I shared my thoughts earlier this week on the impact of the America Invents Act’s (AIA) expanded prior commercial use defense on trade secret law. In this post, my colleague, James Schweikert offers his thoughts on the impact of that defense from the patent lawyer’s perspective:

James’ Take: From a patent perspective I am a little more concerned with the impact of this change earlier in the development of an invention, rather than later, say at the time of litigation. Because this is a defense to a charge of patent infringement, many people are focused on what this means during litigation and trial.  However, the defense has several requirements that need to be satisfied for the defense to be successful.
 
Thus, I see the crucial point in the analysis to be at the time when a new development is evaluated for its business potential. Crudely, this analysis may include the determination of whether or not to file a patent, and if not, then whether or not to maintain it as a trade secret. 

In this case, I purposely use the term “maintain” rather than the word “keep,” as the requirements of the defense place some maintenance cost upon the trade secret holder. To have decided to keep something as a trade secret but not implement the requirements of the prior commercial use defense will serve you no benefit if an accusation of infringement arises later. 
 
Generally, the cost of obtaining a patent after the AIA should be similar to the cost before. However, the cost to maintain a trade secret after the AIA may be much greater than the cost to keep a trade secret before. Now, in order to be able to assert the prior use defense, a trade secret holder must document reduction of the subject matter to practice at least 1 year before the effective filing date of the patent, and support that reduction with commercial use before the effective filing date of such patent. 

Additionally, depending upon variance in particular claims of an asserted patent, and changes in the accused product of the defendant, in my opinion, it is necessary to continually monitor and update these trade secret records that are maintained by the trade secret holder. 
 
I believe that the analysis of new developments will now include a further prong: if a company decides to hold a development as a trade secret, it must then be decided whether or not that secret will be kept for merely enforcement in a trade secret action or if that secret will be maintained so that it is viable as a defense to patent infringement. 
 
In any case, due to these increased costs, I am not so sure that trade secrets have suddenly gained ground on patents. Certainly, both patent and trade secret attorneys need to be prepared to discuss these options with their clients as new developments arise and be prepared to consider the cost/benefit of the options.

John’s Take: James makes some good points here. However, I don’t know that the paperwork issue above will be overly onerous. First, most companies maintain many categories of documents in the ordinary course of the conception, development or maintainence of a process or invention, so those documents should be available if a business elects to rely on the prior commercial use defense instead of a patent. 

Second, as James properly notes, a company will have committed some investment of time and resources at the time of conception. Presumably, it has already made the decision at this time that the invention or process has value. Thus, the decision that remains is whether the company is better served by protecting that invention or process as a patent or as a trade secret. Records reflecting this process should exist and can be maintained.

From this standpoint, I still suspect that the cost associated with maintaining those records, when compared to the costs associated with identifying, deciding and prosecuting a patent application, will still be cheaper than that of a prosecuting and maintaining a patent. 

Third, I don’t think this defense imposes any greater burden on a trade secret holder than existed in any other trade secret case. In order to defend a trade secret at the TRO or preliminary injunction stage (the most frequent proceeding for a trade secret dispute), a trade secret holder has to demonstrate he or she adequately safeguarded the trade secret by clear and convincing evidence, the same standard required for the prior commercial use defense. 

As the patent and trade secret community continue to study the AIA and its impact on intellectual property law generally, we will continue to reflect and share our thoughts on these developments.