Protecting Trade Secrets, Patents, or Both During Covid-19

After nearly a year of remote work spurred by Covid-19, along with an economic downturn and high rates of corporate turnover, theft of IP, including trade secrets, will inevitably increase. The need for an improved understanding of patents, trade secrets, and the interplay between the two is more important than ever.

This will remain true even after the pandemic, as aspects of many remote work-from-home policies, along with their increased confidentiality risks, will likely remain intact. Protecting trade secrets alongside patents will thus remain increasingly vital, even as companies continue to procure and enforce patents.

As we begin 2021, companies need a robust strategy that addresses the role both trade secrets and patents might play in protecting their IP. In the U.S., about 3,000 patent cases are filed each year, and with the 2016 enactment of the Defend Trade Secrets Act (DTSA), trade secret litigation has increased to more than 1,000 cases annually. And dozens of cases raising both trade secret and patent claims are filed each year, including more than 50 such cases in 2020 alone.

Two Decisions Show Interplay Between Patents, Trade Secrets

In the wake of these trends, more and more cases will highlight the interplay between patents and trade secrets in U.S. litigation. Recent cases in the Federal Circuit and in at least one regional circuit underscore these interplays.

One such interplay is between the public disclosure function of patents and the need to secure trade secrets. In December, the U.S. Court of Appeals for the Ninth Circuit held in Attia v. Google that a DTSA plaintiff lacked standing against Google because the alleged trade secrets were “extinguished” by the publication of Google’s patent applications covering the same technology.

In that case, architect Eli Attia had voluntarily provided patent assignments and entered into statements of work with Google years earlier. There, the plaintiff perhaps underappreciated the impact that patents might have on a future trade secret claim as a result of patents’ public disclosure function. This underscores that a patent-heavy strategy could foreclose trade secret protection.

Another interplay between patents and trade secrets is that between ownership of trade secrets and inventorship of patents relating to the same technology. In the April 2020 decision in Intellisoft v. Acer, for example, a federal district court had held that Intellisoft did not own trade secrets simply because it did not prove ownership of a related Acer Inc. patent.

As the Federal Circuit held, however, there is no requirement of proving inventorship of a patent to prove ownership of a trade secret. It vacated the ruling against Intellisoft. Acer, who had raised the inventorship defense against the trade secret claim, perhaps overestimated the importance of patents there.

To be sure, inventorship of related patents may be somewhat relevant to the question of trade secret ownership, but it was not necessarily relevant. It certainly is possible to have a trade secret strategy that does not depend on patents.

Questions to Help Understand Tradeoffs

Those two examples reflect some of the interplay between patents and trade secrets, and on whether companies might want to rely on patents, trade secrets, or both for IP protection. In deciding on such a strategy, and whether on defense or offense, companies and their employees will need to be armed with an understanding of even more tradeoffs.

For example, trade secrets can cover almost anything that has value and is maintained under lock and key, while patents cover an (increasingly limited in light of Section 101) set of “patent eligible” subject matter. Does your IP fall within a patent-eligible category, or is it something that is solely covered by trade secrets?

Trade secrets are maintained in-house and are not disclosed to a public body, while patents must be disclosed publicly and granted with the U.S. Patent and Trademark Office. Is your company comfortable with the risks associated with public disclosure and reverse engineering that might come with securing a patent?

Trade secrets can be virtually unlimited in duration unless a statute of limitations applies, while patents expire 20 years after they are filed. And trade secrets can be reverse engineered or independently developed by competitors, while patents cannot. Does your company have IP that might be worth protecting in perpetuity and that might be difficult to reverse engineer (think, Coca-Cola), or is it something that might be copied and is worth protecting for a shorter generation, such as a technology that might be embedded in the latest smartphone?

These tradeoffs underscore that, depending on context, an emphasis on patents or trade secrets in one’s IP portfolio is more important for particular companies. In most cases, both forms of IP will be an important part of any company’s IP portfolio. Only with an understanding of the tradeoffs and appropriate strategies can companies develop effective strategies for developing and maintaining those portfolios.

These strategies include offensive strategies for logging, maintaining, and keeping track of a company’s patents and trade secrets, as well as defensive ones that ensure that a company is not developing or using technology that infringes patents or trade secrets.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

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Christopher A. Suarez practices patent, copyright, and trade secret litigation at Steptoe & Johnson LLP where he represents clients in a wide range of technology areas, including computer, software, and mechanical technologies.