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Sure as Shootin’, If It’s Claimed in Your Patent, You Can’t Assert It as a Trade Secret

Companies face a potential loss of intellectual property rights when a key employee walks out the door. Those rights may be grounded in both patents and trade secrets, which may pose tricky problems when those rights are intertwined, as a recent case illustrates.

In Atlantic Research Marketing Systems Inc. v. Troy, the Federal Circuit sets its sights on a rifle handguard that attaches to the gun barrel in only one place. Atlantic Research had employed Stephen Troy to assist it in making and marketing this product. When Mr. Troy left to make a competing product, Atlantic Research sued him for infringing its patent and for stealing and using its trade secrets.

The free-floating handguards sold by both parties solve the problem of how to attach ancillary devices, like integrated laser systems, to the barrel of a military rifle without damaging both the rifle and the added device. Ordinarily, the device could cause the barrel to bend; at the same time, the extreme heat from the barrel could damage the device. Both parties overcome these difficulties with a handguard that surrounds the barrel of the firearm without touching it.

The specification of Atlantic Research’s patent discloses a sleeve accessory, which includes a receiver-sleeve component that attaches to the firearm. Although the receiver sleeve is self-supported, the patent specification explained that “additional support may be provided” by a yoke around the barrel nut of the weapon.

Troy, for his part, offered for sale a handguard that could be attached to a rifle in just one location, the barrel nut.

Laying the groundwork for its infringement case, Atlantic Research asked the district court judge for a construction of the key claim of its patent that permitted the barrel nut to provide complete support for the handguard accessory. The receiver sleeve, Atlantic urged, provided additional but not necessary support. In short, Atlantic Research sought to have the claim construed in a manner that would be infringed by Troy’s barrel nut-only support design.

The district court (Judge Saris of the federal court in Boston) obligingly adopted the claim construction that Atlantic Research proposed, but found that the specification of Atlantic’s patent did not disclose a handguard attached only to the barrel nut. To the contrary, every embodiment in the patent had the handguard supported at no fewer than two points on the rifle.

The district court found the asserted patent claim invalid for lack of written description. The patent is supposed to permit a person who is skilled in the art to understand, upon reading the original specification, that the inventor was in possession of the claimed invention.

By the same token, as the Federal Circuit reminds us, “the purpose of the written description requirement is to ensure that the scope of the right to exclude, as set forth in the claims, does not overreach the scope of the inventor’s contribution to the field of art as described in the patent specification.”

For Atlantic Research, getting the claim construction it wanted ultimately led to the invalidation of its claims because they were not supported by the specification.

Atlantic’s other claim, namely, that the barrel nut-only design was a trade secret, only bolstered the conclusion that such design was not in fact disclosed in Atlantic’s patent. The inventor could “not ‘have it both ways’ by reaching back and relying on the disclosure in [his] patent to claim an invention he was purposely shielding from the public.”

Losing on its patent claim did not prevent Atlantic Research from prevailing on its trade secret claim. The jury awarded it more than $1.8 million in damages, finding that Troy had misappropriated Atlantic’s trade secrets and breached his fiduciary duty to his former employer. The jury was properly instructed that, to be protectable, any supposed trade secret must go beyond what was disclosed in Atlantic’s patent.

The Federal Circuit showed some sympathy for Troy, but concluded that the parties’ legal positions almost assured Atlantic Research of winning one of its claims:

Troy’s argument illustrates the inherent tension Atlantic Research created by contending that Troy misappropriated trade secrets, while simultaneously asserting that the products Troy developed with the misappropriated trade secrets infringed its patent. In response, Troy contended that Atlantic Research’s patent disclosed the trade secret, but also contended that the patent asserted against it was invalid for failing to disclose a written description of a handguard that attaches solely at the barrel nut. These conflicting positions left little room for either party to prevail on both claims.

The Federal Circuit affirmed the lower court’s reasoning on both the patent and trade secret issues, but, in a bizarre twist, vacated the jury verdict due to “jury taint.” One juror had brought a plumbing clamp from home to show other jurors during deliberations, and the court held that the judge should have more aggressively ensured that the clamp did not have any “prejudicial effect on the jury as a whole.”

The parties must try the case all over again, but Atlantic Research has already been rewarded for its decision to sue for both patent infringement and trade secret misappropriation. Although this combination forced Atlantic to take mutually inconsistent positions that drew judicial reproach, it was surely just as happy winning on one claim as on the other.

As for the rest of us, we are reminded that, first, when you argue a claim construction with your sights on infringement, be careful you don’t shoot yourself in the foot. Assess carefully the risk of claim invalidation when advancing a construction that lacks support in the disclosure.

Second, trade secret and patent protection are mutually exclusive. Full public disclosure is the basis of the patent system, while scrupulous secrecy is, by definition, essential to asserting a trade secret. If you’ve taken the trouble to protect a product or method as a trade secret, don’t expect a court to view it as patent-protected.

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