Trade Secret vs. Patent Protection: Consider FOIA or Public Records Requests

With patents coming under increasing scrutiny at the Patent Trial and Appeal Board (“PTAB”) in conjunction with changes to the patent laws brought about by the America Invents Act (“AIA”), more companies are considering whether to preserve their methods as trade secrets rather than seek patent protection.

A recent decision of the Wyoming Supreme Court reminds us that trade secrets may be defined in several ways – with the most narrow definition often applied in cases involving Freedom of Information Act or public records requests. The court in Powder River Basin Resource Council et al. v. Wyoming Oil and Gas Conservation Commission, Case No. 2014WY37, identified three possible definitions of trade secrets:

• Trade Secret Under the FOIA:  A secret, commercially valuable plan, formula, process, or device that is used for the making, preparing, compounding, or processing of trade commodities and that can be said to be the end product of either innovation or substantial effort. See Anderson [v. Dep’t of Health & Human Servs., 907 F.2d 936, 943-44 (10th Cir. 1990)].
• Trade Secret Defined by the Restatement (Third) of Unfair Competition § 39:  Any information that can be used in the operation of a business or other enterprise and that is sufficiently valuable and secret to afford an actual or potential economic advantage over others. See Briefing.com. v. Jones, 2006 WY 16, ¶ 8, 126 P.3d 928, 932 (Wyo. 2006).
• Trade Secret Defined by the Uniform Trade Secrets Act:  Information, including a formula, pattern, compilation, program device, method, technique or process that: (A) Derives independent economic value, actual or potential, from not being generally known to and not being readily ascertainable by proper means by other persons who can obtain economic value from its disclosure or use; and (B) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. See Wyo. Stat. Ann. § 40-24-101(a)(iv) (LexisNexis 2013).

In interpreting a state statute regarding public records requests, the court adopted “the definition of trade secrets articulated by federal courts under the FOIA.” It further confirmed that its “definition requires that there be a ‘direct relationship’ between the trade secret and the productive process.” Id. ¶ 38. (internal quotations omitted).

Public records requests can be a significant source of pre-litigation discovery. While the “direct relationship” limitation may be demonstrated in the case of a method of production maintained as a trade secret, it does provide an additional obstacle for a company seeking to shield its trade secrets. It is certainly something that merits consideration when determining whether to use the patent or trade secret system for protection, particularly where trade secret method information must be disclosed to a regulatory body that could be subject to a public records or FOIA request.