Why should companies considering trade secret litigation consider their patent portfolios? After all, trade secrets, by definition, are secret. They have value in the marketplace by virtue of not being disclosed. And like the formula for Coca-Cola, that value can continue perpetually as long as the secrecy of trade secrets is maintained. Patents, on the other hand, represent a limited monopoly granted to the patent-holder in exchange for an enabling disclosure of the patented invention, a disclosure sufficient to enable those skilled in the art to practice the invention. Of course, this public disclosure requirement for patentability destroys secrecy. This means that once the invention is disclosed in a published patent or application, it cannot be subject to trade secret protection. In the context of a litigation concerning whether a claimed trade secret is covered by a patent, the interface between trade secret protection and patent protection can become existential. The defendant may contend that once the claimed trade secrets found their way into the patent’s enabling disclosure, they lost any trade secret protection. The plaintiff will try to delineate sharply between technology covered by the patent and its disclosures, and technology that remains undisclosed and thus properly subject to trade secret protection. So a proper understanding of the interplay between trade secret protection and patent protection can be critical to the outcome in a trade secret case.
A recent petition for certioriari to the Supreme Court illustrates the point. The petitioner, Taiwan computer company Acer, Inc., filed the petition in connection with a state trade secret misappropriation action brought against Acer in California state court brought by by Intellisoft, Ltd.[1] After over two years of litigation, Acer determined based on reports and testimony from Intellisoft’s experts that Intellisoft’s trade secret misappropriation claims rested on Intellisoft’s experts’ contention that Intellisoft’s trade secrets were disclosed by Acer in the specifications of Acer’s U.S. Patent No. 5,410,713 (the ‘713 Patent); that the disclosed secrets were invented by Intellisoft’s Bruce Bierman; that the incorporation of those secrets in the ‘713 Patent breached the terms of a Non-Disclosure Agreement (NDA) arising from a business relationship between the two companies; and that Acer’s devices used the trade secrets Acer incorporated into the ‘713 Patent, thereby entitling Intellisoft to some $300 million in royalty damages. Armed with this information, Acer promptly filed in the California misappropriation lawsuit a “cross-complaint” for declaratory judgment that Bierman properly was not named as an inventor on the ‘713 Patent, and it simultaneously removed the action to U.S. district court on the basis that the trade secret misappropriation arose under federal patent law. Intellisoft moved to remand the case back to state court. Intellisoft’s remand...
