Dec/Jan 2017 today’s gener al counsel
Intellectual Property
Patent or Trade Secret?
Two Ways to Protect Your Valuable IP By Peter Brody and Darrell Stark
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n recent years patent law has undergone drastic change. For example, patents are increasingly subject to challenge for covering ineligible subject matter under 35 U.S.C. § 101. In addition, the rise of post-issuance proceedings in front of the U.S. Patent & Trademark Office’s Patent Trial and Appeal Board (PTAB) has resulted in the invalidation of many issued patents. While patents offer certain advantages for protecting innovations, another important type of IP protection is also generally available: trade secret protection. Trade secret law has also changed drastically this year, as a result of the enactment of the Defend Trade Secrets Act (DTSA), which created the first-ever federal civil trade secret law and opened up U.S. district courts to original jurisdiction over cases brought under that statute. In view of these developments, businesses should consider reevaluating their strategies for protecting IP rights in their innovations and other confidential information. Trade secret protection might be a more appropriate avenue than patents in certain circumstances. This article will help companies decide between seeking a patent for an innovation and maintaining the innovation as a trade secret, when both forms are viable means of protection.
TYPES OF PrOTEcTablE INFOrMaTION
An innovation that seeks a patent must be disclosed to the public, and it must be novel and non-obvious. A patent can be granted on “any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof.” Laws of nature, natural phenomena and abstract ideas are not patent-eligible. On the other hand, trade secrets can very broadly comprise all forms and types of information – financial, business, scien-
tific, technical, etc. – whether tangible or intangible, and no matter how it is stored or memorialized. It has to derive independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by, another person who can obtain economic value from its disclosure or use. Under the DTSA, trade secret information must be subject to “reasonable measures to keep [the] information secret.” Thus, a business can take advantage of trade secret protection for almost any type of valuable information, whereas patent protection, though still quite broad, is limited to specific types of discoveries. Because of the confidential nature of trade secrets compared to the public nature of patents, a choice must be made to pursue one or the other. The primary benefit of a U.S. patent is the right to exclude everyone else from making, using, selling, offering to sell, and importing the patented innovation within the United States. Protection for patents lasts, in general, 20 years from the filing date. The patent owner has the right to license the patent to others, but if another party practices the invention in the United States without a license the patent owner can sue for infringement, regardless of whether the other party intended to infringe, or even knew about the patent. A key benefit to a trade secret is that the information is uniquely known, and thus uniquely valuable, to the owner. Others, especially market competitors, cannot take advantage of the information. Moreover, the trade secret can receive perpetual IP protection as long as it remains secret (and retains its independent economic value). The owner has the right to license use of the trade secret
to others, as long as proper restrictions on its confidentiality are in place – e.g., through non-disclosure agreements. If a trade secret is disclosed or used without consent, the owner has the right to sue for misappropriation. Unlike patent infringement, this recourse is not limited to the United States. On the other hand, in contrast to patent infringement, misappropriation requires guilty intent (mens rea). There is no such thing as “innocent” patent infringement. Many of the same remedies are available for both types of IP. In both patent and trade secret law, compensatory damages in the form of reasonable royalties or lost profits, enhanced damages, injunctions and attorneys’ fees, are available when warranted. There are, however, important differences in the types of damages or fees that can be sought and how to prove they are warranted. For example, trade secret owners can seek disgorgement of the