Protection of Inventions Disclosed in Pending Patent Applications

While it is well-known that an issued patent provides the patent owner with a right to sue in United States courts to prohibit any other party from making, using, offering for sale, selling or importing the invention in the United States after the patent issues, many invention owners are far less certain what protections exist during the pendency of their patent application. In particular, many owners of patent applications are uncertain how to disclose their invention to a potential purchaser/licensee during the pendency of their application while protecting their rights. Similarly, many corporations who receive solicited and unsolicited invention ideas are often uncertain what risks are associated with receiving such disclosures. This article provides a brief overview of two approaches to protecting against a third party’s use of an invention during the pendency of a patent application directed to that invention: provisional patent rights under 35 U.S.C. § 154(d) and trade secret protection.

Provisional Patent Rights

A provisional patent right is a relatively new right created by the American Inventors Protection Act of 1999 (“AIPA”). 35 U.S.C. § 154(d). This right gives a patent owner the ability to obtain a reasonable royalty from any person who makes, uses, offers for sale, sells or imports the invention disclosed in the patent application in the United States during the period beginning on the date the patent application is published and ending on the date the patent issues. Id. Before a cause of action under this statute accrues, the application must be published under 35 U.S.C. § 122(b), the potential infringer must receive actual notice of the publication, the patent must issue and the issued claims must be substantially identical to the published claims. Id.

As of this writing, there are no published cases interpreting any of these provisions, so it is unclear how effective this remedy will be for patent application owners whose patents eventually issue. Cf. 4 Donald Chisum, Chisum on Patents §11.02 [4] [e] Supp., n. 59 (noting “[t]he ‘substantially identical’ standard will undoubtedly create difficult issues.”) One downside to protecting an invention through this statute is that the invention owner must notify all potential infringers of the application’s publication to ensure that the infringer has actual notice of the application. This course risks the potential infringer filing a third-party submission under 37 C.F.R. § 1.99 disclosing prior art for the examiner’s consideration. However, because the third-party is not allowed to present any arguments or even a description of the alleged prior art to the examiner in this situation, it is unlikely that such a submission would be filed as the application owner will have the opportunity to distinguish the alleged prior art and make it of record before the patent issues. This would place the owner in a much better position should the third party attempt to invalidate the issued patent using the disclosed prior art in subsequent litigation.

Regardless of any potential risk in utilizing this approach, provisional rights provide a more effective remedy to patentees than the previous regime, where no patent-type rights existed against infringers for their pre-issuance activity. See National Presto Industries, Inc. v. West Bend Co., 76 F.3d 1185 (Fed. Cir. 1996) (holding that a party who flooded the market with infringing products before a patent issued could not be liable as a direct or contributory infringer of that patent based on its pre-issuance activity).

Trade Secret Protection

In addition to the provisional patent rights conferred by the AIPA, trade secret protection may be available for owners of pending patent applications. As discussed herein, this protection may be available even if the invention owner discloses the invention to a third party without an explicit confidentiality agreement.

Overview of Trade Secret Protection

The contours of trade secret protection vary from state to state. New York is one of the few states that has not codified trade secret protection. Consequently, trade secret protection is governed by the common law. In New York, a trade secret is typically defined as:

any formula, pattern, device or compilation of information which is used in one’s business, and which gives him an opportunity to obtain an advantage over competitors who do not know or use it.

Ashland Management Inc. v. Janien, 82 N.Y.2d 395, 407 (1993). New York courts often examine six factors to determine whether a trade secret exists. The factors are:

    1. the extent to which the information is known outside of [the] business;
    2. the extent to which it is known by employees and others involved in [the] business;
    3. the extent of measures taken by [the business] to guard the secrecy of the information;
    4. the value of the information to [the business] and [its] competitors;
    5. the amount of effort or money expended by [the business] in developing the information;
    6. the ease or difficulty with which the information could be properly acquired or duplicated by others.

Id. (quoting Restatement of Torts § 757, cmt. b). Because the definition of trade secret is quite broad, it typically envelops any invention for which a party has sought patent protection, as long as the requisite level of secrecy is maintained.

Once a party has established that it possesses a trade secret in an invention, it may have a cause of action against a third party for its unauthorized use of that trade secret in breach of an agreement, a confidential relationship or duty, or as a result of discovery by improper means. See 4, N.Y. Practice § 63.3(c). In such an action, the plaintiff may seek injunctive relief or damages in the nature of lost profits resulting from the misappropriation. See Spiselman v. Rabinowitz, 270 A.D. 548, 551 (App. Div. 1946); Garvin Guybutler Corp. v. Cowen & Co., 155 Misc. 2d 39, 44 (Sup. Ct. 1992); Allen Dampf, P.C. v. Bloom, 127 A.D.2d 719, 720 (App. Div. 1987).

Therefore, to maintain a cause of action for misappropriation of trade secrets, it is important for an invention owner to protect the secrecy of the invention and to ensure that any party to whom the invention is disclosed during the period in which it is secret is placed under a duty not to use the secret to the owner’s detriment.

The Patent Application As A Trade Secret

Before a patent application is published, it is “kept in confidence by the Patent and Trademark Office.” 35 U.S.C. § 122(a). Consequently, as long as the patent owner has not otherwise disclosed the invention publicly, such as through academic publications, publicly disseminated marketing materials and/or sales of the product that inherently disclose the trade secret aspects of the invention, the trade secret protection should be extant before publication. See, e.g., Blank v. Pollack, 916 F. Supp. 165, 174-75 (N.D.N.Y. 1996) (“Public disclosure of the features of the devise, [sic] design or process renders such outside the scope of trade secret protection.”). Once the patent issues, no trade secret protection remains as to the portion of the trade secret disclosed in the patent. See Laurie Visual Etudes, Inc. v. Chesebrough-Pond’s Inc., 83 A.D.2d 505, 506 (App. Div. 1981) (“Under New York law, a plaintiff may not recover for a trade secret when the novelty of the idea has been lost through the issuance of a patent”). Although there does not appear to be case law on point yet, it would seem that the logic of the Blank and Laurie-Visual cases would apply to publication of the patent application as well. Consequently, it is unlikely that trade secret protection remains as to the portion of the trade secret disclosed in a published patent application. However, as previously discussed, provisional patent rights will begin to accrue upon publication assuming potential infringers are placed on actual notice of the publication.

Creating a Confidential Relationship By Disclosing A Patent Application

The prototypical way by which invention owners create a confidential relationship with a party to whom they plan to disclose the invention is a written confidentiality agreement. Where such an explicit written agreement does not exist, however, there may still be a confidential relationship between the invention owner and the party to whom the invention is disclosed. See Heyman v. AR. Winarick, Inc., 325 F.2d 584 (2d Cir. 1963) (“an express agreement is not a prerequisite to the establishment of a confidential relationship”).

Numerous courts have implied a confidential relationship between an invention owner and a third party where the invention owner discloses an invention to a third party for the purposes of selling or licensing the invention. See, e.g., Id.; Speedry Chemical Products, Inc. v. Carter’s Ink Co., 306 F.2d 328, 332 (2d Cir. 1962); Laurie Visual Etudes, Inc. v. Chesebrough Pond’s Inc., 105 Misc. 2d 413, 418-19 (Sup. Ct. 1980), rev’d on other grounds, 83 A.D.2d 505 (1981); Klein v. Ekco Products Co., 135 N.Y.S.2d 391, 395-96 (Sup. Ct. 1954); Smith v. Dravo Corp., 203 F.2d 369, 376 (7th Cir. 1953). Nevertheless, invention owners should carefully consider whether to make a disclosure without an express, preferably written, agreement to maintain the information in confidence. Similarly, corporations that receive solicited and unsolicited invention ideas should carefully consider whether to accept a disclosure without an express, preferably written, acknowledgement that the disclosure is not being made in confidence and that no confidential relationship exists between the parties – unless, of course, the corporation is willing to treat the disclosure as confidential. In both circumstances, the existence of a confidential relationship will be highly dependent on the circumstances of the disclosure. See Nynex Corp. v. Shared Resources Exchange, Inc., No. 14577/89, 1990 WL 605347, at 6 (N.Y. Sup. Ct., Sep. 10, 1990) (holding that the question of whether a confidential relationship arose from the disclosure of trade secret information is a “triable issue[] of fact”); Klein, 135 N.Y.S.2d at 396 (“it is for the trial court to determine whether as a matter [of] fact such confidential relationship did or did not arise between the parties”). While no bright line rules exist in these situations, the courts seem to inquire as to whether both parties “knew and understood” the “limited purpose” of the disclosure. Dravo, 203 F.2d at 376. Although the weight of authority suggests that invention disclosures to potential purchasers or licensees of the invention will create an implied confidential relationship in the absence of an express agreement to the contrary, there is no guarantee that such a relationship will be found without an express agreement.


Although the absolute right to exclude does not vest in an invention owner until a patent issues, there may be some protection against the unauthorized use of an invention disclosed in a patent application before the patent issues.


1   The views in this article are the author’s and not necessarily the views of Baker Botts L.L.P.

2   35 U.S.C. § 154 reads, in relevant part:

(d) Provisional Rights.—

(1) In general.— In addition to other rights provided by this section, a patent shall include the right to obtain a reasonable royalty from any person who, during the period beginning on the date of publication of the application for such patent under section 122(b), or in the case of an international application filed under the treaty defined in section 351(a) designating the United States under Article 21(2)(a) of such treaty, the date of publication of the application, and ending on the date the patent is issued –

(A)(i) makes, uses, offers for sale, or sells in the United States the invention as claimed in the published patent application or imports such an invention into the United States; or (ii) if the invention as claimed in the published patent application is a process, uses, offers for sale, or sells in the United States or imports into the United States products made by that process as claimed in the published patent application; and

(B) had actual notice of the published patent application and, in a case in which the right arising under this paragraph is based upon an international application designating the United States that is published in a language other than English, had a translation of the international application into the English language.

(2) Right based on substantially identical inventions. – The right under paragraph (1) to obtain a reasonable royalty shall not be available under this subsection unless the invention as claimed in the patent is substantially identical to the invention as claimed in the published patent application.

3    See 35 U.S.C. § 282.