The Narrows: Winning by Arguing Both Trade Secret Misappropriations and Patent Infringement

Atlantic Research Marketing Systems (ARMS) v. Troy Industries (Fed. Cir. 2011)

By Dennis Crouch

This appeal stems from a 2007 patent infringement and business tort lawsuit filed by ARMS against its former employee and current competitor (Mr. Troy). ARMS' reissue patent claims a firearm hand-guard with an attachment point at the firearm's barrel nut. The original patent application included both the barrel nut attachment and a sleeve support as claim limitations. However, the reissue patent does not require the sleeve support. That change is important for the case because TROY's competing hand-guard uses the barrel nut as the single attachment point.

On summary judgment the district court ruled the patent invalid for failing the written description requirement of 35 U.S.C. § 112 p1.

Written Description Requirement: Section 112 p1 of the Patent Act requires that a patent specification include "a written description of the invention, and of the manner and process of making and using it, in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains, or with which it is most nearly connected, to make and use the same." In Ariad, the Federal Circuit reaffirmed that this provision creates the separate and distinct requirements of written description and enablement. The test for written description considers whether, after reading the original specification, one of skill in the art would understand that the inventor was in possession of the claimed invention. Most written description cases arise in situations like this where the patentee has amended its claims well after the application filing date.

Although not cited here, this case is similar to the Federal Circuit's Gentry Gallery decision where an element in the original claims was omitted in a broader-amended claim. In Gentry Gallery, the original application was directed to a pair of recliners with controls located on a console. The amended claims removed any restriction on the console location. The Federal Circuit held those broader claims invalid because "the patent disclosure did not support claims in which location of recliner controls was other than on the console."

On appeal here, the Federal Circuit agreed that the broader claims are invalid under the written description requirement because it the specification does not provide any evidence that the inventor invented a hand-guard that uses the barrel nut as the one and only attachment point.

[I]t is undisputed that the written description for the '465 patent does not disclose to a person of ordinary skill in the art an invention where the yoke/barrel nut attachment point provides complete support for the handguard accessory. Claims 31-36, however, clearly cover such a design. Put differently, claims 31-36 [as amended] exceed in scope the subject matter that [the inventor] chose to disclose to the public in the written description. Therefore, we hold that the district court properly granted summary judgment invalidating claims 31-36 for failing to satisfy the written description requirement of 35 U.S.C. § 112. Mr. Swan used the reissue process to impermissibly obtain claims unsupported by the written description.

ARMS had also sued TROY for trade secret violation and argued in court that ARMS version of the barrel-nut-only attachment was a trade secret stolen by TROY. That testimony bolstered the court's conclusion that the asserted claims lacked the written description support to cover a barrel-nut-only attachment.

[ARMS] cannot now "have it both ways" by reaching back and relying on the disclosures in the '245 patent to claim an invention he was purposely shielding from the public.

Trade Secret Violation: Although TROY won the patent dispute, the jury found troy liable for trade secret misappropriation and breach of a fiduciary duty to his former employee. The award was $1.8 million in damages under Massachusetts Trade Secret Law. (Massachusetts has not adopted the UTSA). As noted above, the alleged trade secret is the method of attaching the hand-guard to a firearm using only the barrel nut. The jury was instructed that any protectable trade secret must go beyond what was disclosed in the '245 patent. Based upon that instruction, the Federal Circuit affirmed – finding no clear error.

This strategy worked perfectly for ARMS who would likely be satisfied winning either patent infringement or trade secret misappropriations. Although the court clearly sympathized with TROY's position, it noted that the legal positions taken by the two parties meant that ARMS was likely to win one of its claims.

Troy's argument illustrates the inherent tension Atlantic Research created by contending that Troy misappropriated trade secrets, while simultaneously asserting that the products Troy developed with the misappropriated trade secrets infringed its patent. In response, Troy contended that Atlantic Research's patent disclosed the trade secret, but also contended that the patent asserted against it was invalid for failing to disclose a written description of a handguard that attaches solely at the barrel nut. These conflicting positions left little room for either party to prevail on both claims.

The problem: In the end, the Federal Circuit vacated the jury verdict on a "jury taint" issue. One juror brought a plumbing clamp from home during deliberations to show other jurors and the appellate panel held that the judge should have taken more dramatic steps to ensure that the clamp did not have any "prejudicial effect on the jury as a whole."

18 thoughts on “The Narrows: Winning by Arguing Both Trade Secret Misappropriations and Patent Infringement

  1. I’ve increasingly heard of recent cases in which inventors combined trade secret and patent protection, which is quite an interesting development. I predict that this will become more frequent, and will be one of the next hot topics in IP litigation.

  2. Ned, right. I love the court’s acceptance of the assertion “That’s a trade secret right there!”

    Presumably all the info is in the trial transcript.

  3. Bable Boy,

    No need to get testy about your poor writing. Such indicatesa that you need the diaper change and not the person pointing out that you should have asked your question better to begin with. You are engaging in that great MM tactic of accusing the other person of your own behavior, and it is you that you should come back when you grow up. Such accusatory behavior only impugnns Dennis and makes this “mere blog” unrealiable.

  4. IBP, thanks for updating the point. Obviously, the TS had to be more than just the idea of attaching the HG by the barrel nut alone. There must have been some unique structure.

    Absent that, though, if it was the idea of attaching the HG only by the barrel nut, that and no more, THAT idea was disclosed by the reissue. That was the way the claims were construed after all. That was not an issue of fact, but a matter of law.

    So, what remains not clear to me, IBP, is exactly what the TS was and why it was not necessarily disclosed by the reissue.

  5. Despite the complex regulatory background and policy arguments, this case presents a relatively straightforward question of statutory interpretation.

  6. You obviously haven’t been able to follow anything I’ve said, so why should I waste my time bottle-feeding you if I don’t have time to burp you too?

    Now, off with you and find someone to wipe your nose and change your smellies. Come back when you grow up.

  7. Paul–

    See my response to Ned above.

    The whole point is that the jury found that the the TS was NOT disclosed to the public in the reissue, and that it therefore remained “enforceable” as a TS, rendering your further considerations moot in this particular case.

    The question that remains unresolved in this case are the relative standards of disclosure required to indicate possession of the subject-matter of a) the TS, and b) the patent claim.

    In this case, it was decided that the standard of disclosure in the reissue was insufficient to support either TS or patent claim–but as a practical matter, did they just decide a single standard and apply it to BOTH TS and patent, or did they decide 2 entirely separate standards?

    Under Mass. law, and for the purposes of this case, TS is “…anything…intangible…which…represents, evidences, or records a secret…technical…design…invention or improvement.”

    As far as I can tell, no Mass. TS disclosure standards were ever articulated by the CAFC, although they could have been defined at the DC level. The CAFC even glosses over the issue by saying that “The focus is whether what is claimed as the trade secret is in fact secret.”. While that may have been true in this particular case, depending on what happened at the DC level (note that it may NOT be true), that says nothing about the general case.

    It’s like patent claim construction–you have to have a clear idea of precisely WHAT the subject-matter IS before you can determine if it has been kept secret or not.

  8. Ned–

    As a matter of record, your assertion that the TS was “effectively disclosed” in the reissued patent is incorrect.

    Whether or not it was disclosed in the reissued patent sufficiently to preclude its maintenance as a secret was a factual question within the province of the jury, and which they decided in the negative.

    The evidence they ultimately considered sufficient to indicate possession of the TS was the testimony of both Swan and Barreras, and the introduction into evidence of the prototype.

  9. I guess you couldn’t see my point

    Oh I could see it – it was just a fairly banal point to make in the first place. Do you really want comments that merely say “samey-same?” I know I don’t.

    but I would ask it from the flip side
    Why didn’t you ask your question better in the first place?

  10. “Maybe that is why it wasn’t raised.”

    I guess you couldn’t see my point that CAFC decisions based on pre-AIA law should be presumed to be irrelevant and that it would help all of the readers here to include at least a comment in each post as to the relationship of a given decision to the new statutory paradigm, even if it is just to say “samey-same.”

    “Why should she have?”
    Why? That’s an excellent question, but I would ask it from the flip side:

    Why would a federal judge who has disposed of all of the federal issues retain jurisdiction over the state law issues for a jury trial?

    Seems to me that having bifurcated the federal and state issues, and having disposed of the federal issues on SJ, had she then removed the TS issues sua sponte all that would have been appealed to CAFC would have been her summary judgment (which was spot on) and the CAFC remand for new trial would have been avoided. Her record is now tainted by that remand. Judges are graded on these things.

    I think that if I was a federal judge and I could avoid a trial by disposing of federal issues at SJ and sending the rest to a state court for trial, I probably would. I asked the question perchance those with trial experience can explain why the judge would stick her neck out with a trial on state law.

  11. Re: That and Ned’s comment about the TS part of this lawsuit.
    I am not a TS expert by any means, but I assume they meant that since a reissue application is open to the pubic and indexed [and presumably full text computer searchable?] that any TS disclosed to the public in the reissue is therefor no longer an enforceable TS?
    But cannot one can still recover for any actual damages for a TS violation WITHIN the time period BEFORE a published or open patent application publicly discloses the TS?
    [Although as a practical matter, I would wonder if a jury would be as likely to find for such high damages if the TS suit was not combined with the patent suit?]
    Also, as a general question I have always wondered about, if the only TS violation is perloining a secret to put into one’s own patent application, but that patent application does not cause any lost business to the TS originator, what are the TS damages? Are they limited to the TS originator’s legal expenses in defeating the patent or correcting its inventorship in a derivation suit [easier under AIA?], or are punitive damages also allowed in any states?

  12. So we no longer need to include a really cool part in the ap so we can later make that part the basis of a TS claim!
    To boot, the hapless defendant’s handed a Hobson’s choice.

    Brilliant! ( Eexcept there’s boatloads of case law holding that this gambit doesn’t work.)

  13. One question – the main question… As to the CAFC decision regarding 112, the answer is easy: the decision would be the same under AIA.

    Maybe that is why it wasn’t raised.

    Wonder why she didn’t remove the state trade secret claim at that point.

    Why should she have?

  14. Babble, “The lesson is that such time-lines are a reissue red-flag. Whenever you see a reissue filed just after the disclosure of the invention that precipitates the infringement action, look very closely at the parent of the reissue – the 112-compliant disclosure probably isn’t there.”

    Ditto new claims in a continuation.

  15. One question – the main question – we should be asking on ALL of these posts is “How would this outcome be different under AIA?” We are all going to have to come up to speed on AIA pretty quickly on most of the changes, and this blog is an excellent place to combine our efforts.

    As to the CAFC decision regarding 112, the answer is easy: the decision would be the same under AIA. That’s because AIA doesn’t make any substantive changes to 112.

    AIA makes 2 alterations — one good, one goofy. The good one is to identify the subsections so we can finally – after more than 100 years – stop saying “112 first paragraph,” or its pre-1952 equivalent.

    [I am going to give myself a hearty pat on the back and hat-tip here since no one else will, and modestly note that I am the only malcontent on this blog or in the history of US patent law to have groaned about the idgits who wrote 112 and its precursor statutes and left out the subsection letters/numerals. Finally, the gods heard me – “the gods” being Leahy’s clerks. Thank you, may your days be numbered as integers divided by zero.

    The goofy change to 112 is changing “applicant” to “inventor or joint inventor.” “Applicant” was just fine since the statute relates only to the application. Even when it is applied against a patent, as in the ARMS case, it is about what the applicant’s specification did or didn’t say.

    But the real goof is that “inventor” is defined at 3(a)(2)(f) of AIA to include joint inventor. Why? Who knows. So what is meant by the new AIA phrase “inventor or joint inventor” where inventor is already defined to include joint inventor? You tell me.

    Where there is more than one named inventor, they are all both “inventors” and “joint inventors”. So why define a distinction where there is no difference? It has no purpose unless one is discussing inventorship, and it just confuses things.

    OK, so my benediction to Leahy’s clerks stands modified: may your days be numbered as very large integers divided by very small ones.

    With respect to this case, it seems that the time-line analysis is vague.

    Prost declines to tell us that ARMS got its ‘245 patent on Dec31.02 (11 months !! after filing). ARMS filed for re-issue within 2 years, on Mar29.04. OK, hold that Mar29.04 date in mind for a moment. It’s critical.

    The opinion says Troy had his inspiration in Jul03 while in Turkey, of all places; the only thing I ever got in Turkey was crabs and diarrhea. At some unspecified time after the Turkey epiphany, Troy prepared but did not submit a proposal for the hand guard to the Navy. He “began offering” the hand guards in 2004. Proust’s words are vague, but “began offering” probably means “sold,” i.e., as on on-sale bar.

    The opinion tells us only that Troy sought a patent in 2005. Actually, it was on Feb11.05. Troy filed the provisional application that matured into the Troy patent. Another critical date.

    Given the 1 year grace period, we can deduce that Troy started selling the guards around mid-Feb, 2004 – i.e., 6 weeks or so before ARMS filed its reissue application on Mar29.04. How long did it take ARMS’ suits to draft a reissue – ans: 6 weeks.

    IOW, after Troy started selling his guard, ARMS obviously tried to use a reissue to pump up its initial claims in anticipation of the infringement action.

    The lesson is that such time-lines are a reissue red-flag. Whenever you see a reissue filed just after the disclosure of the invention that precipitates the infringement action, look very closely at the parent of the reissue – the 112-compliant disclosure probably isn’t there.

    ARMS almost got away with it but for the fine work of USDC Judge Saris. Wonder why she didn’t remove the state trade secret claim at that point.

  16. The timing of events should relevant here as well. When the claims were expanded to cover the single-attachment hand-guard, the trade secret was effectively disclosed. I think the courts should penalize Troy activity only before that date.

  17. So a jury verdict is tainted if a juryman subjects the arguments of counsel to a reality check by seeing if what is claimed reads onto the commonplace you can buy at your local hardware store. Indeed!

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