The Growing Trend Toward Trade Secret Protection and Away from Patent Protection
By Christopher Simboli
Many assume that patent protection is the most valuable form of intellectual property (IP) protection one can secure in today’s business environment. While this may have been true to a large degree in the past, in today’s market many are questioning this assumption and making a shift towards using trade secret protection instead of patents to guard their valuable IP assets and technology. Why this shift in thinking?
Much of the momentum of this shift is due in large part to the enactment of the U.S. Defend Trade Secrets Act (DTSA) in 2016. Although formal U.S. federal legislation enacted around trademark has existed for decades, and around patent and copyright for centuries, prior to 2016 no formal U.S. federal legislation for the protection and enforcement of trade secret rights and remedies for their misappropriation existed. Part of the incentive for Congress to create a federal act in the form of the DTSA grew out of the dissatisfaction with and inconsistencies caused by the legal patchwork of rights and remedies formed by the trade secret statutes enacted in many states. In just the first year of the DTSA, trade secret litigation in the U.S. increased by more than 25%. This number has grown exponentially since then, and while trade secret litigation is on the rise, the number of patent cases has fallen off sharply.
To understand this shift, it is important to note that a critical difference between trade secret protection and patent protection in the U.S. is the length of time these rights legally subsist: generally speaking trade secret protection can theoretically last forever if these rights are protected in certain prescribed ways, while patent protection ends after 20 years. Also important to note is the difference in the associated costs to acquire and preserve these legal protections: trade secret protection requires no formal application or registration process, whereas patent protection can only be achieved and maintained through a formal and relatively expensive application and grant procedure.
Some of the reasons for this shift are the significant size of jury awards and the specific remedies involved in DTSA trade secret litigation (including the injunctive relief and extraterritorial reach available under the DTSA). For example, in December of 2024, in Insulet Corp. v. EOFlow Co. Ltd., a U.S. jury awarded $424 million USD in compensatory and punitive damages to plaintiff Insulet under the DTSA after finding the defendant EOFlow had willfully misappropriated Insulet’s trade secrets. Also in 2024, in Motorola Solutions, Inc. v. Hytera Communications Corp., the appeal court there affirmed a U.S. jury verdict against defendant Chinese company Hytera ordering it to pay more than $400 million USD in compensatory and punitive damages for misappropriation of plaintiff Motorola’s trade secrets in contravention of the DTSA.
If your business is using or considering using trade secret protection or patent protection to safeguard its IP assets and technology, careful consideration is needed of the impact of this decision on the value of those IP assets and technology. Each of these type of IP rights provide different forms of legal protections, and they vary in terms of the steps that must be taken to secure the desired protection as well as in the expense involved to achieve this protection. At Parsons Behle & Latimer we have the necessary expertise to help our clients be informed about and make these decisions, and we are here to assist in dealing with the legal issues associated with trade secret rights and patent rights. Please let us know how we can help you and your business in this regard.
Enforcement Revival: Washington’s Shift in Favor of Patent Holders
By Karthik Sonty
The United States has long been called “a nation of inventors.” In its earliest days, the Founders recognized that “[t]o promote the progress of science and useful arts . . . [Congress must] secur[e] for limited times to authors and inventors the exclusive right to their respective writings and discoveries.” That foresight helped fuel centuries of innovation, entrepreneurship and economic growth. Today, the Federal Government appears poised to make significant changes to intellectual property policy. After years of efforts to curb abusive litigation tactics, a new legislative and political movement is taking shape to protect patent holders, strengthening their opportunities for enforcement and expanding their available remedies.
Historically, both the public and private sectors shared concerns that issuing broad and strong patent rights would encourage abusive patent litigation brought by Non-Practicing Entities (NPEs). So-called “patent trolls” were believed to hold patents not for innovation, but to extract settlements from businesses through the threat of onerous and costly litigation. In response, Congress passed reforms like the America Invents Act (AIA), which created mechanisms like inter partes review at the U.S. Patent and Trademark Office to invalidate weak patents quickly and cost-effectively. The reforms were so effective that PTAB became known as the “Patent Death Squad” for its claim invalidation rate of 80–85%.
Now, the playing field seems to be shifting. Modern NPEs are no longer simple entities, holding patents and waiting to sue. Instead, NPEs today have become highly-complex (and lucrative) financial investments, which are often backed by sophisticated third-party litigation funders, who, like traditional investors, conduct financial analysis to determine patent litigation worth funding. Accordingly, NPEs are better funded, more aggressive and more likely to pursue litigation to judgment—not just settlement.
Against this backdrop, the second Trump Administration and Congress are showing increased willingness to shift the balance of power back toward patent holders, restoring strong patent enforcement tools with an eye toward boosting domestic innovation and rewarding litigation investors.
Three bills pending in Congress reflect this new direction:
- The RESTORE Act (S.4840) – The Realizing Engineering, Science, and Technology Opportunities by Restoring Exclusive Patent Rights Act would reinstate automatic injunctive relief for patent holders who prove infringement, overcoming the Supreme Court decision to severely limit injunctive relief in eBay v. MercExchange (2006). This powerful remedy would disproportionately help patent holders in high-tech, multi-component products like smartphones or semiconductors.
- The PREVAIL Act (S.2220) – The Promoting and Respecting Economically Vital American Innovation Leadership Act would limit the use of inter partes review proceedings by narrowing who can file such actions and apply estoppel from the time a challenge is filed rather than upon its ultimate decision. This would make it harder for defendants to invalidate patents early and shift leverage to plaintiffs—particularly those not actively making or selling products.
- PERA (S.2140) – The Patent Eligibility Restoration Act aims to clarify and expand what inventions are eligible for patent protection and strengthen the presumption of validity that patents currently enjoy, making it harder to invalidate them in Court.
Taken together, these proposals would make patents harder to challenge and easier to enforce—marking a substantial change in the U.S.’s intellectual property landscape from the AIA.
For many companies, intellectual property (including patents) represents a significant portion of their total value—and these developments bring both opportunity and risk. Business owners would be wise to monitor these reforms closely and assess whether their current patent strategies are aligned with the evolving legal environment.
If you have questions about these proposed bills or need guidance on how to strengthen or defend your patent rights, our intellectual property attorneys are here to help.
