Patents. What is a Patent? 11/16/2017. The Decision Between Patent and Trade Secret Protection

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1 The Decision Between Patent and Trade Secret Protection November 2017 John J. O Malley Ryan W. O Donnell vklaw.com 1 Patents vklaw.com 2 What is a Patent? A right to exclude others from making, using, offering for sale, or selling an invention Not a right to make, use, or sell the invention vklaw.com 3 1

2 Constitutional Basis Article 1, Section 8 of the United States Constitution The Congress shall have the power 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. vklaw.com 4 Protect Ideas Limited monopoly Patent Basics Acquired by filing a patent application with the USPTO Must be filed within one year from the date of first publication disclosure, sale, and of offer for sale of your invention Applications are automatically published at 18 months under international treaty unless non publication is requested Applicants must opt out of publication Link to non publication request form vklaw.com 5 Types of Patents Utility Patent Any new, useful, and nonobvious: Process Machine Article of Manufacture Composition of Matter Improvement vklaw.com 6 2

3 Types of Patents Design Patent Any new and ornamental (non functional) design of an article of manufacture Plant Patent Any invented or discovered and asexually reproduced variety of plant that is new and distinct vklaw.com 7 Patent Terms Utility Patents Generally 20 years from date of filing the application Design Patents 15 years from date of grant if filed on or after May 13, years from date of grant if filed before May 13, 2015 Plant Patents Generally 20 years from date of filing the application vklaw.com 8 Who May Apply for a Patent? Actual Inventors Only the original inventor or joint inventor may apply for a patent Assignee the patent application may be assigned, sold, or licensed to any person or entity vklaw.com 9 3

4 Formal Patent Application Requirements Specification At least one claim Executed oath or declaration Drawings vklaw.com 10 Title Patent No. Inventors Abstract Prior Art References Other pages have: Background Specification and Claims vklaw.com 11 For something to be patentable, it must be: Patentable Subject Matter Useful Novel (new) Nonobvious vklaw.com 12 4

5 Patentable Subject Matter Congress: "include anything under the sun that is made by man." Includes, processes, machines, articles of manufacture, compositions of matter, or any new and useful improvement Not patentable: (1) laws of nature; (2) natural phenomena; and (3) abstract ideas. vklaw.com 13 Utility Requirement The claimed invention must be "useful" for some purpose Usually low hurdle only inventions that are "totally incapable of achieving a useful result fail vklaw.com 14 Novelty Requirement 35 U.S.C. 102(a) states: A person shall be entitled to a patent unless: (1) the claimed invention was patented, described in a printed publication, or in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention; or (2) the claimed invention was described in a patent issued under section 151, or in an application for patent published or deemed published under section 122(b), in which the patent or application, as the case may be, names another inventor and was effectively filed before the effective filing date of the claimed invention. vklaw.com 15 5

6 Exceptions 35 U.S.C. 102(b) Exceptions. (1) Disclosures made 1 year or less before the effective filing date of the claimed invention. A disclosure made 1 year or less before the effective filing date of a claimed invention shall not be prior art to the claimed invention under subsection (a)(1) if: (A) the disclosure was made by the inventor or joint inventor or by another who obtained the subject matter disclosed directly or indirectly from the inventor or a joint inventor; or (B) the subject matter disclosed had, before such disclosure, been publicly disclosed by the inventor or a joint inventor or another who obtained the subject matter disclosed directly or indirectly from the inventor or a joint inventor. (2) Disclosures appearing in applications and patents. A disclosure shall not be prior art to a claimed invention under subsection (a)(2) if: (A) the subject matter disclosed was obtained directly or indirectly from the inventor or a joint inventor; (B) the subject matter disclosed had, before such subject matter was effectively filed under subsection (a)(2), been publicly disclosed by the inventor or a joint inventor or another who obtained the subject matter disclosed directly or indirectly from the inventor or a joint inventor; or (C) the subject matter disclosed and the claimed invention, not later than the effective filing date of the claimed invention, were owned by the same person or subject to an obligation of assignment to the same person. vklaw.com 16 What is prior art? Prior art is everything existing prior to your date of invention Prior art must have been accessible somewhere in the world vklaw.com 17 First Inventor to File The Leahy Smith America Invents Act (AIA) eliminated the first to invent system Patents are now issued to the first inventor to file Applies to applications filed on or after March 16, 2013 Priority is based on the application filing date Applications filed prior to March 16, 2013 are subject to the pre AIA, first to invent system vklaw.com 18 6

7 Grace Period for Inventor Disclosure AIA includes a one year grace period prior to the effective filing date for public disclosures by an inventor or by another who obtained the subject matter from the inventor Public disclosures during the one year grace period by another party who did not obtain the subject matter from the inventor will not prevent the inventor from obtaining a patent unless: The inventor did not make a public disclosure of the subject matter first vklaw.com 19 Non Obviousness Requirement 35 U.S.C. 103 states: A patent for a claimed invention may not be obtained, notwithstanding that the claimed invention is not identically disclosed as set forth in section 102, if the differences between the claimed invention and the prior art are such that the claimed invention as a whole would have been obvious before the effective filing date of the claimed invention to a person having ordinary skill in the art to which the claimed invention pertains. Patentability shall not be negated by the manner in which the invention was made. vklaw.com 20 Why Procure a Patent? Right to Exclude Right to License Block Competitors Collateral Deterrent vklaw.com 21 7

8 Patent Infringement 35 U.S.C. 271 The infringing product or method must read on all elements of the patented claims or the equivalent of each element to infringe Remedies Injunction Damages lost profits or reasonable royalties vklaw.com 22 Trade Secrets vklaw.com 23 What is a trade secret? The Uniform Trade Secrets Act (UTSA) defines trade secret as: Information, including a formula, pattern, compilation, program, device, method, technique, or process, that derives independent economic value from being secret and that is subject to reasonable efforts to maintain that secrecy Sources of law Prior to enactment of DTSA, used to be primarily governed by state law In 2004, Pennsylvania enacted the Pennsylvania Uniform Trade Secrets Act (PUTSA) Continues to apply to intrastate misappropriation of trade secrets Like the Uniform Trade Secrets Act, PUTSA prohibits misappropriation of trade secrets and provides certain remedies Defend Trade Secrets Act (DTSA) vklaw.com 24 8

9 Defend Trade Secrets Act The Defend Trade Secrets Act (DTSA) was enacted on May 11, 2016 Considered an extension of the Economic Espionage Act of 1996 (EEA), which criminalizes certain trade secret misappropriations DTSA was introduced primarily in part to the fact that EEA did not allow a private party to bring a civil action based on theft of its trade secret vklaw.com 25 Defend Trade Secrets Act DTSA permits an owner to pursue federal litigation when its trade secrets have been misappropriated In order for an owner to bring a cause of action based on misappropriation, the trade secret must be related to a product or service used in, or intended for use in, interstate or foreign commerce DTSA was established to act as a supplement to state trade secret laws The act does not preempt state trade secret laws Remedies Injunction Damages based on losses from misappropriation, unjust enrichment, or reasonable royalties The maximum penalty for trade secret theft under DTSA is the greater of $5 million or three times the value of the stolen trade secret vklaw.com 26 Examples of Trade Secrets Customer identities Vendors Product pricing Marketing strategies Manufacturing processes Testing (successes and failures) Technical information and specifications vklaw.com 27 9

10 Trade Secret Violations Violating a nondisclosure agreement Obtaining the trade secret from a third party under a duty of confidentiality vklaw.com 28 Limitations on Trade Secret Rights Reverse engineering It is not a violation of trade secret law to disassemble and examine products that are available to the public Trade secrets learned in this manner can no longer be protected as the information is considered public License? Independent Discovery Trade secret protection does not extend to a business when a third party discovers the secret on its own In the case of two independent discoveries, one party may disclose the trade secret and the other party has no remedy (absent some other illegal activity) vklaw.com 29 Securing a Trade Secret Contrary to patents, trade secrets are protected without registration There is no formal application or registration requirements Any valuable and secret information used by the business is protected as long as the business takes reasonable steps to maintain the trade as a secret vklaw.com 30 10

11 Understanding the Differences: Patents vs. Trade Secrets There are no formal application or filing requirements or fees required to obtain a trade secret; while patents require a formal application/examination process and payment of fees to apply and maintain Both are governed by different laws/statutes Patents have limited terms of protection, while trade secrets have no term or expiration so long as it is maintained as a secret Trade secrets are immediately effective, while patent protection may take years vklaw.com 31 Choose Patents when It is likely that a product can be reverse engineered The innovation might be simultaneously discovered by others The technology is difficult or costly to keep secret The technology must be disclosed to be of use The subject matter is patentable The commercial value of the innovation exceeds the registration and maintenance costs vklaw.com 32 Choose Trade Secrets when The subject matter is unpatentable The subject matter is not easily reverse engineered The subject matter is part of a relatively crowded art Keeping the innovation a secret is easy The potential market is likely to last longer than 20 years The technology is developing rapidly and the innovation is likely to be obsolete in a few years vklaw.com 33 11

12 The Hybrid Approach Provisional patent applications are held in secrecy by the USPTO unless a subsequent patent application claims priority to the provisional application and is published Non provisional patent applications can be filed in the U.S. with patent non publication requests With such a request, the USPTO will hold a patent application secret until the patent issues Without a request to maintain the application as a secret, the USPTO will automatically publish the patent application 18 months after the initial filing date vklaw.com 34 The Hybrid Approach By filing a provisional patent application or nonprovisional patent application with a nonpublication request, an applicant can maintain trade secret protection during the pendency of its patent application This approach does not work if the applicant is interested in pursuing foreign patent applications. vklaw.com 35 When is it appropriate? Non publication requests can be useful in unsettled areas of U.S. patent law Examples include business method and software patents Sensible for businesses focused predominantly on domestic markets with little to no need for foreign patent protection By filing a non publication request, an entity has the ability to protect its trade secret while weighing the benefit of patent protection versus maintaining the trade secret Decision must be made within 18 months from earliest priority date. vklaw.com 36 12

13 Understanding the Risks The publication of a patent application typically results in disclosure of any trade secret if necessary for the patentability Recording an assignment, which is a public record, may allow interested third parties a way to discover information about an abandoned application The USPTO may reject a patent application and the failure to request non publication could result in a disclosure of the abandoned application vklaw.com 37 Thank You For more information regarding this presentation, contact: John J. O Malley (P) (215) (E) Jomalley@vklaw.com Philadelphia Ryan W. O Donnell (P) (609) (E) Rodonnell@vklaw.com Princeton vklaw.com 38 13