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I have two similar questions on how "public use" and "on sale" apply to trade secrets, and how or if trade secrets can be later converted into patents.

I've been reading the law here and looking at additional notes here, but I just can't make sense of it.

I think the relevant part of the law is 35 U.S.C. 102:

(a) NOVELTY; PRIOR ART.—A person shall be entitled to a patent unless—

(1) the claimed invention was patented, described in a printed publication, or in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention; or

I'm not sure exactly how on sale or public use apply when part of a device or system is kept secret.

Question 1.

An electronic device is being sold for several years. This device contains a microprocessor that runs a secret algorithm (protected by encryption, DRM, etc). Can this algorithm be patented now? Or has the device being "on sale" prevented that (even though the algorithm was never revealed and was considered a trade secret).

On the one hand I think the answer is no, because it has been sold for over a year. On the other hand, I feel that the answer is yes because the algorithm has been kept secret and not made public at all. How would this pan out?

Question 2.

There is a software as a service business, and it has a trade secret algorithm that only runs on the company's secure server. Can this algorithm or service be patented even though it has been "on sale" for over a year?

I'm pretty sure the answer here is yes. My reasoning is that the "algorithm" or "service" was never itself sold. Only the output of the algorithm was sold.

Thanks in advance!

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Pre AIA MPEP (Manual of Patent Examining Procedure) states: https://www.uspto.gov/web/offices/pac/mpep/s2133.html

Likewise, there may be a nonpublic, e.g., “secret,” sale or offer to sell an invention which nevertheless constitutes a statutory bar. Hobbs v.United States, 451 F.2d 849, 859-60, 171 USPQ 713, 720 (5th Cir. 1971).

In similar fashion, not all “public use” and “on sale” activities will necessarily occasion the identical result. Although both activities affect how an inventor may use an invention prior to the filing of a patent application, “non-commercial” pre-AIA 35 U.S.C. 102(b) activity may not be viewed the same as similar “commercial” activity. See MPEP § 2133.03(a) and § 2133.03(e)(1). Likewise, “public use” activity by an applicant may not be considered in the same light as similar “public use” activity by one other than an applicant. See MPEP § 2133.03(a) and § 2133.03(e)(7). Additionally, the concept of “experimental use” may have different significance in “commercial” and “non-commercial” environments. See MPEP § 2133.03(c) and § 2133.03(e) - § 2133.03(e)(6).

and:

2.Even If the Invention Is Hidden, Inventor Who Puts Machine or Article Embodying the Invention in Public View Is Barred from Obtaining a Patent as the Invention Is in Public Use

When the inventor or someone connected to the inventor puts the invention on display or sells it, there is a “public use” within the meaning of pre-AIA 35 U.S.C. 102(b) even though by its very nature an invention is completely hidden from view as part of a larger machine or article, if the invention is otherwise used in its natural and intended way and the larger machine or article is accessible to the public. In re Blaisdell, 242 F.2d 779, 783, 113 USPQ 289, 292 (CCPA 1957); Hallv. Macneale, 107 U.S. 90, 96-97 (1882); Ex parteKuklo, 25 USPQ2d 1387, 1390 (Bd. Pat. App. & Inter. 1992) (Display of equipment including the structural features of the claimed invention to visitors of laboratory is public use even though public did not see inner workings of device. The person to whom the invention is publicly disclosed need not understand the significance and technical complexities of the invention.).

(Emphasis added.)

There are some more information regarding commerciality etc. of the use, but I'm leaving that out because it wasn't part of your question.

Under AIA (MPEP again): https://www.uspto.gov/web/offices/pac/mpep/s2152.html#ch2100_d20033_1e416_252

As discussed previously, public use under AIA 35 U.S.C. 102(a)(1) is limited to those uses that are available to the public. The public use provision of AIA 35 U.S.C. 102(a)(1) thus has the same substantive scope, with respect to uses by either the inventor or a third party, as public uses under pre-AIA 35 U.S.C. 102(b) by unrelated third parties or others under pre-AIA 35 U.S.C. 102(a).

As also discussed previously, once an examiner becomes aware that a claimed invention has been the subject of a potentially public use, the examiner should require the applicant to provide information showing that the use did not make the claimed process accessible to the public.

So it's essentially the same if the invention was part of a publicly sold product like you asked. (Question1)

As to question 2, as long as the invention hasn't been on sale or in public use, you should be fine. Determining exactly if the use was public use could prove difficult, for example, if a user can enter a query and get the result while the algorithm only runs on the server, that might be enough for public use. If however it is only used internally, that shouldn't be public use.

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