November 29, 2021

Volume XI, Number 333

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Trade Secret vs. Patent – a False Dichotomy

Trade secrets and patents offer very different forms of protection, with different pros and cons. A trade secret may last indefinitely, while a patent has a fixed term of 20 years. Independent reinvention is permissible under trade secrets, but not with patents. And of course to obtain a patent, one must disclose the claimed invention to the public, in sufficient detail to enable one skilled in the relevant technology to make and use the invention.

Protecting the intellectual property embodied in an innovative product is often viewed as a choice between trade secret or patent protection, but these types of protection are not invariably mutually exclusive. One may use both, as made clear in the recent Seventh-Circuit case Life Spine, Inc. v. Aegis Spine, Inc., — F.4th —- (Aug. 9, 2021), 2021 WL 3482921. In this case, Aegis Spine appealed a preliminary injunction granted against it and its business partners in an action brought by Life Spine for trade secret misappropriation and breach of a distribution agreement.  Aegis Spine argued that a company cannot have trade secret protection in a device that it publicly discloses through patents, displays, and sales. The court disagreed.

The product in question is the Life Spine ProLift, which consists of an expandable implant, or “cage,” and an installer that is used to insert the cage into a patient’s spine and expand it to restore spinal disc height. Among the trade secrets alleged to have been misappropriated are “the precise dimensions and measurements of the ProLift components and subcomponents and their interconnectivity”. A key fact in dispute was whether those precise specifications could be obtained by third parties without first signing confidentiality agreements. The district court answered no, finding that third parties could learn this information only through unfettered access to the device and specialized measuring equipment, and that Life Spine does not allow third parties such access unless they first sign confidentiality agreements. Aegis Spine had signed just such an agreement in order to act as a distributor of the ProLift. But then Aegis Spine’s parent company L&K Biomed, Inc. quickly developed a nearly identical product.

On appeal, Aegis Spine contended that the district court legally erred in concluding that information about the ProLift could remain a protected trade secret after Life Spine patented, displayed, and sold the device to hospitals and surgeons. As the court surmised: “Aegis appears to view trade secret protection as an all-or-nothing proposition for a given product—either it exists, or it does not.” The court then noted the inquiry is not so simple, and instead is focused on “the precise information that the plaintiff seeks to protect.” The court framed the question: “Did Life Spine publicly disclose its alleged trade secrets by patenting, displaying, and selling the ProLift?”

The court observed that Life Spine went to great lengths to protect this trade secret, including contractually maintaining a fiduciary chain of custody of each device from shipment through completion of surgery. Life Spine also closely supervised the devices during displays and sales “much like a jeweler supervises someone trying on a watch.” And the precise measurements and dimensions of the ProLift were not available from marketing materials or from the patent.

Aegis also argued the ProLift may have been reverse-engineered by a surgeon not contractually bound to confidentiality, either before surgery or even after removing one from a patient’s body. The court called these “speculative and factually unsupported hypotheses,” noting that the owner of a trade secret need only take “reasonable measures” to preserve secrecy. After reviewing the requirements for granting a preliminary injunction, the appellate court affirmed the district court’s determination to enjoin Aegis and its business partners from making, marketing, distributing, selling, or obtaining intellectual property rights in their competing product.

Life Spine well illustrates how one may protect a single product with both patents and trade secrets by segregating product information into those categories. Thus, a company can maintain trade secret protection in the undisclosed aspects of a product, even if it has made a public disclosure in a patent application of other aspects of the same product. A key consideration is whether the patent application makes a sufficiently detailed disclosure to enable those skilled in the relevant art to practice the claimed invention.  The Seventh Circuit’s decision in the Life Spine case does not clearly delineate how much detail must be set forth for the patent disclosure to qualify as enabling, but it does make clear that information not included in the enabling disclosure may qualify for trade secret protection.

Copyright © 2021, Sheppard Mullin Richter & Hampton LLP.National Law Review, Volume XI, Number 242
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About this Author

Steven P. Hollman Business Trial Attorney Sheppard Mullin Washington, DC
Partner

Steven Hollman is a partner in the Business Trial Practice Group in the firm's Washington, D.C. office and Leader of the Trade Secrets Team.

Areas of Practice

Steven has jury-tried patent, trademark and advertising cases during his career expanding  over 35 years and has successfully tried section 337 patent and trademark investigations before the ITC. Steve has handled numerous labeling and advertising disputes for major pharma and food companies, including class action advertising litigation, and for pharmaceutical innovators and life sciences companies....

202.747.1941
Rick Dunning Intellectual Property Attorney Sheppard Mullin Law Firm San Diego Del Mar
Associate

Rick Dunning is an associate in the Intellectual Property Practice Group in the firm's San Diego (Del Mar) office. He advises clients in all areas of intellectual property law, including patent and other intellectual property litigation, strategic portfolio development, technology licensing, transactional matters, counterfeits and gray markets.

Areas of Practice

Rick is a patent attorney and electrical engineer providing a full range of intellectual property services to companies and startups, with a...

858.720.7468
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