Over the years on Taft’s Privacy and Data Security Insights, we have written on the risk of data breaches and the specific impact on privacy, or the compromise of confidentiality of personally identifiable information. However, many clients forget to also consider the value in other information they possess, specifically proprietary information, information subject to trade secret, and intellectual property. Today we will discuss how failing to account for intellectual property in your data security program can be costly, especially in the event of a data breach.
Intellectual property and specifically patent protection is a critical component for the success of many U.S. businesses, both large and small. As the desire to obtain patent protection grows, so too does the occurrence of data theft and other data breaches. Therefore, companies need to know whether an invention is still patentable if the propriety information underlying the invention is the subject of a data breach or other cyber security failure. The question applies whether a data breach is accidental or malicious and whether it is perpetrated by an outside source or by an employee of the company. The answer is the same: the patent rights are likely forfeited.
On March 16, 2013, the U.S. patent law switched from a “first-to-invent” system to a “first inventor-to-file” system, which is now known as the America Invents Act, or the AIA. Under the AIA, a person or company “shall be entitled to a patent unless . . . the claimed invention was . . . in public use, on sale, or otherwise available to the public” prior to the filing of a patent application. See 35 U.S.C. § 102(a)(1). An exception is available for a disclosure made “one year or less” before the filing date “if 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 . . . .” See 35 U.S.C. § 102(b)(1)(A). When initially passed into law, the exact boundaries of the grace period were uncertain and not yet addressed by federal courts, which left unanswered questions for U.S. companies. For example, does an unauthorized public disclosure destroy patent rights, or does it constitute a disclosure of subject matter “obtained . . . directly or indirectly from the inventor,” such that the post-AIA § 102(b) grace period is triggered?
Prior to the AIA, it was “well settled that the ‘on sale’ bar [preventing patentability] applie[d] to sales made by...
