When is an invention disclosure or patent application a trade secret?

Philip Alford, MJLST Staffer

Patents and trade secrets are often presented as a dichotomy of legal protections, distinguished by disclosure versus secrecy. Under the patent bargain, the government offers patent protections in exchange for the public disclosure of new and useful inventions. 35 U.S.C. §101. Various trade secret protections, on the other hand, are available when a party has suffered harm from the misappropriation of secret information. See, e.g., 18 U.S.C. §1863 and Minn. Stat. § 325C et seq. While the two areas of law are complementary, they do not perfectly align. Although trade secrets generally refer to information, this information can be embodied by a patented article, a method, or in one case, a pineapple. See Del Monte Fresh Produce Co. v. Dole Food Co., 136 F. Supp. 2d 1271 (S.D. Fla. 2001).

Trade secret protections are lost as soon as the material is disclosed to the public, including the publication of patent applications by patent offices occurring 18 months after first filing. This is the case even if the patent application never matures into a patent. Inventors should be aware that giving up secrecy in exchange for pursuing a patent is not a guaranteed exchange. To obtain a patent, inventors need to convince the Patent Office that their invention is (1) new, (2) a useful and non-obvious contribution to the art, and (3) described in sufficient detail so that others would be able to make and use the invention. 35 U.S.C. §§101, 102, 103, 112. For this reason, inventors should undertake at least a preliminary analysis to determine whether the requirements for a patent are reasonable satisfied before making any decision to give up potential trade secrets. This analysis would typically involve finding a patent attorney, who can together with the inventors to conduct a search, review for potentially relevant art, and best understand the advantages of the invention before drafting the patent application.

Trade secret protection cannot be assumed as a default. Not all secret inventions are eligible for trade secret protections—even inventions that would otherwise satisfy the requirements for a patent. A secret invention is only eligible for trade secret protection if (1) it is secret, i.e., not generally known or readily ascertainable;  (2) it confers an economic or competitive advantage; and (3) it is subject to reasonable efforts to maintain secrecy. See 18 U.S.C. §1863 and Minn. Stat. § 325C et seq. If inventors are considering whether to forgo filing a patent application, or abandon an unpublished application in favor of maintaining secrecy, the inventors must consider whether the resulting secrecy will, in fact, afford any trade secret protections at all. On one hand, a patentable but unpublished disclosure will typically satisfy the secrecy requirement if it also satisfies the novelty and non-obviousness elements of patentability. Similarly, the type of subject matter for which a patent is pursued is typically of the type that would confer an economic or competitive advantage if withheld from competitors. On the other hand, trade secret protections require reasonable efforts to maintain trade secrecy. No part of patentability imposes a similar requirement.

The reasonable effort requirement for trade secret protection is not as likely to be satisfied in the normal course of invention. What exactly is meant by “reasonable efforts” in a trade secret context? Reasonable efforts differ based on the nature of the information, the field of endeavor, and the risks to secrecy. Generally, to show reasonable efforts, parties should plan in advance to protect their secrets, for example, by using confidentiality agreements, internal employee policies, vendor policies, and electronic information policies. Such policies should be monitor compliance, remind employees that information is secret, and limit access to the secret information, e.g., via locks, passwords, and security. The extent of effort deemed reasonable will be based on the value of the information, the cost of precautions, and the likelihood that secrecy will be lost. Maintenance of absolute secrecy is not required, nor is it necessary to take steps that will be ineffective to protect the secret. See E. I. du Pont de Nemours & Co. v. Christopher, 431 F.2d 1012 (5th Cir. 1970).

Inventors may intend to forgo patent or trade secret protection in favor of the other, only to subsequently learn that they lack the protection of either. Inventors and patent practitioners should be mindful that coverage gaps can arise due to the differing requirements for patent and trade secret protections.