Expired Patents, Trade Secrets, and Stymied Competition

W. Nicholson Price II*

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 twenty 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 Article 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 exploit commercially 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.

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© 2017 W. Nicholson Price II. Individuals and nonprofit institutions may reproduce and distribute copies of this Article in any format at or below cost, for educational purposes, so long as each copy identifies the author, provides a citation to the Notre Dame Law Review, and includes this provision in the copyright notice.

*Assistant Professor of Law, University of Michigan Law School. For helpful comments, I thank Jonas Anderson, Ana Bracic, Deven Desai, Rebecca Eisenberg, Roger Ford, Mark Lemley, Arti Rai, Rachel Sachs, and Brenda Simon. This work benefited from feedback received at the Junior Intellectual Property Scholars Association’s Gnocchi Workshop, the Big Ten Juniors Conference at Indiana University, the Michigan Law School Fawley Workshop, and the Notre Dame Law Review Annual Symposium. All errors are my own.