Trade Secret Or Patent?…That Is the Question

Trade Secret Or Patent?…That Is The Question.

University of Pennsylvania

11.15.16

TRADE SECRET

Proprietary Copyright Trademark Information

PATENT Others

2 Trade Secrets and Patents

Trade Secret: » protection via secrecy, potentially forever » what begins as a trade secret may become a patent

Patent: » prevent others’ use of your invention for some time » quid pro quo is eventual public disclosure

3 Trade Secrets Trade Secrets, Defined

Any information that can be used in the operation of a business or other enterprise and that is sufficiently valuable and secret to afford and actual or potential economic advantage over others.

» Novelty not required. – e.g., customer-related information

» Negative know-how can be valuable. – e.g., WD-40.

5 What are the goals of trade secret law?

» To protect valuable business information.

» To foster incentives to innovate, regardless of the size of the investment or the patentability of the “innovation.”

» Allow everyone the equal opportunity to independently discover the same innovation.

6 Trade Secrets, A Classic Example

Coca Cola

» Secret formula made in 1886.

» Only a few employees know formula.

» Vaulted since 1919 (when first written down as collateral to SunTrust bank to finance a sale of the company).

7 Trade Secrets, Modern Examples

Customer Data/Preferences » marketing email lists

Search Optimization » Google Algorithms

Complex Manufacturing Processes » Biologics

8 Trade Secrets, Historical Pros & Cons

» Pros: » Cons:

– Can last forever. – Poor trade secret asset mgmt.

– Protect short shelf-life idea. – Not prevent reverse engineering.

– Circumstantial evidence – Need NDAs & non-competes. sufficient to prove theft. – Uniform Trade Secret Act applied – Injunctions & damages possible. inconsistently by states (so needed federal cause of action).

9 The Defend Trade Secrets Act (DTSA)…A Game Changer?

Federal civil cause of action as of May 11, 2016

» UTSA not displaced – injunction & damages remain

» Potential international scope – (“…intended for use in…foreign commerce…”)

» New obligations & remedies. – Must identify trade secret with particularity at beginning of case.

10 DTSA, Key Provisions

– Broad Discovery • Nationwide subpoena power

– More Remedies • actual losses; maybe unjust enrichment or reasonable royalty

– Ex parte Seizure • "prevent the propagation or dissemination of the trade secret” • PI/TRO inadequate & notice would destroy/move/hide property

– Whistleblower Protections • Immunity from civil and criminal liability to report misappropriation

11 Patents What exactly is a patent?

» Grant by US Government of intangible property right

» Right to exclude

» Territorial

13 U.S. Patent Rights Derived from the Constitution

U.S. Constitution, Article I, § 8, Clause. 1, 3 and 8:

The Congress shall have the power . . .

to regulate commerce . . . among the several states . . .

to promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries. . . .

14 What are the goals in establishing patent rights?

» Increase Innovation

» Promote Investments

» Reward Creativity

» Encourage Disclosure To The Public

15 Patent, A Classic Example

» The Light Bulb

16 Patent, Modern Examples

» Smartphone-related Patents – Software, design, features

» IBM’s Watson – Natural language processing system

» 3D Printing Technology – Making nearly anything on demand

17 Patents, Historical Pros & Cons

» Pros: » Cons:

– 20 years (from filing) of protection – Publishes 18 months after filing.

– Asset for [cross] licensing – Timely & expensive to obtain.

– Injunctions possible. – Expensive to enforce.

– Deterrent to competitors (esp. – Ltd. monopoly runs out fast. when reverse engineer-able)

18 Patent Eligibility, A Game Changer?

§ 101 Patent Eligible Subject Matter:

» Mayo: methods for administering drug ineligible as laws of nature, unless there is an “inventive step”

» Myriad: composition claims isolated DNA ineligible; law of nature

» Alice: business method & software patents ineligible; opened the door to early motions to dismiss (§ 101)

19 Invalidation By IPR, A Game Changer?

Inter partes Review

» Trial proceeding before USPTO to review patentability of ≥1 claims, only on grounds of anticipation or obviousness based on patents or printed publications.

» As of 10/01/16: – ~70% of instituted cases invalidated all claims – ~75% of the claims reviewed were invalidated.

20 Is The Pendulum Swinging Away From Patents And Toward Trade Secrets? Biotechnology As A Model

» Almost exclusive reliance on patents. – patents/applications attract investment.

» Recent feeling of dilution of U.S. patent law.

» A manufacturing process (or diagnostic method of use/treatment) presents a compelling dilemma about whether to patent it or keep it as a trade secret.

22 Biotechnology, Manufacturing Processes

» For biologics (& biosimilars), the product is the manufacturing process. – Developing the specifics of that process takes a lot of trial and error, and tweaking.

» Biotechs also work with 3rd parties (e.g., CROs) – The more people with access to the trade secrets increases the risk.

» QUESTION: Protect as a trade secret or best to patent?

» ANSWER: ______

23 Biotechnology, Catch-22

» If you keep the process as a trade secret in the US, then you cannot seek patent protection abroad (foregoing IP in those major markets).

» Alternatively, if you obtain patent protection outside the U.S., then you may lose protection in the U.S.

24 Biotechnology, Where The Pendulum Lies Now

» The balance still favors patent protection (for originators & biosimilars).

» WHY?: Patent application need not disclose the entire process of making the biologic. – For a bioprocess, only file on an aspect of upstream processing optimization. (e.g., cell engineering, medium, operation, analytics, etc.) – Do not disclose aspects of downstream process optimization. (e.g., separation efficiency, process development)

25 Takeaways

» Balance: – Likely patentability weighed against possibility of maintaining secrecy.

» In each case: – Inventors and companies should seriously consider using trade secret protection where appropriate, i.e., where particular methodologies are not easily detected by competitors and where the risk of rejection of the invention for lack of patentable subject matter is high.

26 Disclaimer

The views set forth in this presentation are those of the author and do not reflect views of Holland & Knight LLP.

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