The Interplay of Patents and Trade Secrets in Protecting IP

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Orrick - Trade Secrets Group

Often companies are faced with a dilemma in protecting their IP—should the company disclose its IP to the world and seek a patent that will protect its IP for a set number of years? Or, should the company keep the IP a secret perpetually and protect it through state and federal trade secret laws? The answer is typically not one or the other; but, instead, a complex combination of the two. This article outlines a few thorny issues that can come up when balancing these two types of IP protections:

Provisional Patent Applications.  Filing a provisional patent application in order to preserve an earlier invention date while evaluating whether to proceed with the costly patent prosecution process is an important tool in the post-AIA first-to-file system.  This grace period can also allow a company leeway in deciding whether it wants to keep the information in that provisional patent application a trade secret while at the same time preserving an earlier invention date.  Because the USPTO keeps provisional patent applications confidential and does not publish them, if companies take other reasonable measures to keep the information confidential, the trade secrets contained within the provisional patent application should remain a trade secret, unless and until the company decides to proceed with a non-provisional patent application.  35 U.S.C. § 122(a); id. at § 122(b)(2)(iii) (provisional patent application is not published and kept confidential).   Courts typically find that information contained in patent applications lose their trade secret status upon the date of publication—and not the date of disclosure to the patent office.  Filing a provisional patent application can help a company articulate its trade secrets and establish its value to the company; however, there is still a risk that a defendant will argue that the company took insufficient secrecy measures due to the disclosure to the patent office.

Seeking a Patent on an Old Trade Secret.  USPTO guidance, congressional commentary on the AIA, and the plain reading of post-AIA 35 U.S.C. §102 suggest that a company should be able to keep something a secret for as long as it likes and still be able to file a patent application.  See, e.g., 35 U.S.C. §102(a)(1)(“a person shall be entitled to a patent unless—(1) the claimed invention was patented, described in a printed publication, or in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention.”) (emphasis added).  The focus of 35 USC §102(a)(1) is public accessibility.  See, e.g., https://www.uspto.gov/web/offices/pac/mpep/s2152.html (“public use under AIA 35 U.S.C. 102(a)(1) is limited to those uses that are available to the public.”).  However, despite the current USPTO guidance suggesting that it will issue a patent even where an inventor uses his or her invention secretly for more than a year, there is a chance that a court may nevertheless invalidate the patent.  The Supreme Court recently ruled that post-AIA 35 U.S.C. §102 did not alter the meaning of “on sale,” based on the fact that Congress used the same “on sale” language in both the pre and post AIA 35 U.S.C. §102 statute.  The same reasoning may apply to the interpretation of “public use,” which is also used in both pre and post AIA 102.  And, pre-AIA, an inventor’s own prior secret commercial use could be considered prior art.  Therefore, there is risk in keeping an in-use trade secret confidential for more than a year prior to seeking a patent on it.

Disclosing Best Mode.  In order to obtain a patent, 35 U.S.C §112 requires that an inventor disclose a written description of the invention, enablement of the invention, and the best mode for carrying out the invention.  Traditionally, the best mode requirement prevented an inventor from obtaining a patent, while keeping the “secret sauce,” i.e., a preferred embodiment of the invention, a secret.  Pre-AIA, if an inventor kept a trade secret related to his or her invention out of the patent, an alleged infringer could argue the patent should be invalidated for failure to disclose the best mode.  In 2011, the AIA amended 35 U.S.C. §282 (the statute governing defenses to patent infringement and invalidity) to provide that “the failure to disclose the best mode” of an invention “shall not be a basis on which any claim of a patent may be canceled or held invalid or otherwise unenforceable.”  The inclusion of the “otherwise unenforceable” language suggests that even claims of inequitable conduct before the patent office based on failure to disclose best more are foreclosed.  The AIA, however, did not change the requirement to disclose best mode.  Therefore, while a company must still disclose the best mode to the USPTO in order to obtain a patent, there does not appear to be any repercussion in litigation for failing to do so.  And, at least one district court struck an affirmative defense trying to advance this theory post-AIA.  This suggests that there is less risk to a company seeking to protect their IP through both trade secrets and patents in the same area of technology.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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