National security and the patent squeeze

For years, the U.S. government has made use of secrecy orders to identify and hold secret patent applications containing subject matter relevant to traditional notions of national security.

Traditional notions, however, are changing rapidly as the threat of an attack on American soil is more real than ever before.

In the past, defense contractors have been forced to deal with patent secrecy orders, but the nation's new focus on domestic terrorism may force private sector companies to surrender their technology for national security reasons--and suffer financial hardship in the process.

If a company designs missile guidance systems, selling to the U.S. military is likely to be a major part of the company's business plan. In fact, many government contractors structure entire business plans around sales to the military and various defense agencies. Contractors also sometimes use patents to bolster their business.

Indeed, a well-known caveat among contractors is that the government may be "concerned" if they try to protect sensitive technology, such as missile guidance systems, with a patent. This concern is primarily due to the fact that when patents are granted they are published for the whole world to see--that includes the likes of North Korea, Iran and Iraq.

You, too, might receive a secrecy order. All that's required is for the government to deem the information on the application to be detrimental to national security.

These contractors often expect to receive a secrecy order, which prohibits them from publishing or disclosing material information relating to the invention and keeps the patent from issuing for a certain amount of time. Indeed, it is not uncommon to find information in a defense contractor's patent application already classified by the agency with which it is dealing.

The guidance system designer could continue to do business with that agency, but there could be no sales to the private sector, and definitely no sales to the "axis of evil," as coined in President Bush's State of the Union address.

The defense contractor knows this when the business plan is developed, however, and with any luck is able to turn a profit from the government.

But what if your company develops cybersecurity software for private networks or face-recognition software for the banking industry? You, too, might receive a secrecy order. All that's required is for the government to deem the information on the application to be detrimental to national security.

Although the patent code provides for review of secrecy order decisions, the process is complex and defers heavily to the various defense agencies.

What do these technologies have to do with national security, you ask? The answer could be "everything." The answer could also be "nothing."

The fact is few people know exactly what is relevant to national security because such information is classified. Currently, patent examiners with special clearance determine whether patent applications are candidates for a secrecy order and forward them to defense agencies such as the Defense Threat Reduction Agency (DTRA).

As recently as 1993, technologies from high-speed photography techniques to inflatable boats and rafts were candidates for secrecy orders. The criteria are no longer public information, so it is difficult for a patent seeker to know precisely whether a secrecy order will be issued.

What we do know is that Sept. 11 happened, and that the formation of a homeland security department is inevitable.

Consider also the fact that the U.S. government has had an interest in a wide variety of developing technologies for many years. Even the pervasive Internet was partially born out of ARPA/DARPA--a research and development agency of the Department of Defense. So it should not come as a surprise if the cybersecurity or face-recognition software is deemed relevant to protecting our nation's borders, airports and computers.

So what should nongovernment contractors do to protect the viability of their companies in such trying times? Although the patent code provides for review of secrecy order decisions, the process is complex and defers heavily to the various defense agencies.

One option is to file a set of patent applications, covering different inventive aspects of the product or service. Thus, if one application is hit with a secrecy order, other applications might go through.

Another option is to simply not file for a patent in the first place, since the government's authority over purely private ideas is limited by constitutional considerations. Other types of intellectual-property protection, such as trade secret protection, might be available. Yet another approach is to try to become a government contractor if a secrecy order issues.

The important thing for all tech companies is to consider the nation's new focus on homeland security before seeking patent protection. By failing to do so, a company may have its technology kept under wraps and, as a result, may be forced to fundamentally restructure its business strategy.

Brian Mudge, a partner at Kenyon & Kenyon, contributed to this article.