One might think the twain would never meet. A trade secret, as the name indicates, exists only in information or a process that is unknown outside of the business that asserts it. That is, it must in fact be secret.
On the flip side, anyone who seeks a patent must make a broad disclosure of the invention for which he seeks protection. Indeed, the essence of the “patent bargain” is that, in exchange for twenty years of exclusivity, an inventor must reveal the workings of his discovery.
In Tewari De-Ox Systems, Inc. v. Mountain States/Rosen, LLC, the Fifth Circuit Court of Appeals recently concluded that a company might possess a trade secret in a process even though it was partly described in its patent application.
Gustav Tewari devised a means for packing meat with zero oxygen. In 2005, he demonstrated his method to Mountain States, a seller of fresh cuts of lamb, but not before that company signed a non-disclosure agreement. Tewari eventually accused Mountain States of misappropriating the alleged trade secrets that he disclosed to them.
The trial court judge threw out the lawsuit. A trade secret is defined as appropriately safeguarded information whose economic value arises from not being generally known to competitors. The judge concluded that everything Tewari claimed as a trade secret was either disclosed in Tewari’s 2004 patent application or included elements that were known in the meat-packing industry.
The appeals court affirmed, up to a point, but still allowed Tewari to revive its trade secret lawsuit. The court agreed that when Tewari’s patent application was published – in keeping with a patent law that has been in effect since 2000 – any claim to the secrecy of its contents was destroyed.
However, regarding the meatpacking elements that were known in the industry, the court said that Tewari was entitled to show that he possessed a trade secret in a unique combination of those elements. Tewari claimed trade secrets in such things as:
- A gas mixture in combination with the zero-oxygen process published in the patent application
- An oxygen scavenger, disclosed in yet another patent application, that adapts to particular environmental conditions
- The combination of these two secrets
- Knowing how to adapt the disclosed process to an open-nozzle system
The appeals court ruled that Tewari was due an opportunity to prove that these combinations of known elements represent trade secrets, that is, that they give his company a competitive advantage.
Courts have long grappled with the assertion of trade secrets in combinations of otherwise known information. Some have scorned the notion. More often, courts take a case-by-case approach and give the claimant a chance to prove that some synergistic value arises from the combination. Such value is often measured by the competitive advantage that the supposed trade secret gives the owner.
Competitive advantage, in turn, might be judged by the time and effort that have gone into developing the secret information or process. A cornerstone of trade secret law is protecting the value of this head start by requiring competitors to spend their own resources to create a competing process.
The useful lesson of decisions, like that in Tewari, is that secrecy, not novelty, is the litmus test for trade secrets. This principle explains why even known elements, if brought together in a valuable combination, have the makings of a trade secret, if the combination is closely guarded.
Tewari offers the additional lesson that a combination can constitute a trade secret, even if one of the known elements derives from a published patent application.