on any single protection mechanism will find their competitive advantages vulnerable. The question is not whether to transform the IP approach it whether to be a leader of the transformation with a comprehensive strategy that protects both legal rights and confidential competitive advantages, or fall behind with a one-dimensional approach.
