[co-author: David Hughes]

The United States District Court for the Eastern District of Louisiana recently held that, under the Defend Trade Secrets Act, 18 U.S.C. § 1836, et seq., information included in a patent application remains an actionable trade secret, thereby extending the time for potential misappropriation until the patent’s publication.

DTSA

The DTSA was enacted in 2016 to expand trade secret law beyond its traditional roots as a state law doctrine, creating the first federal cause of action for trade secret misappropriation. To succeed in bringing a DTSA claim, a plaintiff must prove (1) the existence of a trade secret; (2) the misappropriation of a trade secret by another; (3) and the trade secret’s relation to a good or service used or intended for use in interstate or foreign commerce. Additionally, the owner must take reasonable measures to keep the trade secret a secret. 18 U.S.C. § 1836(b)(1).

Relevant Facts

Plaintiff, Cajun Services Unlimited, LLC (“Cajun”), and defendant, Besco Energy Service Co. (“Besco”), both operate in the oil and gas industry––Cajun providing product design and development services and Besco as a service company specializing in oilfield pipe running services.

The trade secrets at issue concerned Cajun’s elevator roller insert system (“ERIS”), a tool that is used to reduce friction during the process of running tubulars in an oil and gas well. In March 2015, Cajun submitted its patent application, which the United States Patent and Trademark Office published on September 29, 2016.

Besco rented an ERIS from Cajun for ten separate projects spanning from May 2015 through July 2016, before a disagreement arose over Cajun’s rental prices. Subsequent to Besco ending the parties’ rental relationship, Cajun learned Becso had reverse-engineered its ERIS and brought suit, asserting various claims, including violation of the DTSA.

Besco moved for partial summary judgment, arguing, inter alia, Cajun could not maintain its trade secrets claim because it did not take reasonable efforts to maintain their secrecy, and even if Cajun did have a protectable trade secret, any claim for misappropriation was forfeited “by operation of law” when its patent application was published because, as a result of the publication, the trade secret “became part of the public domain.” While the parties agreed that anything disclosed in Cajun’s patent application ceased to be a trade secret the day it was published, Cajun argued the patent application’s publication does not protect Besco’s misappropriation of its trade secrets that occurred before publication.

The district court sided with Cajun, holding that the publication of a trade secret in a patent application “does not deprive [Cajun] of a cause of action for misappropriation of trade secrets before the patent application was published.” The court declined to answer whether Cajun’s efforts to maintain the secrecy of its trade secrets were reasonable, citing instead to record evidence which it found evidenced “numerous disputed issues of material fact” that precluded granting partial summary judgment.

Analysis

This case illustrates the complimentary but distinct nature of legal rights regarding patents and trade secrets and how intellectual property may be protected both by patent law and a trade secret at different points in its existence. According to this case, the fact that a trade secret later becomes part of the public domain as part of a patent application does not deprive the trade secret’s owner of a claim for misappropriation that occurred before the patent application’s publication. Thus, a party that filed a patent application containing its trade secrets can still prevail on a DTSA claim so long as the behavior at issue occurred before the patent issued or was published. Once that patent is published, however, the existence of the trade secret necessarily ceases and any unauthorized use of the information in the former trade secret after publication appears to become an issue of patent infringement.

Cajun Services Unlimited, LLC v. Benton Energy Serv. Co., CV 17-0491, 2019 WL 2410933, at *11 (E.D. La. June 7, 2019).