Patenting Exception to Non-Disclosure Agreement

by Dennis Crouch

Soarus L.L.C. v. Bolson Materials Int’l Corp., 2018 U.S. App. LEXIS 27802 (7th Cir. Oct 1, 2018).

This 7th Circuit decision stems a nondisclosure agreement – titled a “secrecy declaration — between Soarus and Bolson Materials.  Soarus was a G-Polymer distributer (for Nippon Synthetic) and Bolson was looking to begin acquiring and using G-Polymer in connection with developing a new 3D printing process.  Problems arose, though when Bolson filed for patent protection on a 3D printing process it developed using G-Polymer. The court explains:

Shortly after executing the NDA, Bolson filed a provisional patent for the 3D printing process it developed using G-Polymer. The filing resulted in Bolson receiving U.S. Patent No. 8,404,171 . . . Soarus later claimed that Bolson’s application for the ‘171 Patent revealed confidential information about G-Polymer, in violation of the NDA. Litigation ultimately ensued in the Northern District of Illinois.

The district court sided with the defendant on summary judgment — holding that the NDA authorized use of the confidential information for patent filings. On appeal, the Seventh Circuit has affirmed.

[Read the SecrecyAgreementAmended]

The two-page NDA includes broad restrictions against disclosure of confidential information.  However, there are two particular provisions relating to the filing of patent applications:

6. Bolson shall not file any application for a patent or other intellectual property using any piece of Confidential Information or the results of the Evaluation without prior written consent of Nippon.

10. Notwithstanding Article 6 hereof, Bolson is free to patent and protect any new applications using G-Polymer® in the specific area of Fused Deposition Method Rapid Prototyping Equipment and Methods.

In reading the provision here, the district court construed the language of paragraph 10 as an exception that gave Bolston the right to “freely patent and protect new applications of GPolymer in the specified 3D printing process” without being confined to the confidentiality restrictions of the NDA.

On appeal, the Seventh Circuit reviewed the contract interpretation de novo under Illinois law but arrived at the same result.

Soarus argued that paragraph 10 is simply making it possible for Bolson to patent its 3D printing inventions — but was not intended as also a blanket release of all confidentiality requirements associated with the filing.

Soarus contends that no reasonable company would seek to protect the confidentiality around a new product by entering into an agreement that permitted a counterparty to disclose those confidences in a public filing with the U.S. Patent Office.

The courts, disagreed with Soarus — finding that the language was clear.

[I]f Soarus was right about the meaning of paragraph 10, there was no reason to create an exception with respect to paragraph 6: the parties instead could (and should) have stated in clear and precise terms, as Soarus would now have it, that Bolson was free to patent and protect the new 3D printing method so long as doing so did not disclose confidential information without the consent of Soarus.

Since the language is clear, the standard contract interpretation process precludes the court from giving substantial or controlling weight to the commercial purposes of the agreement.





One thought on “Patenting Exception to Non-Disclosure Agreement

  1. 1

    Well, duh.

    And yet there are lawyers who, if you pay them enough, will make these arguments before a judge.

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