Tag: trade secrets

When Inventee Becomes the Inventor: Can AI be a Patent Inventor?

by Pranita Dhungana

“Why did ChatGPT go to the therapist? Because it had too many layers and couldn’t figure out which one was the true self!” I prompted ChatGPT to tell me a joke about itself, and it responded with the “joke” above. A bit too eerily self-aware for my liking!

Artificial Intelligence (“AI”) has taken the world by storm. The arrival of AI chatbots like ChatGPT has made AI accessible to small businesses that might not otherwise have the resources to develop an AI system in-house. As of 2020, 29% of small and medium businesses had adopted AI. That number must be higher today since AI commonly exists across multiple facets of business, like customer service, marketing, sales, data analysis, inventory management, accounting, and even research & development.

But what happens when your AI system creates an invention? Can it be listed as the inventor on a patent application?

The Answer Depends on the Country You Are In

The United States

The Federal Circuit recently answered this question in Thaler v. Vidal. According to this case, AI cannot be an inventor.

Dr. Thaler developed an AI system called Device for the Autonomous Bootstrapping of Unified Science (“DABUS”). DABUS, without any human involvement, invented a flame device used in search-and-rescue missions and a food/beverage container. Dr. Thaler sought to patent both of these inventions. Interestingly, Dr. Thaler filed both patent applications with DABUS listed as the inventor. The United States Patent and Trademark Office (“PTO”) rejected the applications, reasoning that AI could not be the inventor on a patent. Dr. Thaler unsuccessfully challenged the PTO’s rejection in the U.S. District Court for the Eastern District of Virginia and appealed its decision to the Federal Circuit.

Relying solely on statutory interpretation, the Federal Circuit determined that AI cannot be a patent inventor. The Patent Act (“Act”) defines an inventor as the “individual” who invented the subject matter. The Federal Circuit found the Act’s multiple references to “individual” compelling. Although the Act does not define “individual,” the United States Supreme Court has defined it as a human being or a person. In addition to considering how we use the word individual in everyday use and how dictionaries define it, the court also found support in the Dictionary Act. The Dictionary Act confirms that an individual is a human being and is different from artificial entities like corporations. The Act also uses the personal pronouns “himself” and “herself” to refer to the inventor, as opposed to “itself,” further showing that Congress intended for only humans to have patent inventorship. Finally, the Act requires inventors to submit an oath that they believe themselves to be the original inventor. Since the record was void of any indication that AI can form a belief, and because Dr. Thaler had submitted the oath himself on DABUS’s behalf, the court found no ambiguity in the Patent Act that an inventor must be a natural person.

Regardless of the negative outcome in the U.S., Dr. Thaler has continued his global campaign for the recognition of AI as an inventor.

Europe

Courts across Europe have aligned with the United States in rejecting DABUS’s applications, finding that their patent laws fail to recognize AI as an inventor. The European Union’s European Patent Office specified that under the European Patent Convention, an inventor on a patent application must have “legal capacity,” which is the ability to be the subject of rights and duties. Current laws do not recognize the rights and duties of AI.

Australia

Although a Federal Court of Australia initially ruled that the Australian Patent Act did not limit inventorship to humans, a higher court reversed the ruling based on the finding that the Australian Patent Act confers a patent for human endeavor. Therefore, Australia has also aligned with other jurisdictions globally.

However, an outlier has emerged in South Africa.

South Africa

South Africa remains the only country to have granted a patent to one of DABUS’s inventions. However, commentators have questioned the significance of this grant since South Africa does not have as substantive of a patent examination process as other countries. Specifically, South African patent laws do not define “inventor,” and its patent approval procedure seems to be nothing more than a simple assessment of whether the paperwork was filed correctly.

Regardless, patent rights are territorial, so a patent granted in South Africa is enforceable only in South Africa.

So what should business owners do?

Trade Secret as an Alternative to Patent Protection

Entrepreneurs who implement AI systems in their businesses should understand that their AI-invented inventions are not eligible for patent protection, and there is no way around that bar in most global jurisdictions. In Thaler, the Federal Circuit distinguished DABUS’s inventions from those not entirely made by AI. However, the court provided no guidance on inventions made with the assistance of AI since that was not the issue before the court.

Given this uncertainty, entrepreneurs should utilize trade secrets to protect their AI-invented or AI-assisted inventions. Trade secret protection applies to almost anything that has value because it is not known and is sufficiently secret. In addition to not having a formal registration requirement like patents, trade secret protection also covers those inventions that are not eligible for patent protection, including those that are AI-invented or AI-assisted.

Due to the trade secret secrecy requirement, inventions that are customer-facing or prone to reverse engineering may not qualify. However, for inventions used internally trade secret protection is a viable alternative to patents. To enjoy trade secret protection, business owners should implement measures to maintain secrecy. These measures may include having employees sign confidentiality agreements or NDAs and limiting the distribution of information both inside and outside the business.

This post has been reproduced and updated with the author’s permission. It was originally authored on March 24, 2023 and can be found here.

Pranita Dhungana, at the time of this post, is a recent graduate of Penn State Dickinson Law who is now pursuing Intellectual Property law. She also has a B.S. in Chemistry.

 

 

 

Sources:

ChatGPT, OpenAI (March 21, 2023).

Forbes, AI Stats News: Only 14.6% of Firms Have Deployed AI Capabilities in Production (January 13, 2020) https://www.forbes.com/sites/gilpress/2020/01/13/ai-stats-news-only-146-of-firms-have-deployed-ai-capabilities-in-production/?sh=1e30a55c2650.

Thaler v. Vidal, 43 F.4th 1207 (Fed. Cir. 2022).

Kingsley Egbuonu, The Latest News on the DABUS Patent Case, IPStars (March 17, 2023) https://www.ipstars.com/NewsAndAnalysis/The-latest-news-on-the-DABUS-patent-case/Index/7366.

Andrew J. Gray IV et al., Copyright, Patent, or Trade Secret Protection for AI Content: Challenges and Considerations (February 10, 2023) https://www.morganlewis.com/pubs/2023/02/copyright-patent-or-trade-secret-protection-for-ai-content-challenges-and-considerations#:~:text=Along%20with%20a%20low%20cost,inventions%20made%20by%20AI%20technologies.

Patents vs. Trade Secrets: Choosing the Best Method to Protect your Intellectual Property

by Coryn Hubbert

A company’s intellectual property is its number one asset, so choosing the method to protect it can be one of the most important business decisions an entrepreneur will make in the start-up phase. Two options for protection are patents and trade secrets. This post explores the pros and cons of each option.

Utility patents

Patents are contracts between the patent owner and the government. In exchange for the patent owner’s full disclosure of the invention, the government grants the patent owner monopoly rights for 20 years from the date of filing. Once these rights expire, the invention falls into the public domain, where anyone is free to utilize it.

Requirements

There are four legal requirements for patentability: the invention must be (1) useful, (2) patentable subject matter, (3) novel, and (4) nonobvious. Patentable subject matter includes machines, processes, methods of manufacture, or compositions of matter. This definition excludes laws of nature, natural phenomena, abstract ideas, and business strategies.

Once these four requirements are met, the invention must be fully disclosed to the United States Patent and Trademark Office (“USPTO”) to receive protection. Proper written disclosure to the USPTO requires the inventor to provide a written description of the invention that enables an expert in the field to make the invention without undue experimentation.

This is only a brief explanation of the requirements for an invention to be patented. If you wish to choose a patent to protect your IP, you will need to consult with an attorney to begin the filing process.

Pros

Safeguards: Safeguards for the protection of patents are considerably stronger than the safeguards offered by trade secrets. Patents grant holders the exclusive rights to make, use, sell, offer to sell, and import a product or process for 20 years. If independent invention occurs (through reverse engineering or otherwise), the original product, formula, or process still enjoys the protection of the patent.

Worth the Investment: Patents provide strong protection against the loss of a company’s investment in technology, particularly when the company intends to continue developing and building upon the patented technology. Additionally, because patents are property rights, they can be bought, sold, or licensed, thus enhancing their value as revenue sources for the company.

Cons

Cost: Patent applications are complex legal documents that require an attorney’s assistance through each step of the process. Further, once the patent is granted, the owner must pay three separate maintenance fees.

Public Disclosure: Patents require companies to disclose their inventions publicly, and in return, they provide protection for twenty years. However, once the twenty years expire, your invention is public knowledge and can be used by any of your competitors.

Trade Secrets

A trade secret is any information, including a formula, pattern, compilation, program, device, method, technique, or process, that derives independent economic value by remaining unknown and not being readily ascertainable by proper means.

Requirements

To retain protection, the trade secret must be subject to reasonable efforts, under the circumstances, to maintain its secrecy. This could mean securing relevant documents, using encryption, having employees sign nondisclosure agreements (“NDAs”), or only allowing employees to know the information on a need-to-know basis.

Pros

Duration: Trade secrets can be protected indefinitely. One example of this is Coca-Cola’s secret recipe, which they chose not to disclose through a patent so it remains a trade secret.

Cost: Trade secrets do not need to be filed or approved, meaning they do not require filing fees or legal fees. The secret must simply meet the requirements of the statute, and then it immediately becomes a trade secret.

Advertising: People inherently want to know that which is not meant to be known. People naturally gravitate toward the hidden and mysterious, providing intrinsic value in products with a secret component.

Subject Matter: Trade secrets may protect things that are not patentable subject matter. This allows things such as customer lists and pricing information to be protected as a trade secret in some instances.

 

Cons

Less Protection: Trade secret protection is inherently riskier. While the duration of a patent is much shorter, its protection is much stronger than that of a trade secret. Trade secrets only protect against unlawful breaches. They do not prevent parties from legitimate duplication efforts, such as reverse engineering, to learn of the secret independently. In addition, competitors may develop their own version of the trade secret and file a patent to claim an exclusive right to it, effectively shutting out the inventor.

Risk of Unintentional Disclosure: Using your trade secret in business can lead to unintentional disclosure that results in a loss of protection. Trade secret protection can be lost through independent discovery, reverse engineering, discovery under a license from the owner, observation of an item in public, literature, or a failure to have company employees sign NDAs to ensure the secret is maintained.

Choosing the Right Approach

The decision between using a patent or a trade secret involves an analysis of many considerations and factors.

While patents may be expensive and time-consuming to secure, they provide extremely effective protection for a limited period. A company with exclusive use of a product or process will command that market for 20 years.

While a well-kept trade secret could be secret indefinitely, any person who lawfully learns of the secret may use it as their own. A patent may only last 20 years, but the protection is stronger than a trade secret since independent invention is not a defense in a patent suit. However, a trade secret may protect anything not considered to be patentable subject matter.

If the requirements for both options are met, a company should investigate two factors in making their decision:

      1. Is 20 years a sufficient period of protection?
      2. Is a competitor likely to reverse engineer or independently reproduce the product during that period?

It is important to think long-term when making the decision between a trade secret and a patent. These pros and cons will assist with that determination.

This post has been reproduced and updated with the author’s permission. It was originally authored on January 31, 2023 and can be found here.

Coryn Hubbert, at the time of this post, is a recent graduate of Penn State Dickinson Law. She has a B.A. in Political Science with a Pre-Law minor from Arcadia University. Since attending law school, Coryn has interned with the Honorable Judge Royce Morris at the Dauphin County Court of Common Pleas and with Pennsylvania’s Office of General Counsel, Department of Conservation and Natural Resources. Coryn currently works at Marshall Dennehey Warner Coleman & Goggin in Camp Hill.

 

Sources:

https://www.morningtrans.com/trade-secrets-vs-patents-which-is-right-for-you/

https://ocpatentlawyer.com/can-get-patent-invention/

Lydia Pallas Loren & Joseph Scott Miller, Intellectual Property Law: Cases and Materials (7th 2021).

https://www.ift.org/news-and-publications/food-technology-magazine/issues/2002/april/features/protecting-innovation-patents-vs-trade-secrets

Bring Your Own Device (“BYOD”) Policies: Trading a Technology Budget for Legal Issues?

By: Martin Risch

Entrepreneurs are always looking for ways that money is being wasted. When electronic advancements came into the modern workplace, few employees owned the new time-saving devices, such as Personal Digital Assistants (PDAs) and pagers. However, nowadays, the opposite is true. Few employees do not already own the electronic devices that assist with their work, such as smartphones and laptops. As a result, Bring Your Own Device (“BYOD”) policies were born; rather than having a company-issued phone or laptop, employees can bring their personal electronics instead. Some companies even offer to pay for a portion of a device’s cost, with the expectation that the employee will then use their personal device for work matters.

Why Would a Company Institute BYOD?

Both employers and some employees find these policies attractive. For instance, an employer does not have to buy these devices, and an employee does not have to ensure that they keep multiple devices safe, make calls on ‘the right phone,’ or use ‘the correct computer’ to work. Additionally, as the employee already owns the device, there are far fewer instances where employees have to get accustomed to a new interface or system. Another benefit of a BYOD program is increased employee satisfaction due to being able to use their preferred devices. Rather than the company providing a specific phone or laptop, the employee can instead use the device they would choose – seeing as they already did so.

IT Issues

IT departments are quick to point out a variety of issues that these policies cause. First, with a variety of devices, there is no guarantee that all are compatible with a relevant program. Is the company going to provide IT support to personal devices? If so, employees may have chosen devices that the IT department may have less experience with, increasing the time and effort required to troubleshoot. In addition, do the company’s firewall and security programs work on all of the devices chosen? However, these issues remain without an explicit BYOD policy.

Who “Owns” the Data?

There is also the issue of ownership of information. It is relatively easy to say that all of the information on a company laptop belongs to the company. After all, the employee signed a device usage policy detailing what the laptop is to be used for and it is company property.  With a BYOD policy, the device is still the employee’s personal property. They are likely to use it even when not working. So, who owns the data on the device at the end of the day? Now, if an employee leaves the company and does not want any data the company values, this is a nonissue. There are a variety of programs that companies can use to remotely delete employer data from personal devices – or even deleting all of the data off the device, including the employee’s personal information. Deleting data is easy; if the company wants the data, it can be significantly harder.

It is not difficult to imagine an employee creating a valuable list of suppliers or buyers. If the employee quits or is fired, who gets the list? Was it created with propriety data, or during working hours? Does a contract clarify that it is company property regardless? What if the employee was hired specifically due to their expertise in that field? Some company’s most valuable assets are their trade secrets. But who is the “owner” of the trade secret?[1]

Having a well-written contract stating the information is exclusively the companies helps. But, if an employee is fired, what is the practical effect of the contract if they refuse to give the data to the company or even destroy it? The contract may provide legal remedies, but they may not be adequate. Rather than simply getting the valuable data back, the company could be forced to sue the ex-employee and receive a favorable judgment. This forces the company to spend time and money trying to recover its data. If the data is unrecoverable, the company only gets some money from the ex-employee. If the company would not have sold the data for that price, the remedy is inadequate.

Trade Secret Protections

The earlier issues may be rather clear. However, establishing the company’s ownership of the data does not resolve all issues of a BYOD policy. Even data that is a protected trade secret before the employee is hired is not immune. A trade secret is only protected if it is valuable as a secret and “the owner thereof has taken reasonable measures to keep such information secret”.[2]  Here, the company is the owner. That is the easy part; far more difficult is defining the “reasonable measures.”  For example, a company may establish rigorous security settings and encrypt the relevant data on an employee’s device. However, is that enough? Few companies would want to risk destroying their trade secret protections based on the actions of employees. Remember, at the end of the day, these are employees’ personal devices. A work laptop may only travel between desks at home and work, but employees use their personal devices in a variety of places. The more places the device moves around to, the higher the risk of it being forgotten or stolen, and the company’s valuable data along with it.

Discovery

In fact, establishing the company’s ownership of data may have unintended consequences. Federal Rule of Civil Procedure 34 (“FRCP 34”) requires a party to produce during discovery, inter alia, the electronically stored information in the responding party’s “possession, custody, or control”.[3] Courts have found that relevant data on employee-owned devices must be produced when requested under FRCP 34, and the failure to do so has resulted in sanctions against the company.[4]  On the other hand, well-crafted BYOD policies have allowed other companies to avoid sanctions.[5]

This post has been reproduced with the author’s permission. It was originally authored on March 29, 2021, and can be found here.

Martin Risch, at the time of this post, is a rising third-year law student at Penn State Dickinson Law. His interests in law include intellectual property, international business transactions, contracts, and regulatory compliance.

 

 

 

Sources:
[1] 18 USC §1839(4).

[2] 18 U.S.C. §1839(3)(A).

[3] FED. R. CIV. P. 34(a)(1)

[4] In re Pradaxa (Dabigatran Etexilate) Prod. Liab. Litig., No. 312MD02385DRHSCW, 2013 WL 6486921, at *17 (S.D. Ill. Dec. 9, 2013), order rescinded sub nom. In re Petition of Boehringer Ingelheim Pharm., Inc., & Boehringer Ingelheim Int’l GmbH, in Pradaxa (Dabigatran Etexilate) Prod. Liab. Litig., 745 F.3d 216 (7th Cir. 2014), modified and order aff’d in part sub nom. In re Pradaxa (Dabigatran Etexilate) Prod. Liab. Litig., No. 312MD02385DRHSCW, 2014 WL 984911 (S.D. Ill. Mar. 13, 2014), Small v. Univ. Med. Ctr. of S. Nevada, No. 2:13-CV-00298-APG, 2014 WL 4079507 (D. Nev. Aug. 18, 2014), report and recommendation adopted in part, overruled in part sub nom. Small v. Univ. Med. Ctr., No. 2:13-CV-0298-APG-PAL, 2018 WL 3631882 (D. Nev. July 31, 2018), and report and recommendation adopted in part, overruled in part sub nom., No. 2:13-CV-0298-APG-PAL, 2018 WL 3795238 (D. Nev. Aug. 9, 2018).

[5] H.J. Heinz Co. v. Starr Surplus Lines Ins. Co., No. 2:15-CV-00631-AJS, 2015 WL 12791338, at *2 (W.D. Pa. July 28, 2015), report and recommendation adopted, No. 2:15-CV-00631-AJS, 2015 WL 12792025 (W.D. Pa. July 31, 2015).

Photo Sources:

https://images.app.goo.gl/RafTabYsW65wnzPm7

https://arstechnica.com/gadgets/2021/02/the-worlds-second-most-popular-desktop-operating-system-isnt-macos-anymore/

https://www.trendmicro.com/vinfo/us/security/news/cyber-attacks/data-breach-101