United States: Can Opposites Attract? Protecting A Company's Intellectual Property Through Patents And Trade Secrets

While patents and trade secrets are viewed in part as opposites — patents require public disclosure, and trade secrets require confidentiality — seeking patent protection for aspects of a technology, while retaining trade secret status for others, may provide the best protection for a company's intellectual property portfolio.

Patent Overview

In exchange for a limited monopoly over the right to "exclude others from making, using, offering for sale, or selling" an invention or "importing" it into the United States, a patent requires inventors to disclose, in clear terms, how to make and use their inventions. See 35 U.S.C.S. § 271; 35 U.S.C.S. § 112. Typically embodied in a patent's claims. specification and drawings, the disclosure requirement is met by publicizing the claimed invention. This "ensures that the public receives something in return for the exclusionary rights that are granted to the inventor by a patent." MPEP § 608. Acting in tandem with disclosure is enablement. Under 35 U.S.C. 112(a), an inventor is required to provide "a written description of the invention . . . in such full, clear, concise, and exact terms as to enable any person skilled in the art to . . . make and use the" invention, including disclosure of the best mode.

Trade Secrets Overview

In contrast, trade secrets derive their worth from staying secret. Under 18 U.S.C.S. § 1839(3), a trade secret can only exist if its owner "has taken reasonable measures to keep [it] secret" and it "derives independent economic value . . . from not being generally known." Practically speaking, trade secrets give their owner a competitive advantage in the marketplace. Some famous examples include the formulas for popular soft drinks and chemical compositions of industrial products. Even businesses with public products can possess trade secrets in those products' manufacturing, industrial and commercial aspects.

Window of Opportunity for Joint Protection

Some believe that the principles of patent law are forever at odds with those of trade secrets since a core requirement for patent protection — public disclosure — can destroy a trade secret. See Atl. Research Mktg. Sys. v. Troy 659 F.3d 1345, 1357 (Fed. Cir. 2011) ("A trade secret is secret. A patent is not. That which is disclosed in a patent cannot be a trade secret."). Likewise, limiting disclosure of certain information necessary to practicing an invention may support trade secret protection but, in certain instances, prevent a patent from reaching the enablement requirement.

However, recent authorities reaffirm the window of opportunity where patents and trade secrets co-exist. For example, undisclosed information learned during research and development, proprietary methods for making or using a patented product, and/or a combination of patented characteristics that, when combined, add value to the whole can be withheld from patent disclosure and, in some instances, may allow trade secret protection.

In 2023, the Southern District of Texas denied a defendant's motion to dismiss trade-secret claims based on its argument that the plaintiff did not sufficiently identify the alleged misappropriated trade secrets. Well Cell Glob. LLC v. Calvit, No. H-22-3062, 2023 U.S. Dist. LEXIS 5649, at *18 (S.D. Tex. Jan. 12, 2023). The plaintiff alleged that it "possesses trade secrets in the form of specialized medical training it has personally developed for the use of its patent-protected medical technology." The patented technology was related to insulin infusion for medical treatment. Recognizing the general principle that methods for making or using a patented product can still be protected as a trade secret, the court held that the company "has identified two classes of trade secrets," one being "the medical training in the patented kit and method." Thus, the plaintiff had alleged viable trade secret claims.

Similarly, in 2022, the 11th Circuit held that a subscriber assistance program (SAP) used by mobile phone companies could constitute a trade secret even though aspects of the invention had been publicly disclosed in a patent application. See Subscriber Holdings, LLC v. Brightstar Corp., No. 21-12985, 2022 U.S. App. LEXIS 35963, at *9-10 (11th Cir. Dec. 30, 2022). The court held that "a jury could reasonably find that . . . the entire SAP was a protectable trade secret," including a component called a "phone upgrade component." According to the court, "the relevant aspects of the patent application did not mention, much less describe, the phone upgrade component." The court went on to state: "If a component of a multi-faceted program is not disclosed, it is difficult to see how the purported trade secret — comprised of all of its component parts — is in the public domain as a matter of law."

Other examples of patent and trade secret coexistence abound. See e.g., Life Spine, Inc. v. Aegis Spine, Inc., 8 F.4th 531, 536 (7th Cir. 2021) (finding that "the precise dimensions and measurements of the ProLift components and subcomponents and their interconnectivity" were not disclosed in the patents and were thus afforded trade secret status); Metricolor, LLC v. L'Oreal USA, Inc., No. 2:18-cv-00364-CAS-Ex, 2022 U.S. Dist. LEXIS 209113, at *35 (C.D. Cal. Nov. 16, 2022) (denying summary judgment despite defendant's arguments that only "minute differences" existed between the plaintiff's claimed trade secret and a corresponding patent, as well as a separate prior art reference); Aircraft Gear Corp. v. Lentsch, No. 18 C 50244, 2022 U.S. Dist. LEXIS 239435, *26 (N.D. Ill. 2022) (finding that "plaintiff presents evidence that the identification of [redacted] in the patent does not disclose the [claimed trade secret]").

Finally, in August 2023, in a case involving oil and gas technology, a Texas Court of Appeals upheld the following jury instruction regarding combination trade secrets:

A trade secret can exist in a combination of characteristics and components each of which, by itself, is in the public domain, but the unified process, design and operation of which in unique combination meets the definition of a trade secret. The combination itself must add value to the product, beyond simply the sum of its components.

This jury instruction supports that, in certain instances, trade secrets can exist even if all individual elements of an invention are publicly disclosed in patent applications, provided that a unique, valuable combination of such elements is not disclosed.

Key Takeaway

While patents and trade secrets are mutually exclusive in many respects, it is possible — and often wise — to evaluate and pursue both forms of intellectual property in a company's portfolio. The best protection and greatest value may be attained by patenting certain aspects of a technology and actively retaining trade secret protection for the rest.