Trade secrets and patents: Are you protected?

Web content editor Ian Bolland spoke to Philip Nelson and Tom Cowan from Knobbe Martens, to discuss trade secrets and patents in the United States, trends behind its usage, and what might be better for medical device companies to adopt.

As medical device companies move towards using software in devices, particularly in the cases of smart devices, the US Supreme Court case of Alice Corp versus CLS Bank International becomes more relevant to the industry.

The case highlighted whether software patents were patentable. It heard the argument that software is too much of an abstract idea, with debate over whether an inventive concept is involved or not.

As a result, the US Patent Office seemed more reticent since the 2014 court case to grant software patents after it received some bad press for issuing patents that were viewed as too broad by some. This has included an MRI machine that was declared as patent ineligible back in 2017, as the ruling stated: “It can accurately be characterized as being directed to an abstract idea and not eligible as patentable subject matter.”

Explaining the effect of the Alice versus CLS Bank on the medical device industry, Nelson said: “There’s a lot of medical device patents that involve smart devices these days that incorporate an algorithm or software somehow and, for a while, medical device patents still flowed at generally the same rate.

“Over the last couple of years, the patent examiners that were deciding whether to allow medical device cases started to look for these software aspects. On many occasions the fact a device has this software aspect would be the thing that distinguishes it over the prior art because these were being connected to the internet of things or to the hospital information system somehow.

“The novel aspect was often software, but the US Patent Office were treating it as if some software aspect would be like a poison pill for the patent application process, and they would say it’s too abstract - even though there were other aspects of the claims that were mechanical and not software related at all.

“It wasn’t across the board, but I was noticing that more in the last few years. The pendulum might be swinging back the other way because the current director of the US Patent Office (Andrei Iancu) is trying to teach the examiners not to let that sort of analysis affect their thinking.”

Following an uptick in rejections, Nelson believes they are starting to fall slowly. Cowan explains how medical diagnostics have been under the same kind of scrutiny for the law of nature issue – one of the excluded areas for patent eligibility: “We saw in the last five or ten years, medical diagnostic tools like lateral flow assays, testing for enzymes or certain antibodies in the body or in bodily fluids come under scrutiny because of the expanded doctrine of ineligibility that pertains to laws of nature.

“Medical diagnostic devices can sometimes be thought of as medical devices – that for me I’d say is the other big problem area, but if it’s more mechanical and less emphasizing the software aspect you’re pretty safe.”

When it comes to protecting devices, Nelson feels it is important for companies to consider whether they want to use the patent system at all: “In general, we advise clients that come in with intellectual property to take a hard look at what the best avenue for protection is. Trade secrets is an option for protection but the way you protect a trade secret is just by keeping it secret and providing company policies and agreements that make sure your formulas are locked away.

“If it’s the sort of thing that’s in a fast-moving field where there’s lots of innovation going on, and you’re going to be passed by in a few years anyway, maybe the patent system is useful.

“If it’s going to be something that’s really hard to reverse engineer, like a chemical formula, or a really detailed, underlying algorithm, you might want to keep it as a trade secret.

“If it’s easy to reverse engineer the only option is to keep it under a trade secret and protect it with confidentiality agreements and so forth. If it’s harder to reverse engineer, it is wiser to keep it a trade secret, but you still have the option.”

Both Nelson and Cowan suggest there is more public awareness of the patent process, partly because of their desire to read up on the issue, and non-profit organizations who are anti-patent who often talk about patent trolls.

Cowan explained there was a feeling that unscrupulous entities were taking advantage of the system in that they weren’t making any products but were buying patents to sue people and recover money in damages: “There has been a successful PR campaign, a narrative that somehow there’s more litigation now. Actually, the litigation rate, if you look at the number of patents, is at the same or lower level than it’s been.

“Just because society is technological, and technology is so ubiquitous now, everybody is pretty much using some kind of technology. The public is more acutely aware of it.”