Protecting Technology Rights

When determining whether to file for patents or rely on trade secrets, it is important to know the advantages and disadvantages of each route to intellectual property protection.
By Charles R. Richard | March 23, 2010
Developing and marketing new biodiesel technology is an exciting and potentially highly profitable enterprise. Since large amounts of capital can be required to do so, investors may have legitimate concerns. One way to increase profits while reducing investment risk is to establish and protect technology rights, and avoid losses by respecting others' rights. Patents and trade secrets may be used to protect and increase market share by creating significant barriers to competition, and creating direct profits through licensing.

This article provides a general overview of technology rights, but given space limitations, certain details, exceptions and topics are not discussed. For particular situations, readers should consult a properly licensed attorney.

Patents are national governmental grants of the right to exclude others for a set length of time from making, using, offering to sell, selling or importing an invention in/into that country. Patents often effectively give holders a monopoly in practice, but since patents provide a right to exclude others, but not a right to practice per se, they don't give true monopoly rights. This may be a concern where a later patent issues with scope within the larger scope of an earlier patent owned by a different entity, because neither patent owner could practice the common scope without infringing the other's patent when in force unless permission of the other owner was obtained.

Trade secrets are information used in a business that may give it an advantage over competitors who don't know them. Multiple entities may legally hold or use the same trade secret if independently developed, properly licensed or properly reverse engineered. There can, however, be only one patent per invention per country (usually), and licensing is limited accordingly. Many things can be trade secrets, from process technology to customer lists, while not patentable.

Trade secrets do not involve governmental grants but are still protected. To establish and maintain trade secret protection, a system is needed to keep secure current and detailed documentation of the trade secret with limited "need to know" access, absent a secrecy agreement. Trade secret rights are private and without term limit, but they are lost if the information becomes public. There may be civil remedies (monetary damages) and injunctions (cease and desist orders), and criminal penalties for trade secret misappropriation.

The concealment required to protect trade secrets and "public use" that occurs when exploiting them may eventually prohibit their patenting. There is even a danger that Company A might patent technology that Company B previously established as a trade secret, and Company A will then sue Company B for patent infringement.

Basic Requirements

There are few restrictions on patentable subject matter, and patents may claim processes, machines, manufactures, compositions of matter and improvements on these. "Products of nature" can raise subject matter issues, but such compositions enhanced by human involvement, and processes for enhancing them, are frequently patentable.

There are three major patenting requirements found in sections 101, 102 and 103 of the U.S. patent code. Any indication of usefulness in the patent application is sufficient to meet the utility requirement of section 101. The section 102 requirement for novelty defines "prior art events" that render an invention unpatentable. Materials known for years such as common biodiesel-related processes and their individual components are unpatentable since they lack novelty, but new combinations of such materials might be patentable. New processes to make "old" materials may be patentable also.

Section 103's requirement, non-obviousness, is based on the prior art events for novelty, but is distinct. A patent will not issue if differences between the invention and the prior art are such that the invention would have been obvious at the time made to a person having ordinary skill in applicable technology. The U.S. Patent and Trademark Office usually makes an initial determination on a patent claim's obviousness by determining whether all claim parts are present in the prior art-usually some assembly of patents or other printed publications-and whether there was suggestion there for the combination. An initial determination of obviousness by the USPTO can often be successfully challenged.

U.S. Patent Applications

To get a patent, an inventor files an application that must pass examination, or "get through prosecution," in the USPTO. Important application parts include explaining the invention, its uses, how it's made and practiced, and claims that set the scope of any patent issuing.

Inventors must give written description of their invention in the application and cannot later introduce amendments to the claims not supported by the original filing. The law requires that an application be "enabling"-contain sufficient information for a person with ordinary skill to make and use the invention without "undue experimentation." The application must also disclose the best mode to carry out the invention contemplated by the inventor(s) when filed; this best mode cannot be kept as a trade secret.

U.S. patent law also requires applicants to disclose any prior art or prior art events discovered by time of filing or later until patent issuance. Failure to do so may render a patent unenforceable. While there is no prior art search requirement, a thorough search before filing is recommended. Applications are usually published after 18 months. The patent term is generally 20 years from earliest filing date.

Patent infringement Direct infringement is unauthorized making, using, offering to sell or selling a patented invention when/where the patent is in force, or importing the invention into a country when/where the patent is in force. There may be liability for inducing or contributing to infringement by others, and even for certain activities outside the granting country. Defenses may include claim invalidity and inequitable conduct-breaching the duty of candor-but ignorance is no excuse. Remedies may include monetary damages and injunctions.

International differences Patent law worldwide is fairly consistent, while trade secret law is more variable. Patents are only really effective in the country where granted, but most countries routinely grant patents on inventions made elsewhere upon proper application. The "absolute novelty" requirement is probably universal outside the U.S.; there is a one year grace period sometimes in the U.S. Generally in the U.S., "first to invent" gets the patent if contested, and elsewhere "first to file" is probably the rule. The duty of candor and best mode requirements are probably unique to the U.S.

Managing tech rights Portfolios of technology rights may include patents or trade secrets from one or more countries derived from internal research, licensed or purchased. Portfolios are managed to maximize value and can facilitate trade and manufacture in the U.S. and abroad, while offering protection from competitors and bringing in licensing revenue.

It is said that the biodiesel industry favors using trade secrets over patents. If true, this may be because trade secret protection is viewed as easier to establish than patent protection, but trade secret rights can be lost through any public disclosure and unlike patent rights, might have to be "shared" with those who successfully reverse engineer. A compromise is protecting basic technology with patents and later improvements with trade secrets, but this isn't foolproof.

Businesses and specific technology rights may be owned by one or more entities. In the U.S., joint patent owners may exploit a patent without the permission and with no accounting to other owners, absent a prior agreement. Inventors are considered the owners of U.S. patents, unless assigned, and there may be a contractual or implied duty to assign (and similarly for trade secrets). Inventions made involving U.S. federal funding or state university research may have ownership restrictions.

A recent survey of U.S. patents and published applications containing "biodiesel" shows there were 29 patents issued and 158 patent applications published in 2009 alone. The situation internationally is similar. Although trade secret activity isn't as easy to determine given its nature, it is also likely very high.

Charles R. Richard is a Washington D.C.-based patent attorney and attorney-at-law with a technical background in microbiology, chemical engineering and nanotechnology. Reach him at
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