It is well established that, once a patent issues, the subject matter contained in the patent is publicly available and therefore no longer entitled to trade secret protection. As one court succinctly explained: "A trade secret is secret. A patent is not. That which is disclosed in a patent cannot be a trade secret." Atl. Research Mktg. Systems, Inc. v. Troy, 659 F.3d 1345, 1357 (Fed. Cir. 2011).
Courts have also consistently held that the same principle applies to information disclosed in a published patent application, i.e., a patent application that is under examination by the U.S. Patent and Trademark Office (USPTO) to determine if it should issue as a patent. See, e.g., Accent Packaging, Inc. v. Leggett & Platt, Inc., 707 F.3d 1318, 1329 (Fed. Cir. 2013) (explaining that information disclosed in a published patent application cannot, "[a]s a matter of law," constitute a trade secret); Attia v. Google LLC, 983 F.3d 420, 426 (9th Cir. 2020) ("[D]isclosure of a trade secret in a patent application extinguishes the information's trade secret status.").
Despite this rule, the mere publication of a trade secret in a patent or patent application does not necessarily defeat a claim for trade secret misappropriation. The timing of the publication relative to the alleged misappropriation is often key, and so is the nature of the disclosure.
For example, a defendant generally cannot patent another's trade secret information and then assert as a defense to a misappropriation claim that the information no longer qualifies for trade secret protection because of the public disclosure. As the 7th U.S. Circuit Court of Appeals concluded several decades ago, where "the holder of the trade secret did not make an election to obtain a patent," allowing the disclosing party to escape the protection of trade secret law because of their own unlawful disclosure would be to permit the wrongdoer to "profit from their own wrong." See Syntex Ophthalmics, Inc. v. Tsuetaki, 701 F.2d 677, 683 (7th Cir. 1983).
But does the same principle apply if the trade secret owner agrees to seek a patent? A recent case from the Eastern District of Virginia addressed this issue.
Background
In Smith v. Atlas N. Am., LLC, No. 4:23CV95 (AWA) (E.D. Va.), plaintiff Melinda Smith sued Atlas North America, LLC and Thyssenkrupp Materials North America, LLC for trade secret misappropriation. Plaintiff had an invention that assisted in tracking and rescuing individuals who are lost overboard, and she disclosed it to Martin Wilcox, an engineer at Atlas, in 2015.
Not long after, Wilcox informed Smith that Atlas would pursue patent protection for the invention and name Smith as co-inventor. Smith and Atlas then entered into a nondisclosure agreement concerning their discussions regarding the invention.
Over three years later, in 2018, Smith received an email from Wilcox stating that ThyssenKrupp, which had purportedly acquired Atlas, was seeking patent protection for Smith's invention. Then, in 2019, Wilcox informed Smith that the invention went through ThyssenKrupp's in-house patent process with both their names on the application and that ThyssenKrupp had filed a formal patent application with the USPTO.
Despite attempts to follow-up on the patent process through Wilcox, Smith received neither the names of the listed inventors, nor a confirmation of when, how, and in what form the patent application was filed.
Concerned about the status of the invention and the patent protection for it, Smith engaged a firm to conduct a search for the pending patent application. The firm, however, found no publicly available record that the patent application had been filed. After hiring counsel, Smith eventually learned from ThyssenKrupp that the application had actually been rejected by the USPTO and abandoned by ThyssenKrupp.
By the time Smith filed suit against Atlas and Thyssenkrupp, the only other information Smith had received regarding the application came from the USPTO, which indicated that: (1) a patent application had been filed in 2019 with the title of "Overboard Protection and Tracking System"; (2) Martin Wilcox was named as an inventor on the application; and (3) Smith was not named as an inventor on the application.
Smith then filed suit for trade secret misappropriation, claiming defendants harmed her by taking the trade secret invention, using it to prepare and file a patent application without informing her or involving her in the process, and then abandoning the application.
Court denies Atlas' motion for dismissal
In response to the complaint, Atlas moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), arguing that Smith failed to state a claim upon which relief can be granted.
Atlas asserted, inter alia, that Smith had "allow[ed] Atlas to pursue patent protection for her invention" and that she cannot show that the information qualifies as a trade secret and/or has been misappropriated because it has been "disclosed in a patent making it generally known to the public." The court rejected Atlas' theory. See Order, Feb. 24, 2024 (Dkt. No. 26).
While recognizing that publication of information in a patent application typically eliminates any trade secrecy, the court found this principle inapplicable because Smith alleges that the filing of the patent application itself qualifies as misappropriation.
The court distinguished a case Atlas relied on where the 9th U.S. Circuit Court of Appeals had found that the prior publication of a patent application containing the alleged trade secret extinguished the information's status as a trade secret and defeated the plaintiff's misappropriation claim. In that case, the court pointed out, the plaintiff had permitted the defendant to file the patent applications, knowing that the information would be available to the public upon publication.
Here, in contrast, notwithstanding Smith's general agreement to patent the information, the court concluded that the omission of Smith's name as an inventor meant that she did not consent to the patent application "as filed." The court added that, even if the publication of the patent application extinguished any trade secret status, the alleged misappropriation — the filing of the patent application — occurred before any trade secret was publicly exposed, meaning Smith still had a viable claim.
Takeaways
Although this decision does not deviate from the well-settled principle that publication in a patent application destroys a trade secret, it shows how the analysis of a misappropriation claim involving information in a patent application can be nuanced. Curiously, neither the court nor the parties ever identified the patent application that was purportedly published. And from a review of the USPTO's records, no such publication exists.
Under 35 U.S.C. §§ 122(b)(2)(A)(i), (B)(i), an application "shall not be published" if it is either "no longer pending" or if an applicant "makes a [non-publication] request upon filing" and certifies that a few conditions are met. It is not clear which occurred here. Either way, instead of arguing about the effect of a published patent application on a trade secret, Smith likely could have defeated Atlas' 12(b)(6) challenge by pointing out that there is nothing in the complaint or the record indicating that the application was in fact published.
Moreover, while the absence of a publication might not save Atlas from the misappropriation claim, it could impact the parties' positions on damages, as the value of the trade secret seemingly has not been "destroyed" through publication. On that point, this case serves as a reminder to parties considering whether to patent information or keep it as a trade secret that they can potentially delay that decision — and get a preview of the invention's patentability — by requesting that the patent application not publish while it is pending.
Originally published by Westlaw Today
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