Trade secret claims and patent law frequently intersect, most notably in the patent application context. A recent case out of the U.S. District Court for the Eastern District of Pennsylvania, Foster v. Pitney Bowes, 2013 U.S. Dist. LEXIS 17061 (Feb. 7, 2013), should provide a cautionary tale to any trade secret holder of the risks that accompany a patent application that might reveal those trade secrets.
In Foster, U.S. District Court Judge Joel Slomsky found that the plaintiff’s patent application caused the information to be made public and extinguished any claim for trade secrecy. (A hat tip to Brian A. Hall for his post on this case in his blog, Unintellectual Property).
Background: The plaintiff, Frederick Foster, alleged that he had invented a system that, for a fee, would allow users to present personal identification documents to a local U.S. post office that would allow their identity to be verified so that they could receive a virtual post. Foster described his invention as the Virtual Post Office Box/Internet Passport powered by Global Registration and Verification (VPOBIP).
In May 2008, Foster mailed a description of VPOBIP to the U.S. post office and filed a provisional patent application for VPOBIP with the U.S. Patent and Trademark Office (USPTO) shortly afterwards. Curiously, Foster failed to secure a non-disclosure agreement from the U.S. post office for his discussions with the post office over his invention. The post office directed him to consult further with Pitney Bowes, and ultimately negotiations over VPOBIP fizzled.
In June 2010, the USPTO issued a final rejection of Foster’s patent application for VPOBIP. In another mistake that came back to haunt him, Foster had failed to check off the box in his application to make a non-publication request, so the USPTO published the patent application on December 4, 2008.
In early 2011, Pitney Bowes launched a website, at volly.com, that Foster believed directly copied his invention and trade secrets. Foster then sued the U.S. post office and Pitney Bowes, alleging, among other things, that they had misappropriated his trade secrets for VPOBIP.
Holding: Judge Slomsky dismissed Foster’s trade secret claims, reasoning that Foster had failed to adequately safeguard trade secrets because he did not secure a non-disclosure agreement (NDA)from the U.S. post office and because he failed to ask the USPTO not to publish his application. Although Foster claimed that the trade secrets were not disclosed in the patent application, Judge Slomsky found that these failures to safeguard his trade secrets were fatal.
Foster filed the case pro se, so there were some arguments that he could have made that might have salvaged his case, at least at the early stage of the proceeding. For example, at the time that he disclosed the information to the post office, the information had not yet been published by the USPTO. As a result, subsequent public disclosure of the patent application might not have been fatal because he could have argued that it was a trade secret at the time that it was allegedly misappropriated. However, the biggest problem he would have ultimately faced was the lack of a non-disclosure agreement with Pitney Bowes.
The Takeaway: Foster made two fatal mistakes (1) he failed to get a non-disclosure agreement signed by the post office and Pitney Bowes before disclosing his confidential information; and (2) he failed to request non-publication of his patent application under 37 C.F.R. 1.213(a).
The most important takeaway, however, is that courts will always be suspicious of trade secret claims that arise from an invention that has been publicly disclosed in a patent application, especially now with the enactment of the America Invents Act (AIA). Indeed, in his opinion, Judge Slomsky noted that one of the goals of the AIA was greater emphasis on public disclosures to avoid “submarine” patent applications that might be kept out of view and suddenly emerge to disrupt the marketplace.