In CertainTeed v. BIPV, the United States District Court for the Eastern District of Pennsylvania has given us a good reminder that patents (or patent applications) and trade secrets don’t mix well, and also weighed in on the confounding question of whether allegedly confidential information that is not a trade secret can still be protected simply by contract.
CertainTeed manufactures solar roofing panels, and entered into a number of contracts with BIPV, which designs, develops, and sells roofing panels that use solar power generating cells. As is often the case, CertainTeed and BIPV entered first into a nondisclosure agreement (NDA) to allow them to discuss freely the possibility of doing business together. The parties then entered into a private label agreement to allow BIPV to supply CertainTeed pursuant to CertainTeed’s purchase orders. Later, the parties entered into another NDA, and ultimately CertainTeed decided to purchase some of BIPV’s products, and did so pursuant to purchase orders. But soon after CertainTeed started selling the solar cells it purchased from BIPV, customers started reporting that the panels were igniting on customers’ roofs. Suffice to say, litigation ensued.
CertainTeed sued BIPV for selling it faulty panels, and BIPV counterclaimed for trade secrets misappropriation and breach of the NDAs. The Court had no trouble finding that BIPV had breached its contract by selling CertainTeed faulty panels, and turned then to BIPV’s trade secret misappropriation claims. Most of BIPV’s alleged “trade secrets” were already contained in public patent applications. As succinctly summarized by the court, inventors are “faced with a choice: keep the secret and risk independent discovery or share the secret with the world and receive a temporary government-issued monopoly to practice the invention.” BIPV chose the patent route—and once it did, it could not thereafter claim trade secret protection for the same inventions disclosed in its applications. What few alleged trade secrets were not contained in the patent application were easily reverse-engineered, and so not protectable as trade secrets.
But after finding definitively that BIPV had no trade secrets whatsoever to protect, the Court still found that BIPV could proceed to trial on its breach of NDAs claim because the NDAs purportedly protected confidential information, which the Court found might be broader (and not identical to) the failed trade secrets. While the Uniform Trade Secrets Act (as adopted by most states) (UTSA) preempts conflicting “tort, restitutionary, and other law” providing any remedy for trade secret misappropriation, the UTSA generally does not preempt contract claims. Neither does the new(ish) federal Defend Trade Secrets Act, 18 U.S.C. s. 1838.
So despite seemingly having nothing secret to protect, and having sold CertainTeed admittedly defective products, BIPV gets to go to trial on its (alleged) breach of contract claim on the theory that somehow CertainTeed breached its contractual duty of confidentiality. The tension between contractual duties to protect alleged “confidential” information and the protection of true trade secrets is palpable, but that problem is not going to be solved soon.