On January 8, 2015, the United States Patent and Trademark Office (USPTO) hosted its first-ever event on trade secrets. As we noted when we announced news of the event, the mere fact that the USPTO, an office whose primary focus is patents and trademarks, hosted such an event is noteworthy. So why would the USPTO host an event on trade secrets?
The USPTO’s Michelle Lee, who delivered opening remarks, took this question head-on, stating that the USPTO decided to host the event because “trade secrets are an important form of intellectual property,” and noting that, according to some estimates, two-thirds of US companies’ IP portfolios is made up of trade secrets.
I was able to travel to the USPTO’s headquarters in Alexandria, VA to attend the symposium and provide TSW readers with the following observations.
The morning began with a discussion on the economic impacts of trade secrets theft. Panelists seemed to agree that trade secrets are an important part of the economy but are inherently difficult to measure.
Companies and lawmakers are interested in trade secrets.
As Mark Schankerman of the London School of Economics noted, when it comes to securing IP, patents are not at the top of most companies’ lists except in pharmaceuticals, biotech, and medical devices. Instead, lead time (getting a jump on competitors) and trade secrecy are often at the top.
Mark A. Charles of Proctor & Gamble (P&G) noted that his company is “taking a much harder look at utilizing the trade secret regime” for protecting its inventions. According to Tina Chappell, Director of Intellectual Property Policy at Intel, her company spent $10 billion last year alone in research and development (R&D).
But the picture is still far from complete.
Pamela Passman of the Center for Responsible Enterprise and Trade (CREATe.org), who co-authored a February 2014 study with PwC on the economic impact of trade secret theft, spoke about some of the inherent challenges that come with valuing trade secrets. She noted that very often “companies don’t have a process for categorizing, organizing, and valuing their trade secrets” and that they fear disclosing theft for a number of reasons, including regulatory, morale, or competitive reasons.
Although we often think of iconic trade secrets such as Coca-Cola’s secret formula, the reality is that a lot of trade secrets embody more behind-the-scenes processes. P&G’s Mark A. Charles noted that, when it comes to his company’s trade secrets, it’s not about how to make the soap itself, but rather it’s about the manufacturing processes—about how to bring millions of bars of soap to market efficiently.
Even though there’s work left for companies to do when it comes to identifying their trade secrets, education and training of employees is perhaps an even more pressing issue. As Intel’s Tina Chappell noted, younger, more tech savvy employees might be excited about a new innovation or project and want to talk about it on social media. It’s critical that these employees know the risks involved with potentially disclosing anything that might be a potential trade secret, Chappell said.
Federal legislation seems likely—and may be coming soon.
And as most TSW readers are aware, lawmakers in Washington have had trade secrets on their minds for the last couple of years. Unsurprisingly, the House and the Senate each sent a panelist down to Alexandria to discuss current legislative efforts during the day’s final session.
Ted Schroeder, from the office of Senator Chris Coons (D-DE) (the sponsor of the Protecting American Trade Secrets and Innovation Act of 2014) summed up nicely the legal dilemma that has sparked the push for federal legislation—namely that lack of uniformity in the law creates higher compliance costs for companies.
Both Schroeder and Jason G. Everett, Chief Minority Counsel for the Subcommittee on Courts, Intellectual Property, and the Internet Committee on the Judiciary, indicated that trade secrets legislation will remain a priority in both the House and Senate in 2015 and, as Schroeder put it, federal trade secrets legislation is “very, very close.”