Patents are from Mars, Trade Secrets are From Venus

“The assumption that no one in their right mind would choose secrecy for a patentable invention was, and is, demonstrably wrong. Process technology, for example, has classically been protected as a trade secret, largely because it is so difficult to detect infringement by a competitor.” in ancient times, in this case 1990, John Gray, an obscure “relationship counselor” with a correspondence degree in psychology, was perplexed. The communication problems of the heterosexual couples he worked with were so serious that he couldn’t explain them by individual circumstances. His clients seemed to be talking past each other, almost as if they were coming from different planets. With that tired metaphor in mind, he penned the book Men Are from Mars, Women are from Venus, generalizing what he thought were the universal, contrasting communication styles of the sexes.

Rarely has a book so widely panned by critics been so successful. Despite its obvious stereotyping, indeed sexism, sales have exceeded 15 million copies in 43 languages. The book spawned a Broadway show, a TV sitcom, and innumerable weekend seminars. Mr. Gray has continued to plumb the shallow depths of his thesis with several follow-on volumes. In effect, he has become rich by talking about how incompatible men and women are, despite eons of evidence to the contrary.

Public Disclosure v. Private Confidentiality

In our world of intellectual property, it once was like this between patents and trade secrets. The early common law concept of trade secrets, summarized in the 1939 Restatement of Torts, appeared to limit coverage to machines or processes run behind closed doors. But as courts began to embrace the idea that any valuable business information deserved protection, some academics raised the alarm that secrecy was moving on to the turf previously reserved for patents. How, they asked, could the same innovations be regulated simultaneously by a system that encouraged public disclosure and another that enforced private confidentiality?

The conundrum was especially difficult because of the very different pedigree of patents and trade secrets. While the former system was governed by a federal statute and grounded in the Constitution, secrecy was nothing more than the collective observations of judges expounding on notions of state law. Indeed, trade secret law was a mongrel, with parentage vaguely traceable to principles of tort, contract, employment and unfair competition law. Surely, the academics argued, there was no room in our carefully crafted federal system for this state-law carpetbagger. Patent law must preempt it.

A few judges agreed, and the issue eventually made its way to the U.S. Supreme Court, which in 1974 issued its opinion in Kewanee Oil Co. v. Bicron Corp. I can recall the day when as a relatively new lawyer I saw a partner sitting at his desk reading the advance sheets with unusual intensity. I asked him what was up, and he said, “The Supreme Court has said we can still have trade secret law.”

The Right Outcome for the Wrong Reason

I came to study that opinion very carefully over the years, and it remains for me one of the best examples of a decision reaching the right outcome for a wrong reason. Basically, the court said that the federal patent system was not losing any business to trade secret protection. If someone with an invention that was obviously or likely unpatentable, the public lost nothing if it was kept secret. And while patents grant the right to exclude, trade secrets are “weak” because of the risk of independent invention. Therefore, the court assumed, anyone with a clearly patentable invention would never choose secrecy, so there was nothing in this parallel form of protection that would interfere with the integrity of the federal patent system.

The assumption that no one in their right mind would choose secrecy for a patentable invention was, and is, demonstrably wrong. Process technology, for example, has classically been protected as a trade secret, largely because it is so difficult to detect infringement by a competitor.

Patents and Trade Secrets Get Along Better Than We Think

In any event, one of the concurring judges pointed out, patents and trade secrets had been in coexistence for almost 150 years, with Congress occasionally amending the patent laws without ever muttering a word about secrets.

So, we are allowed to simultaneously enjoy a disclosure-oriented patent law alongside a separate system that enforces secrecy. This is where we come back to the theme of Mr. Gray’s book. While generalizations about the sexes may be neither accurate nor appropriate, patents and secrets are so different in so many ways that it seems remarkable to me that they work in parallel, not to mention that they can each contribute to a company’s IP strategy.

Understanding the differences can help us appreciate the complementary relationship and make better use of each. Here are some observations that should be useful.

Patent law is legislated, while trade secret law is constructed by judges. This is less true than it was 40 years ago with the introduction of the Uniform Trade Secrets Act, but only slightly less so. The UTSA official comments declare that it was designed to codify the common law. The model statute, like the more recent federal Defend Trade Secrets Act which was based on it, is very short, certainly relative to the patent statute. If you want to understand trade secret law, you have to read the cases, because the foundation was built on individual judgments about ethical business behavior.

Patents are rules-based, while trade secrets are principles-based. This difference is closely related to the first. The reason the UTSA is so short is that the balancing of competing interests – for example, between employer and employee – inherently requires interpretation of ambiguous circumstances and application of ethical and moral judgments. With most patent cases, the path to a decision can be laid out in a flowchart. Which is not to say that patent cases are easy; but they are more predictable.

Patents are not about fault, while trade secrets are all about fault. As an attorney, preparing a patent case for trial to a jury can be challenging, as you search for the human-interest element that will sustain attention through an otherwise fairly dry presentation. In stark contrast, almost any trade secret case will capture the jury with its inherent focus on themes like treachery, abandonment, jealousy and revenge. No problem keeping everyone awake for that.

Patents are narrow and specific, while trade secrets are broad and vague. I sometimes use the metaphor of a large storage room, filled up to the ceiling with a physical representation of the data assets that help distinguish any business – R&D, financial plans, secret processes, road maps, customer preferences – and point out that, for most companies, the relative size of its patentable inventions might be equivalent to a grapefruit or maybe a basketball. There’s a lot there that potentially deserves protection, and the trick is in discerning what matters most, and then managing to maintain control over its integrity.

Patents are defined, while trade secrets are assumed. With a patent you get a government-approved description of the invention. You can show patents to investors. You can count them. You can flaunt them, to keep competition at bay. But secrets are usually not defined until you have to do it because (most often) you are in litigation over them and a judge tells you to. This is not ideal, of course, and in recent years I have seen this difference narrowing, as businesses pay closer attention to proactive management of secrets. What used to be the Patent Committee is now the Innovation Committee, and the most sophisticated companies are implementing specific business systems to identify and manage their critical information assets.

Recognizing all these differences should help us exploit them, to find synergies that can supercharge our IP strategies. Remember, all patents start out as secrets. And you don’t necessarily have to choose one or the other exclusively, as there are aspects of most products that suggest using both (as well as other forms of IP). Yes, patents and trade secrets come from different planets, but they are joined in a valuable, and creative, orbit.

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Join the Discussion

10 comments so far.

  • [Avatar for Chris Little]
    Chris Little
    July 28, 2020 02:54 pm

    Josh Malone, on July 26th, says, “Patents are not grounded in the Constitution.” I beg to differ. To quote the Constitution, Article 1, Section 8, ” The congress shall have power to… 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.” The word patent is not there, but neither is copyright, which is used to refer to books, songs, newspaper articles… All of which come from authors.

  • [Avatar for Pro Say]
    Pro Say
    July 27, 2020 02:07 pm

    Thanks for the nice exposition James.

    That said; the real world necessitates concurrence with Josh, Night Writer, and Anon.

    And in a further application of the “here – there” dichotomy:

    Inventors are from Heaven, Big Tech is from . . . .

  • [Avatar for Night Writer]
    Night Writer
    July 27, 2020 10:23 am

    @6 Anon Re: Mr. Poole.

    I am asking for a simple disclosure. Is this paid advocacy? Does he represent the big SV firms and is this written to help get more work from the SV?

    Plus my points point out how the article is not balanced in examining the negative effects of Trade Secrets.

  • [Avatar for Anon]
    July 27, 2020 09:48 am

    Night Writer,

    I am entirely in your camp in regards to the relative benefit to society between patents and trade secrets.

    Trade secrets are the stuff of guilds and stifled competition.

    I will note how amazing it is that the typical US lemming aspect of the Slashdots and Techdirts feed the notion that ‘patents are bad,’ with NO ‘total picture’ view of what corporations would prefer.

    As to the author of this piece, I have personally met Mr. Poole, and found him to be a highly principled and very capable advocate — even as he IS an advocate for strong Trade Secret positions.

    I may not agree with his larger thrust, but I would not throw shade on his professionalism.

  • [Avatar for Night Writer]
    Night Writer
    July 27, 2020 07:07 am

    Just as a final note. I think it is very telling and disturbing that we are seeing all these articles about trade secrets where the trade secrets are pushed as a good thing. We can tell they are propaganda because they do not discuss the very real restrictions they put on employment and the very real ways they can be twisted to make it difficult for an employee to switch to a new job.

    I’m OK with articles about trade secrets but the negative effects of trade secrets are being glossed over. Just one simple example. The inventor can’t publish a paper about a trade secret but can about the contents of a patent application.

    Also, I would ask this blog to consider requiring authors to disclose whether the articles are paid advocacy or an attempt at creating a scholarly work.

  • [Avatar for Night Writer]
    Night Writer
    July 27, 2020 06:57 am

    Plus @2 Josh Malone.

    Trade secrets have the same characteristics in your 4 and 5. They can be twisted to control employees and legislated endlessly where an employee with little means is fighting a large corporation.

  • [Avatar for Night Writer]
    Night Writer
    July 27, 2020 06:55 am

    I am a patent attorney with many years of experience. When I graduated school I was a software engineer. Trade secrets were used to prevent me from switching companies or starting my own company for three years.

    Make no mistake that trade secrets are about restricting employment and about creating dark secretive worlds at giant corporations.

    Patents are about one million times better for employees than trade secrets. They make what you did public so that you can write papers about it. They make it so the company owns what you did and feels OK about you going to a new job.

    It does not surprise me that the clients of the author are large SV companies who very much want to continue to strengthen trade secrets that are beyond horrendous for employees.

  • [Avatar for Josh Malone]
    Josh Malone
    July 26, 2020 04:36 pm

    Most of the propositions in this article are false under the present U.S. Patent system. For example,

    1. A patent is NOT the right to exclude
    2. Patents are not grounded in the Constitution (they are privileges or public franchises, revocable by the agency)
    3. Patent laws are not legislated, but like trade secrets are developed by judges
    4. Patents are not rule-based – those who follow the rules lose their rights to the insiders
    5. Patents are not defined – they are endlessly morphed, twisted, and disputed by lawyers in the courts and the USPTO

  • [Avatar for MaxDrei]
    July 26, 2020 02:48 pm

    Nice thesis. My eye was drawn especially to your point that patents are not about “fault” but trade secrets are. Does it follow then, that the recent confected (?) senatorial uproar about “theft” of “IP” by China seems NOT to be about patents but, instead, ALL about their making off with trade secrets?

  • [Avatar for Concerned]
    July 26, 2020 01:40 pm

    The title explains a few things. I have often said on what planet do my examiner’s rejections and rationale apply?

    It must be Mars since nobody on Earth uses my claims, individually or in combination, and the so called manual process does not exist on Earth either. Of course, the examiner did not substantiate his arguments, he just said it was so after admitting the decades old problem was solved.

    Earth calling the examiner, come in.