From October 2016 to March 2017 the team is joined by Guest Kats Rosie Burbidge and Eibhlin Vardy, and by InternKats Verónica Rodríguez Arguijo, Tian Lu and Hayleigh Bosher.

Friday, 22 May 2015

Does a patent professional need to raise the trade secret option with the client?

I recall being in a meeting a while ago where the matter under consideration was whether to seek patent protection. All of the assembled, save this Kat, were patent professionals principally engaged in the non-contentious, registration side of the patent practice. Well into the discussion, this Kat raised the question of whether it would not also be useful to address trade secret protection, given the nature of the technology under discussion. One of those in attendance sniffed and said, “Come now--you can really protect only what you disclose”, meaning presumably that what you protect is only what you can register as a patent. No one took issue with this and the discussion continued, focusing solely on patent registration matters. The message conveyed to this Kat was that he was instructed, more or less, to return to his basket and do what he was told.

The question that has nagged this Kat since that meeting is the extent to which an attorney who is engaged in patent matters, or a more narrowly licensed patent attorney, has any duty or obligation to raise the trade secret option to a client and, if so, actively to counsel how the client might behave to protect is trade secret. From a different angle, if the patent professional is a licensed patent attorney but not a licensed lawyer, is he/she prohibited from providing legal advice on the trade secret aspects of a client’s invention? That trade secret protection, as weak or as strong as one views it, is an alternative form of protection for an invention was emphatically recognized by the United States Supreme Court in the 1974 case of Kewanee Oil Co. v Bicron Oil. There, the Court addressed the bedrock issue under United States law of whether the federal patent right, anchored in the U.S. Constitution, pre-empted the state law of trade secrets, rendering the latter legally void. In ruling against pre-emption (and thereby preserving the validity of the trade secret right under various state laws), the Court devoted extensive attention to explaining how trade secret protection was a desirable and robust legally alternative to the patent law.

The problem is that one who is engaged in the registration of patents derives no direct pecuniary benefit if a client seeks to protect his invention as a trade secret. As such, absent any legal mandate to do so and assuming that there is no legal prohibition, the incentive to address the possible trade secret aspects of an invention may be lacking or, in the current academic nomenclature, there may be a misalignment between the lawyer and his client.  Kewanee Oil sharpens our understanding of the circumstances in which the patent/trade secret interplay might arise: (i) the trade secret is clearly patentable subject-matter; (ii) the patentability of the trade secret is uncertain and (iii) the so-called invention is not patentable. Having regard to option (i), if the client seeks patent protection and the trade secret is clearly patentable, the rationale to expect the attorney to raise the trade secret option is weak. Regarding option (iii), since there is no reasonable patent option, the only question is whether the implications and operation of trade secret protection should be raised. More difficult is option (ii), which lacks the certainty of alternatives (i) and (iii). Should the patent professional pose the problem as choosing between two options—patents or trade secrets, or rather focus only on the patent option, setting the risks and likelihood of success?

But choosing between a trade secrets and patent protection does not depend solely upon the registrability of the invention. There are at least two additional factors. First, there is the issue of costs. Rarely can a client afford patent protection for all possible client inventions. Priorities must therefore be established about what to protect as a patent. In counselling the client on what his patent portfolio should look like, should such advice extend to actively suggesting how to manage those aspects of the client’s developments that will be protectable (perhaps by default) by trade secrets? Secondly, there is the potential role that trade secrets may play in the client’s broader business context. The report by Wesley Cohen, Richard Nelson and John Walsh, “Protecting Their Intellectual Assets: Appropriability Conditions and Why U.S. Manufacturing Firms Patent (or Not)”, NBER Working Paper 7552 (2000), is frequently cited for the proposition that (at least for R&D managers), first-mover advantage, undergirded by trade secret protection, may be the preferred way to monetize a company’s developments, except for the pharmaceutical and medical instrument fields. Should these research findings play any part in the counsel and advice given to a client who expresses an interest to patent a putative invention?

Circling back to the questions posed above, this Kat has no ready answers. Still, he has the lingering feeling that the nature of the relationship between the patent professional and the client does not always optimize the client’s appreciation for the potential trade secret alternative. Whether the patent professional can (or should) be doing so is a separate question.


Anonymous said...

Many folk treat trade secrets glibly, thinking that one has a trade secret merely because one doesn't publish it, as opposed to taking all the proper appropriate measures (e.g. stamping documents, restricting their circulation, specifically instructing people). We always ask clients to consider whether their interests would be better protected by trade secrets. It all depends on the nature of the invention. If it's one in which infringement can be detected only by resorting to industrial espionage, it might have been better to have kept it as a trade secret.

Anonymous said...

Personally, I always explain to new clients the three main options open to them, with their advantages and drawbacks:

a) filing a patent application ;

b) secrecy ; and

c) defensive disclosure.

Even I do not derive any direct pecuniary benefit from the client choosing b) or c) over a), I'd consider it unethical to keep my clients in the dark about their options other than patenting.

And my clients generally appreciate my honesty, something from which I usually do derive a pecuniary benefit after all.

Anonymous said...

Absolutely it should be considered and discussed with the client. It would be unethical and unprofessional not to do so.

Anonymous said...

I was somewhat disappointed to read your post.

Like other commentators, I would consider it unethical and a breach of code of conduct (which requires us to act in the best interests of the client) not to mention all the possible ways forward for protection including patent applications and trade secrets. Trade secret is always an option and will be discussed. It is difficult to manage trade secrets in house and they can "walk out" the door, but these are an option and a good one if managed and policed appropriately.

I do not know of a patent attorney who would not do so, or who would act in the manner you suggest.


Michael Factor said...

If one is providing consultancy, one should discuss the option and point out the pros and cons. There are certainly cases where trade-secrets are the way to go, but many patents are easily retroengineered and many tehnologies develop because the time is right. Patent Attorneys who are not attorneys in law will generally be drafting and prosecuting patents because they believe in the system and are likely to genuinely believe that a patent application is in the client's interest.

Anonymous said...

"Confidential Information" and "Know How" are key elements of the syllabus for qualifying as a UK Patent Attorney (see the Advanced IP Law and Practice FD1 syllabus).

So all UK patent attorneys are qualified to advise clients on such matters, and I would expect them to do so.

S.280 of the Copyright, Designs and Patents Act 1988 provides legal privilege for patent attorneys giving advice "relating to the protection of any invention, design, technical information". I take this as covering trade secrets, which are a legitimate form of protection.

Meldrew said...

the lingering feeling that the nature of the relationship between the patent professional and the client does not always optimize the client’s appreciation for the potential trade secret alternative

And I have the lingering feeling that I have been insulted.

Anonymous said...

And I have the feeling you are spot on. Having worked in two firms and having been effectively sanctioned by partners for advising trade secret as an option. People in this profession really have far to high an opinion of the ethical standards of their fellows. Stuff and nonsense. They are as mercenary as any for fees.

Anonymous said...

From the perspective of an American reader, I think IPKat has raised an interesting question. Note that the personal incentives for patents extend beyond lawyers and patent agents. Most large corporations pay their R&D personnel incentives to generate patent applications. Seldom, if ever, is an inventor directly rewarded when the innovation is shunted toward trade secret protection. And there's no nicely engraved or etched plaque for the trade secret.

MaxDrei said...

Germany (and Japan) have had for ages an Employee Inventor Law that regulates what shall happen, as between employer and employee, when an employee conceives of something that might be patentable.

First step: you have to report it to the employer.

A succession of steps then follows. The Statute addresses what to do if the employer thinks it's a trade secret.

Lots of work for everybody involved, including the patent attorneys, regardless whether the eventual judgement is "patent" or "trade secret".

Germany has a load more patents per head than other big European countries. Perhaps it has a lot more well-protected trade secrets too.

But hey, in Anglo-Saxon countries it is thought outrageous, that Nanny State should dare to set a framework for negotiation how rights might be divvi-ed up, when an employee makes an invention.

I liken it to a seat-belt law. When it came in, everybody cried "Nanny State". Now, they just accept the wisdom of a seat belt law.

Anonymous said...

A patent attorney is often in a conflict between what is the best advice and how to make most money. For example:
- whether or not to file a patent application
- how many applications to file
- in how many countries to enter the national phase at the end of the International phase
- whether to file a divisional.

Not all attorneys will offer the best advice to the client.

Meldrew said...

The clue is in the word "professional".

If you give advice on patents and trade secrets, you are a "patent professional".

If you give advice on patents but not on trade secrets you are "in the patents business".

Having said that, in the modern world of "collaborative" research the word for those who rely on trade secrets is frequently "mug". Often the best advice is "publish or patent, but don't have trade secrets at the core of your business critical technology".

THE US anon said...

Perhaps there is a nuance that is under-appreciated, and perhaps using US case law is not the best way to address that nuance.

One first has to look at the client control and the client choice of who and for what counsel is being engaged.

In the US, one does not engage a patent attorney who is not an attorney at law - there is no such animal (a patent agent is a different breed).

This fact entails a completely different view of any and all ethical considerations.

That being said, and aware that I am speaking from the US perspective, if the client approaches someone who is NOT an attorney at law, then the client has dictated the terms of the engagement and has removed any ethical obligation of a non-attorney-at-law of discussing anything outside of patent protection.

Quite in fact (from a US patent agent perspective), one is ethically barred from advising on such, as that falls to the unlicensed practice of law.

I will not go as far as to say that I am disappointed with the author her for failing to make this distinction, as I admit to the possibility that there is something "lost in translation," but I will admit that the article could rather be easily vastly improved by noting the nuance (especially given that US case law was invoked).

To the extent that any and all attorneys find “conflict” between advise and “making money,” I would daresay that the commentator lacks a fundamental understanding of both the profession and the requirement of professional ethics. This may come across as harsh, but it is paramount in combatting the general perception that attorneys face such “conflict,” as it is the very nature of our profession to place our profit motive secondary to the client’s needs. To allow even the perception otherwise is to do a disservice to our profession. Is this to say that all individuals in the profession are ethical? Absolutely not. No such Pollyanna exists or is even needed to be mentioned, as ALL professions have bad elements. I would dare anyone to provide a profession lacking such. You have doctors, accountants, bankers, yes even politicians (I mean to be droll) that are criminals first and professionals second (if at all).

THE US anon said...


I would take issue with the global nature of your statement.

The great lawyer answer that is far better applies here: "It depends."

To attempt a blanket statement of "don't have trade secrets at the core" is EVERY BIT as wrong as "Always have trade secrets at the core."

Meldrew said...

The U.S. Anon

Agreed "it depends", that is why I made no blanket statement.

"Often the best advice" is not the same as "always the best advice" .

I think we are on the same page and will now consider myself a "great lawyer".

THE US anon said...

Meldrew - I might push you above a C - but not by much, as your "often" was made with no external reference, and thus is not associated (enough) with the view as I put that "it depends" requires.

You have a naked propensity without justification. Sure, not as dangerous as a full blanket statement, but not nearly as a "let's see the facts, then decide" as it should be.

Anonymous said...

As a UK patent attorney, trade secrets absolutely come into my practice, even when the decision is to go for patent protection. The inexperienced attorney might try to shoehorn everything disclosed to him by the client into the application "just in case"; the experienced attorney listens to the client, understands what is best disclosed in the interests of sufficiency and support for amendment, and what is best unsaid, and drafts the application accordingly.

A great deal of the patent disclosure will be a trade secret at least up until the point of filing, which is certain no longer to be so on the date of publication. Often, a client (unless he has a product ready to launch) will be well-advised to maintain what is in the patent disclosure as a trade secret even up until publication, in case a decision is taken to withdraw the application and to rely on the trade secret aspect. The patent system gives the applicant 18 months from his application before he really has to make the choice between patents and trade secrets.

THE US anon said...

UK patent attorney,

Thanks and good points.

I would merely add that here in the States the addition of trade secret advice is a bit more involved than merely what is included or not in an application.

Here, the status of trade secret is not just dependent on "secret" per se, and will invoke a state-by-state analysis (trade secret is under the domain of state law - not federal law). There are other items to be considered, of which typically include controls/access to the "secret," notification of that status, and the presence of "value" from the "secret."

There is a reason why here in the states the limited law practice of patent agents is not allowed to include the practice of law regarding Trade Secrets.

As I mentioned, I may have blind spots for this topic outside of US law (which I readily admit to), but the case law invoked here being US law did catch my attention, and my (hopefully taken as friendly) note that the topic is more nuanced than a first reading of the article might suggest.

Meldrew said...

The US Anon "Meldrew - I might push you above a C - but not by much, as your "often" was made with no external reference, and thus is not associated (enough) with the view as I put that "it depends" requires.

You have a naked propensity without justification. Sure, not as dangerous as a full blanket statement, but not nearly as a "let's see the facts, then decide" as it should be"

Who appointed you the arbiter of what "should be"?

You're a bit of a pompous arse aren't you.

THE US anon said...

Let's leave out the ad hominem, eh Meldrew? You are the one who wanted to distinguish yourself from the "blanket" statement - I merely pointed out that you are not nearly as distinguished as you want to be.

The pompous one is thee, not me.

Judith_IP said...

I have been practicing as a patent prosecutor for 20 years, and I always bring up trade secrets (as well as trademarks and copyrights) when discussing intellectual property strategy. The goal is to optimize the protection for the client, and sometimes the answer for that is trade secrecy, or more likely a mixture of trade secrecy, copyrights, licensing, and patent protections.

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