Expired Patents, Trade Secrets, and Stymied Competition
30 Pages Posted: 23 Dec 2016 Last revised: 30 Jul 2018
Date Written: December 22, 2016
Patents and trade secrecy have long been considered substitute incentives for innovation. When inventors create a new invention, they traditionally must choose between the two. And if inventors choose to patent their invention, society provides strong legal protection in exchange for disclosure, with the understanding that the protection has a limit: it expires 20 years from the date of filing. At that time, the invention is opened to the public and exposed to competition.
This story is incomplete. Patent disclosure is weak and focuses on one technical piece of an invention — but that piece is often only a part of the market-relevant innovation. Patent-holding innovators use various tactics to distort the patent bargain and prolong effective monopolies beyond the patent’s expiration date. These tactics include using patented inventions to generate secret information, relying on the timing difference between patent filing and product marketing to make disclosure nearly irrelevant, and tying secret components to patented frameworks.
While these phenomena have been noted before, this paper joins them together as examples of ways that innovators avoid the competition-promoting function of patent expiration, ultimately limiting the benefit the public receives from patented inventions. It also suggests that the most problematic cases likely involve markets where additional factors, such as regulation or other market irregularities, require that goods be interchangeable. Finally, it proposes the concept of economic enablement: patentees may have a responsibility to enable not just the bare technical invention disclosed in a patent, but rather the minimum information necessary to commercially exploit the patented invention. Against the background of the newly enacted federal Defend Trade Secrets Act, courts and scholars alike should examine the boundaries between trade secrets and patents to ensure that the overlap does not distort the policy goal of incentivizing and promoting both innovation and competition.
Keywords: trade secrets, secrecy, patents, innovation
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