Many companies assume that they need to choose between patent protections or trade secret protections for their intellectual property, thereby foregoing an important tool in their arsenal to protect key company assets. Some believe that these protections are diametrically opposed, as patents offer protection of intellectual property in exchange for public disclosure, whereas trade secrets offer protection for ideas, recipes, information, and technology, which has been kept confidential. However, despite the misconception that they are incompatible, trade secret and patent protections can be complementary means to protect IP, as evidenced by a recent Federal Circuit opinion which explored the intersection of patent law and trade secrets.
In Texas Advanced Optoelectronic Solutions, Inc. v. Renesas Electronics America, Inc. (“TAOS”), 895 F.3d 1304 (Fed. Cir. July 2018), the court examined the dual prong approach of using the protections of both patent law and trade secrets, and its opinion demonstrates that it is possible to successfully use both forms of protection.
In January 2002, TAOS filed a patent application for certain technology utilized in smart phones. In 2004, the parties engaged in unsuccessful merger discussions. During the course of these discussions, TAOS disclosed confidential information to Renesas’s predecessor. After the failed merger discussions, Renesas’s predecessor released a product incorporating confidential design information disclosed during the merger discussions.
In 2008, TAOS filed suit in the Eastern District of Texas alleging, in part, violations of patent and trade secret law. The case went to trial in 2015, where a jury awarded TAOS over $70 million in damages, including almost $50 million in damages for disgorgement of profits resulting from the misappropriation of trade secrets.
Renesas unsuccessfully sought to overturn the jury’s misappropriation verdict. While the Federal Circuit reversed and remanded portions of the trade secret misappropriation verdict along with the verdict on certain patent infringement claims, it nonetheless held that where Renesas failed to present evidence that the 2002 patent application disclosed the alleged trade secret, the claim for misappropriation of trade secrets should be upheld despite the existence of the patent application. The court held that the mere existence of a patent application, which does not disclose a trade secret, is insufficient to defeat a claim for misappropriation. In order to defeat a claim for misappropriation based on the existence of a patent application, the patent application must disclose the alleged trade secret.
This decision highlights a company’s ability to layer various types of protections to safeguard its intellectual property. In light of this decision, companies should consider a dual-pronged approach for protecting intellectual property by using both patent and trade secret protections.