NEXUS BETWEEN TRADE SECRET AND PATENT LAWS

Abstract

This paper draws attention to the nexus between trade secrets and patent law. The author aims to answer a few questions, such as: (1) whether this is the appropriate form of protection, and (2) whether both protections can be applied to a single invention.

Introduction 

 

The modern world is approaching the metaverse for making transactions of their assets and crafts. In a fast-paced era of piracy and reverse engineering, it is essential to protect intellectual property. To address such vulnerabilities, we have robust forms of intellectual property protection: Patent Law and Trade Secret Law. A patent protects novel innovation whilst trade secrets can broadly protect anything of economic value to the holder. However, the information that gets protected under patent law can be covered by trade secrets law whereas, information protected under trade secrets is not necessary to get patented. In this article, the author outlines the origin, scope of protection, and considerations for choosing between trade secrets and patents by examining their fundamental nature.

Origin of Patent Law and Trade Secret 

The Patent law is one of the oldest codified forms of intellectual property all across the globe. King Edward III of England introduced the concept of letters patent on 16 July 1331 by protecting a Flemish weaver of woollen clothes named John Kemp. Primarily by Act VI of 1856, Indian inventions got their first patent legislation, albeit later Act XV 1859  granted exclusive privileges to the holders.The purpose of creating patent law is to “promote the Progress of Science and useful Arts by securing for limited Time to Authors and Inventors the exclusive Right to their respective Writings and Discoveries”. Even the drafters achieved the purpose by providing exclusive rights to patent owners for a specific period. Subsequently, after getting patented, owners can sue others for selling, stealing or copying their invention. But the possession of the patent is not sufficient to punish the infringer since the patent owner has to find the infringer himself for pursuing compliance.

Maintaining the secrecy of valuable business information is not a novel concept. Trade secret laws are not codified and are not registered with any government authority. Comparing both later appears to be a recent concept until a scholar traces its roots in Roman law, where an employee got prohibited from stealing the trade secret from his master and giving it to a third party. In India, there is no statute, yet trade secret laws are enforced through contract law, the principle of equity etc. Whereas, in the US laws, Courts recognised trade secrets in Vickery v. Welch case in 1837. Later, mentioned in Restatement of torts in 1939 and then in Uniform Trade secrets in 1985. Trade secret means information, including a formula, pattern, compilation, program device, method, technique, or process, that: (i) derives independent economic value, actual or potential, from no being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

Trade secret law and patent law are intertwined and serve different purposes. Patent law mainly promotes the publicizing of information. Moreover, trade secret law promotes secrecy and protects the holder from theft. Prior are governed by the policies hence are more susceptible than the latter.

Preferences between Patent Law and Trade Secret 

• Eligibility 

Primary and perhaps the most vital inquiry is to determine whether the information comes under the eligibility criteria of the patent. The company's information like, customer lists, mathematical formulas, plans, are patent ineligible. Patent-eligible subject matter includes: (1) a process, machine, manufacture or article of manufacture, or composition of matter, and (2) does not fall under judicially recognized exceptions such as laws of nature, physical phenomena, or abstract ideas.

Whereas, a trade secret is a secret recipe that runs the company mainly:-

1. It is secret or confidential for others

2. It has monetary value or competitive advantage in the market

3. The owner made an effort to maintain the secrecy of such information, and can get protected by trade secret laws.

Trade secrets do not get registered by any government agencies. Therefore, the ways of its protection are different from other intellectual property. Mainly, they get secured by other means such as contracts, non-compete forms, NDA and other documents. These documents draft guidelines to prevent the acquainted person from sharing the secrets of a trade secret with others. Attorneys specifically design such contracts or agreements to limit the individual’s ability to disclose trade secrets to competitors or others, thereby maintaining confidentiality.

• Tenure

Patent terms can enjoy the protection till 20 years from the date of filing of an application. In reality, patents are not being granted on the same day but after a long period which gives substantially less than 20 years. However, an ideal term of protection depends upon the invention and country.

Trade secrets offer a more flexible approach to information protection and do not require interference from governmental agencies. The tenure of protection of trade secrets gets decided by the company's demands and can remain forever.

• Injunction 

Companies claiming money damage will be considered more feasible under trade secret protection. The threshold for getting an injunction on patent infringement was raised higher by the Supreme court in 2006. Therefore, one requires to pass the test:-

1. It must have suffered an irreparable injury; 

2. Remedies available at law are inadequate to compensate for that injury;

3. Considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and

4. Public interest would not be disserved by a permanent injunction.

Even the law recognizes once the trade secret gets revealed, it cannot be recovered, due to which injunction is the primary form of relief in trade secret cases.Therefore, the threshold for obtaining an injunction in such cases is comparatively lower. In trade secret cases, one gets injunctions for misappropriation as well as for threatened misappropriation.

• Publication 

The nature of trade secrets is to maintain the secrecy of information in the form of a Non-disclosure agreement, and publicizing it will destroy its essence. If a trade secret loses its confidentiality, it can be misused or reverse-engineered by the public. In such a situation, patent protection seems a plausible option for a company. However, in getting patent protection written description of the invention has to be published. Publication of patent applications provides an edge to the competitors. Moreover, rivals may use those strategic insights to design modified versions of the same invention.

• Cost-effective 

In the final analysis, regardless of the company's beliefs related to protecting the information of their invention or innovation, it will choose the cost-effective option. In most countries, obtaining patent protection is significantly more expensive than protecting trade secrets. Patent prosecution fees and costs get escalated relying on the duration of prosecution, a country in which protection requires. Further attorneys charge fees for maintaining the application from getting abandoned till the legal expiration date. 

In contrast, maintaining trade secrets does not require filing with any government office. It is the most economical alternative to protect inventions. However, the nature of information and the jurisdiction must qualify the "reasonable " measure to maintain the secrecy of information under trade secrets law.

Opted both Patent Law and Trade Secret 

The analysis does not end here, as the question remains whether a company can utilize both patent and trade secret protections simultaneously. The infallible answer is positive patent and trade secrets are complementary. We can attain the benefit of both in several ways.

• Non-Disclosure 

Mere submission of the application for a patent does not disclose your trade secrets in public. The application maintains the secrecy of information for the first eighteen months after filing. During this period, As long as the trade secret described in the patent application remains as such, reasonable secrecy is maintained, and wrongful disclosure of the information is punishable. Be the patent application gets issued or held unenforceable.

Even after eighteen months, a company can protect trade secrets from disclosure by filing a request for non-publication with the patent application but only in limited circumstances. Non-publication is available in almost all inventions. It can get revoked if a company files patent protection with publication applications in a foreign country.

• Particulars of invention

Despite the publication of patents, trade secrets can get protected. Every patent covers a limited aspect of an invention, not the complete invention. The patent application requires a sole description of the face of the project "claimed" and not broad details regarding the making and operation of that particular invention. In this way, one can parallelly hold the protection of both patent and trade secrets.

Furthermore, Karl F. Jorda recognizes the effects of combining different forms of intellectual property as:

1. They cover other subject matters of the invention.

2. They intensify the exclusiveness of the product.

3. Gets privilege of more remedies in litigation 

4. Other rights stay even if primary IP rights get nulled.

• Best mode

"Nothing is impossible", a company can protect the same invention at the same time by both patent and trade secrets.

U.S. code says that the patent should disclose the best mode contemplated by the inventor or joint inventor of carrying out the invention. Due to this disclosure, the question arises, whether the best mode contemplated by the inventor can get protection under trade secrets? Well, the answer is Yes. Primarily, this obligation applies only to the best mode contemplated by the inventor, not otherwise. Therefore, if the assignee knows the better mode unknown to the inventors, he is not bound to reveal it.

The best mode requirement applies only at the time of filing the patent. Therefore, if the best mode is discovered after filing, it can be retained as a trade secret.

Conclusion 

The nexus between trade secret and patent maintains the equilibrium of publicizing and secrecy. USPTO perceives Trade secret protection as a complement to patent protection. Authors also believe that trade secrets and patents can be more effective when used together rather than as alternatives. Proper ways should be published for the company to know- how to use both for their company's protection? Allowing companies to use both forms of protection in a complementary manner will provide the most comprehensive safeguard for their information.

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