Posts Tagged: "Trade Secrets"

Employers often spend considerable resources recruiting, hiring and training key talent, only to face potential disaster when those trusted employees quit to join a competitor, often taking sensitive files on their way out the door. Even if they don’t act in bad faith, departing employees carry critical, confidential information inside their heads, which can’t be deleted. Fortunately, various remedies may be available for the former employer, from confidentiality and non-competition agreements, to lawsuits for actual or threatened misappropriation of trade secrets and the doctrine of inevitable disclosure. But there’s a conflict. Employers have a legitimate interest in preventing misappropriation of trade secrets, while employees have a legitimate interest in utilizing knowledge and skills gained through work experience and working for employers of their choosing.

Not every claimed invention will be able to be re-patented, but there will undoubtedly be some that will be able to be re-patented. This is possible thanks to 35 U.S.C. 102(b)(2)(C). So, if a patent or published patent application is commonly owned it may not be considered prior art against an identical set of claims in a subsequently filed patent application. Of course, 102(b)(2)(C) does not eliminate prior art that qualifies under 102(a)(1), but 102(a)(2) makes the patent application prior art as of its effective filing date of the claimed invention. So if you keep your invention secret and file a patent application it will be secret (and not prior art) up until the application publishes 18 months after filing. If you then re-file a second application with identical claims before publication of the first application there would be no 102(a)(1) prohibition. 102(a)(2) would make that first filing prior art as of its effective filing date, but if you remove 102(a)(2) through common ownership then a common owner would be able to effectively extend their patent term by up to 18 months; longer if publication doesn’t occur at 18 months.

Last week, police detained three employees of Taiwanese smartphone-maker HTC, raided their homes and offices and seized their computers and cellphones to search for evidence, as HTC is accusing them of stealing sensitive technology to sell to HTC’s competitors. The three men – a vice president of product design, director of R&D, and senior designer – are accused of stealing secrets relating to HTC’s Sense 6.0 smartphones, which are scheduled for launch later this year. The accused purportedly formed design companies in Taiwan and China and began speaking with Chinese phone-makers about selling them the stolen secrets. They are also accused of defrauding HTC out of more than US$300,000, by use of forged documents, apparently to raise capital for their new venture.

United States Marine, Inc. (USM) sued the United States government in the United States District Court for the Eastern District of Louisiana under the Federal Tort Claims Act (FTCA), 28 U.S.C. § 1346(b) and 28 USC §2674. USM alleged that the United States misappropriated USM’s trade secrets. Specifically, USM claimed that the United States Navy, which had lawfully obtained USM’s proprietary technical drawings under a contract (to which USM was not a party), owed USM a duty of secrecy that it breached by disclosing those drawings to a rival private firm for use in designing military boats for the government.

There are some exceptions whereby a person who files second can still prevail, but those exceptions are infinitesimally insignificant, and the law surrounding the parameters of the exceptions is non-existent and unfortunately rather ill defined by the USPTO at this point. It is also critical to understand that the new law contains traps and loopholes. For those who have not spent adequate time considering the many nuances of the law you will be surprised to learn what it really means. For example, did you know that long held and previously unpatentable trade secrets can now be patented? It seems unthinkable, but then again it is also unthinkable that the law will allow for the repatenting of inventions, but it does that as well.

Not long after it was reported that a Chinese military unit might be responsible for a number of cyber attacks that have taken place on US infrastructure and businesses, the Obama Administration unveiled its strategy to put an end to the theft of US trade secrets by foreign governments and foreign competitors.

During the last six days of a session the Speaker of the House of Representatives is allowed to suspend Rules in order to expeditiously dispose of non-controversial matters quickly before the end of a session. This year there will be several intellectual property bills that will move under suspension of House Rules on Tuesday afternoon, December 18, 2012. One is a substitute version of HR 6621, the America Invents Act (AIA) technical corrections bill. Another is a bill to undo a recent decision of the Second Circuit relative to trade secrets and the Economic Espionage Act.

Yesterday, Kolon Industries Inc. and several of its executives and employees were indicted for allegedly engaging in a multi-year campaign to steal trade secrets related to DuPont’s Kevlar para-aramid fiber and Teijin Limited’s Twaron para-aramid fiber. The conspiracy and theft of trade secrets counts each carry a maximum penalty of 10 years in prison and a fine of $250,000 or twice the gross gain or loss for individual defendants and a fine of $5 million or twice the gross gain or loss for the corporate defendant. The obstruction of justice count carries a maximum penalty of 20 years in prison and a fine of $250,000 or twice the gross gain or loss for individual defendants and a fine of $500,000 or twice the gross gain or loss for the corporate defendant.

These first-level-thinkers just assume that information would be disseminated at the same rate without a patent system, which is so ridiculous it is hard to take anyone seriously who actually professes to believe such nonsense. Can anyone really believe that? This is why it seems overwhelmingly clear to me that there is an anti-patent agenda in many newsrooms across the country. No intelligent person who has reviewed history and has any knowledge about how business works would think that businesses would randomly disclose proprietary information in the volume that occurs today absent a patent system that incentivizes such disclosure.

Protecting trade secrets is critically important if for no other reason than making sure that the time, money and energy you spend building your business is not wasted. If your employees could simply leave without having any contractual obligations that would prevent them from taking information, stealing employees away and/or soliciting your existing customers then they would be able to set up a business and compete with you for a fraction of what it cost you to do the same. After all, you were the one who spent the time and money for marketing to attract customers in the first place, and you were the one who spent the time and money necessary to train your employees. Without the cost of acquiring new customers and the costs associated with training employees that new business set up by your former employee would compete with you and have only a fraction of the start-up and overhead costs you faced. That can make it difficult for any business to keep the doors open.

Prior user rights also implicate free rider problems with respect to a subsequent patent that an inventor obtains covering the subject matter of the secret prior user. At the point of publication the prior user no longer maintains a trade secret. At the point of issuance, the patentee and the prior user relatively co-exist with each other in the market. The patentee excludes others from the market except for the prior user. The prior user then enjoys the benefits and advantages associated with the patentee excluding others from operating in the market, while being free from liability to the patentee. In this regard, the prior user enjoys the period of time operating the technology in secret in addition to 20 years of excluding others provided by the competitor.

Can you imagine the security employed in transferring the trade secret from the SunTrust Bank vault to the vault at the World of Coca-Cola? The Coca-Cola formula has been notorious with rampant rumors, creating its own urban mythology with respect to both the formula and efforts to protect the secret formula. All you have to do is Google “coke formula urban myth” and you will find all kinds of claims. Thus, it seems almost a virtual certainty that a new mythology will now be created and grow. It has always seemed to me that Coca-Cola is very comfortable with the urban myths, relishing them and even using them by some accounts to feed into the power of the trade secret, not to mention using them to misdirect the public into thinking, rightly or wrongly, that Fort Knox like security has always been employed to protect the formula.

When copying has occurred, much of the code may have changed by the time it’s examined due to the normal development process or to disguise the copying. For example identifiers may have been renamed, code reordered, instructions replaced with similar instructions, and so forth. However, perhaps one comment remains the same and it’s an unusual comment. Or a small sequence of critical instructions is identical. Correlation is designed to produce a relatively high value based on that comment or that sequence, to direct the detective toward that similarity. If correlation were simply a percentage of copied lines, the number could be small and thus missed entirely among the noise of normal similarities that occur in all programs.

So why would large companies be such supporters of first to file? What if first to file was the Trojan Horse that carried prior user rights? Prior user rights will not benefit the individual or the small business. Prior user rights unambiguously will benefit the large corporations who innovate and then shelf technology for one reason or another, or those who exploit the technology in secret. Perhaps they choose not to pursue a patent because it isn’t perceived to be a meaningful innovation, or worth the cost and time of pursuing a patent. Perhaps the innovation gets weeded out along the way, never getting green-lighted past a certain point. These trade secrets today are not prior art thanks to 102(g). Remove 102(g) and insert a prior user rights regime and all those secrets that large companies hide, fail to pursue or willfully keep from the public will allow them to ignore the patent rights of those who innovate and actually disseminate that information to the public.

What is startling about Wellman is how the patentee put the ‘863 and ‘317 patents squarely in the path of the “best mode” Patent-Raptor by deliberately keeping the Ti818 recipe a trade secret. As I’ve instructed numerous clients, you have a clear choice on “best mode” issue: (1) disclose the “best mode” and file the patent; or (2) don’t file the patent if you want to keep the “best mode” as a trade secret. There is simply no “in between” on this issue. The only question now is whether the Tyrannosaurus Rex of patent law (inequitable conduct) will devour what is left of the Wellman patents.