August 17, 2017
Patents and Trade Secrets as Substitutes
Traditionally, patents and trade secrets are viewed as economically interchangeable. This is because as soon as an inventor decides to patent their invention, they make the conscious decision to disclose its details. Prior to patenting, many inventors kept their inventions secret during the R&D phase until they have garnered enough information to apply for a patent. A patent application must disclose sufficient detail (1) to satisfy the written description requirement that the inventor demonstrate “possession” of the claimed invention and (2) to enable a person of skill in the art to make and use the invention. The disclosure is published and thereby enters into the public domain for all to see. In that sense, choosing to patent an invention is also choosing to forgo trade secret protection. Similarly, by making, using, or selling an invention using a trade secret, an inventor can lose their ability to patent said invention.
What is a Data-Generating Patent?
The theory that patents and trade secrets only work as economic substitutes is crushed by the recognition of data-generating patents. A data-generating patent is a term coined by Professor Ted Sichelman and Professor Brenda M. Simon in their latest paper describing “patents on inventions involving technologies that by design generate valuable data through their operation or use.” Prime examples of data-generating patents include genetic tests, medical devices, internet search engines, and even social networking websites (i.e.: Facebook). When a data-generating invention is initially patented, the patentee has complete market power over the invention and all the data that is generated by that invention in the course of its twenty-year monopoly. The market power enjoyed by the patentee does not end after the twenty-year monopoly and continues on as a trade-secret closely held by said patentee.
Myriad Genetics is an American molecular diagnostic company that performs a number of tests that allow doctors and patients to understand the genetic basis of human disease and the role genes play in the onset, progression, and treatment of disease. The information gathered from these patients are used for the development of new molecular diagnostic products that assess a patient’s risk for developing disease later in life, their likelihood of responding to a particular drug treatment, their risk of disease progression and recurrence, and the measure of disease activity. Myriad’s diagnostic patents for breast and ovarian cancer inevitably lead to the large, proprietary databases of patient information that they now keep as a trade secret. While Myriad’s patents have been invalidated in the recent years, the initial grant of their diagnostic patents allowed Myriad the strong lead time advantage that they needed to stay ahead of the competition. Their extensive database of clinical data and information is nearly impossible to replicate and will give them a significant advantage in the marketplace when deciding their next genetic endeavor (i.e.: which genes to isolate and focus on next).
Google is a multinational technology company that specializes in Internet-related services and products, but is most known for its popular search engine (i.e.: Google Search). The company benefits from information generated from its search engines, such as a user’s previous search queries, locations, social networking data, and other personal information. This wealth of information allows Google a competitive edge to improve its current search queries and its targeted advertising. Have you ever wondered how one search of “24 Hour Fitness” has now garnered you a significant amount of advertisements from an assortment of fitness related websites (i.e.: Chuze Fitness, Rogue, LA Fitness, No Bull, Pilates, CrossFit, Yoga, etc.)? Well this is because Google utilizes your previous search queries to better fit your preferences, and to cater to your specific tastes and preferences in terms of advertisements and search results. Search engines such as Google can catalog words, phrases, and concepts represented by those words and phrases to better cater to their user’s queries. Just like Myriad, Google initially used its patented search engine to gain this information and now holds that information as a trade secret.
Repercussions of this Gap in IP Law
The holders of data-generating patents are safe from the loopholes of ordinary trade secrets while their patents are still valid. So for twenty years, the holder does not need to concern himself or herself with another individual reverse engineering their invention or independently creating it. By the time that their patent has expired, the patent holder will be so far ahead of the competition that the competition will not be able to “catch up.” This leads to anti-trust issues that intellectual property right advocates have not taken into account. While both patents and trade secrets were created to foster a shared wealth of innovation, the use of data-generating patents actually stifles it.
A patent rewards those who disclose their inventions with a monopoly on said invention for twenty years. However, the pertinent information is released to the public as soon as a patent is published, and if free to be made, used or sold once a patentees twenty years of protection is up. Similarly, trade secrets can be protected from entering the public domain for as long as it is kept a secret. Those secrets are not protected when they are acquired by lawful means – such as by reverse engineering or independent invention. Ultimately by working in tandem, the use of patents and trade secrets actually leads to stronger and longer protection of intellectual property rights. These rights are for secrets that most patent holders did not plan for but are now enjoying a wind-fall of information to boost their market advantage in the long run.
Author: Marissa Lim, Intern
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