Inventors Digest - December 2015

Page 43


Patent litigation rules that make it harder to sue are changing December 2015. Federal court rules have made it easy to file a patent suit—until now. The Judicial Conference and the Supreme Court have adopted rule changes that bring pleading standards for patent cases in line with other federal cases, making it harder to get into court. These changes will automatically begin this month—without legislation.


. . . And to make it harder to abuse lawsuits. The rule changes will also make it harder to abuse the discovery process—often the most burdensome and expensive part of a lawsuit—by making the party that is requesting documents or information pay the costs of getting the information. That party will only be able to request information that is “proportional” to the needs of the case. This will help stop abusive litigants from burying their opponents in paperwork just to force an unfair settlement.


The Federal Trade Commission and the states are fighting abusive patent demand letters. The FTC and states are aggressively combating abusive patent demand letters to protect small businesses and consumers. For example, last year the FTC and the New York attorney general announced settlements with MPHJ Technology Investments, LLC that stopped it from sending deceptive letters concerning its patents. What are the results of this work? New patent cases dropped 18 percent from 2013 to 2014, and in the first half of 2015, the number of plaintiffs filing patent cases neared its lowest level in years—and legislation had nothing to do with it. Alice and Octane Fitness are only one year old, and the changes take effect December 2015. Congress should focus on protecting innovative enterprises, not doubling down on controversial legislation that would hurt innovators and our economy. Jeffrey Birchak is associate general counsel and vice president of intellectual property at Fallbrook Technologies.

A Fear of Trade Secret Trolls Is Completely Unfounded (cont. from page 37) Jim Pooley, author of a well-known treatise on trade secrets, as well as the recently published book Secrets: Managing Information Assets in the Age of Cyberespionage. Speaking on October 14, 2015 during an LES webinar on the pending trade secret legislation, Pooley went on to say, “Trade secret claims just do not work that way.”

Patents vs. Trade Secrets

Let’s peel back the layers even further and explore the differences between patents and trade secrets, after which it will be clear that there is absolutely no legitimate reason to worry about trade secret trolls. Under current patent laws, innovators are granted rights to a claimed invention. Those rights are against the world. That means that once a right is given to an inno-

these individuals and small companies have no real way to know whether they have infringed. Bad actors use judicial inefficiencies and scare tactics to force small payments from numerous people and companies they don’t know and have had no relationship with. It is also critical to understand that trade secrets do not protect information in and of itself. If I create valuable information and keep it secret, then I own a trade secret. If you create the same valuable information and keep it secret, you likewise have a trade secret. My trade secret rights cannot prevent you from doing anything on your own. A trade secret, properly preserved, protects the owner of the secret information from misappropriation (i.e., taking of the information)

“You cannot sue someone unless they have stolen the information from you or they were a party to a confidential relationship.” — JIM POOLEY vator in a patent, that innovator can prevent others from making, using, selling, offering for sale or importing his invention. These rights attach regardless of whether the alleged infringer knows about the patent or the infringement is unintentional. Patent infringement is a strict liability offense; it requires no fault, nor a previous relationship or tie between the parties. The heart of the patent troll model is that anyone could knowingly or unknowingly infringe a patent. The same is not true of trade secrets. Unlike patents, trade secrets do not provide a right against the world. Trade secrets protect valuable business information that is not generally known. This doesn’t mean that trade secrets cannot be known by anyone, but rather that all those who know of the secret information have a legal obligation to maintain the information as confidential. Therefore, trade secret actions are, by their very nature, between parties that have some kind of business relationship, operate within the same industry or have some nexus. The patent troll model has thrived by threatening many thousands of individuals and companies with patent infringement and then preying on the fact that

through improper means. “You cannot sue someone unless they have stolen the information from you or they were a party to a confidential relationship,” Pooley explains. “That personal relationship that is required means that it is simply not possible to build a troll business.”

Trade Secret Misappropriation

The pending legislation specifically states that reverse engineering and independent derivation are not legally actionable as a trade secret misappropriation. That means in order to be liable for trade secret misappropriation, there must be improper behavior based on a relationship or nexus with the party claiming ownership of the trade secret. The proposed legislation specifically requires misappropriation of the trade secret by improper means (i.e., theft, bribery, espionage). Therefore, a fear of widespread litigation and the rise of trade secret trolls is not only wholly unfounded, but fundamentally misunderstands the very nature of a trade secret dispute. A trade secret is a very different kind of right. You simply can’t use a trade secret in the same way that patent trolls have used patents to pursue people. DECEMBER 2015 INVENTORS DIGEST


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