When you begin to study the law of trade secrets, you are advised that trade secret protection requires that the secret cannot be publicly disclosed, and this requirement is contrary to the patent protection system that requires the owner to publicly disclose the invention. This secrecy requirement appears unrealistic in a commercial environment. It is difficult to imagine how one can exploit the trade secret commercially without some disclosure to others engaged in the commercial activity associated with use of the trade secret. Those necessary disclosures could involve employees, suppliers and customers.
When the issue of making a necessary discourse arises, many practitioners look to nondisclosure agreements (NDAs), which may or may not include noncompete provisions and/or specific identification of the trade secret information. Unfortunately, these NDAs are often very general or comprise boiler-plate language that is insufficient to convey that a specific trade secret is being disclosed. Another and possibly more troublesome aspect of a breach that results in a public disclosure, such as a publication in a trade journal, is the loss of the trade secret to nonbreaching third parties.
So how is it possible to use the patent application process to protect a trade secret when the requirements regarding public disclosure for trade secrets and patents are seemingly diametrically opposed? While these difference in the disclosure requirements are true, they are not the whole story on how to use patent applications as part of a program for protecting trade secrets. Like most things in life, the devil is in the details. To better appreciate how patents can be combined in a program for protecting trade secrets, it is helpful to review some of the different disclosure requirements for a trade secret and a patent application.
Turning first to what can be a trade secret, the basic requirements for a trade secret are that: the trade secret provides some advantage to the trade secret owner; the trade secret is not generally known in the relevant industry; the trade secret is only disclosed on a need to know basis; reasonable measures are taken to protect the trade secret; and, the trade secret is not reasonably discoverable by legitimate means. Unlike patent protection for an invention, trade secret status does not require the secret to be new or novel and it can be a minor improvement, what the patent system deems an obvious improvement, over what is already known in the relevant field.
The trade secret story is often marred by the trade secret owner’s failure to meet two fundamental real-world requirements for a trade secret. These fundamental requirements are: that it is not generally known in the relevant industry; and, reasonable measures are taken to protect the trade secret. Since it is always difficult to establish the total knowledge of the industry and virtually impossible to establish the negative requirement that the trade secret is not known, the trade secret owner must have a clearly defined description of the trade secret. This description does not need to be as detailed as an instruction manual, but it cannot be so broad that it is later found to be description of what was known in the relevant industry. The level of detail should be such that it can be used as a chart to compare against known information being asserted by someone attaching the trade secret status. Developing this detailed description is an important element in the next step for establishing that reasonable measures were taken to protect the trade secret.
While many employers regularly have employees execute a form of confidentially or nondisclosure agreement as part of the new employee on-boarding process, these form agreements are rarely sufficient to establish reasonable measures to protect a specific trade secret. Furthermore, the trade secret in question may be disclosed to the employee at a later time when the employee has demonstrated a particular skill or knowledge which is useful in exploiting the trade secret. When a trade secret is about to be disclosed to an employee or any third party with a need to know the trade secret, the trade secret owner should secure an executed trade secret specific agreement. This agreement should include a reference to the trade secret owner’s previously developed definition of the trade secret. Preferably, this reference includes an acknowledgement that the employee or third party had an opportunity to review the definition at the time of signing and agreed to protect it as a trade secret.
Now, how should the patent application process that requires disclosure be used in view of the tension between disclosure and preserving the secrecy of the trade secret? As noted previously, the commercial reality of benefiting from a trade secret frequently requires some disclosure to trusted employees, suppliers and customers. This necessary exposure for commercial benefit also carries the risk of a bad actor, such as a disgruntled or rogue employee, supplier, or customer, making a disclosure that exposes the trade secret. This is where the patent application process can be a hedge against such a disclosure. The U.S. Patent and Trademark Office (USPTO) application process provides the trade secret owner with at least two options—a provisional application and an unpublished nonprovisional application.
Provisional applications receive USPTO filing receipts that provide an application filing date and a serial number acknowledging receipt of the application documents. Provisional applications are not examined so they are not required to meet the USPTO’s stricter application requirements for non-provisional applications, which are examined by the USPTO. To make use of the provisional application reduced disclosure requirement, it is essential to include the clearly defined description of the trade secret discussed above. It is not necessary to include all of the required sections and details for a nonprovisional application in order to receive the dated USPTO filing receipt. This USPTO acknowledged provisional application can be used as the description of the trade secret in later NDAs to establish that the trade secret owner was in possession of the trade secret at least as early as the provisional application filing date, which preceded the execution date of the later NDA.
In the event meaningful changes are made to the trade secret, it is possible to file one or more updated provisional applications to secure new USPTO dated filing receipts. While it is possible to file a series of provisional applications, subsequent applications cannot claim priority to the earlier provisional applications so it will be necessary to be sure to provide the complete details of the trade secret as of the date of filing. An updated provisional application may include the prior provisional application’s trade secret description with updates or a completely new description. The choice will depend upon an evaluation of the changes and the particular circumstances at that time.
Since provisional patent applications are never published or disclosed, unless, they are refenced as a priority document in a nonprovisional application, provisional applications can be a useful tool for securing a dated USPTO document with a definition of the trade secret without running afoul of the requirement for secrecy.
As noted previously, nonprovisional applications are subject to the USPTO’s stricter disclosure requirements because they undergo the examination process. In addition, to be examined by the USPTO, nonprovisional applications also are subject to publication 18 months after the effective filing date, which would constitute a public disclosure. And, if a nonprovisional application is found to be allowable after the USPTO examination, the allowable application will issue as a freely available patent, which would constitute a public disclosure, ultimately published as a publicly available patent.
How can a trade secret owner benefit from filing a nonprovisional patent application in view of the 18 month publication and the possible issuance of a patent? A trade secret owner who wants to file a nonprovisional application can eliminate the publication 18 months after the effective filing date by filing a nonpublication request with the USPTO. The USPTO requires a filer of a nonprovisional application to file an Application Data Sheet (37CFR 1.76) (PTO/AIA/14) (ADS). The Publication Information section, at the bottom of page 1 of the ADS, includes this box:
Checking this box will block publication of the application at the relevant 18 month period. Filing this nonpublication request has the consequence that the trade secret owner/patent applicant cannot rely on the unpublished application as a priority document in any foreign county that requires the 18 month publication. This loss of the right to claim priority is an insignificant consequence since the trade secret owner is not likely to want to risk any publication.
In the event the USPTO examiner finds the nonprovisional application to be allowable and issues a notice of allowance requiring the payment of an issue fee, the trade secret owner can protect the trade secret by not paying the required issue fee and requesting abandonment of the application, 37 CFR 1.138. Since there was no 18 month publication and the patent did not issue, the USPTO record will remain a secret.
Returning to the commercial and economic realities of using the trade secret, USPTO filings can enhance the trade secret owner’s ability to police and enforce the trade secret. Enforcement of the trade secret, whether under state common laws, state adopted Uniform Trade Secret Acts, or the Defend Trade Secret Act, will require the trade secret owner to establish the four basic requirements noted above. Regardless of whether the bad actor treating the trade secret is a former employee or a previously trusted third party, the documents filed in the USPTO and the USPTO filing receipts can be very valuable for both describing the trade secret and establishing the date of possession of the trade secret.
If the trade secret owner filed a nonprovisional patent application and the USPTO examiner found the application to be allowable, the patent owner has the option of electing between patent protection and trade secret protection. Electing between these options will depend on the circumstance at the time and the trade secret owner’s confidence that the trade secret has not been compromised.
Skillful handling of the patent application process can enhance the protection of a trade secret and provide alternative paths for protection, and should be considered early in the development of the trade secret.
Reprinted with permission from the March 23, 2022 issue of The Legal Intelligencer ©2022 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.
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