ONSC Educates an Inventor on the Difference Between Obtaining a Patent and Maintaining a Trade Secret

ONSC Educates an Inventor on the Difference Between Obtaining a Patent and Maintaining a Trade Secret

Rowland v Stephan, 2017 ONSC 7276

Not understanding the differences between intellectual property rights or learning about their ownership implications could prove to be dangerous pitfalls when it comes time to assert them.

In this decision, the Ontario Superior Court of Justice (“ONSC”) granted [23] two motions under Rule 21.01(1)(b) of the Rules of Civil Procedure, brought by Anthony Stephan, the Estate of David Hardy, Drew Dahl, The Synergy Group of Canada Inc., Truehope Inc. and Nutratek Health Innovations Inc. (collectively, “Stephan”), on the ground that David Rowland’s (“Rowland”) Statement of Claim disclosed no reasonable cause of action. [1] A Statement of Claim does not disclose a reasonable cause of action if the allegations it contains do not give rise to a recognized cause of action or if it does not plead the necessary material facts to establish the legal elements of a recognized cause of action. [2]

Background

Rowland’s Statement of Claim alleged that Stephan had stolen his “trade secret” and engaged in a scheme to conceal that theft. [3] The knowledge of this “trade secret” was that when certain percentages by weight of shilajit are added to vitamin/mineral compositions, it increases the energetic properties of those vitamin/mineral compositions. [3] Rowland had patented vitamin/mineral compositions containing shilajit in both Canada and the US, with both patents expiring in 2011. [4] Rowland claimed that Stephan stole his “trade secret” by manufacturing and selling vitamin and mineral products containing 1.1% shilajit by weight, in Canada and the US. [5] Damages of $20 million were sought, in addition to $2 million in punitive damages. [7]

Issues

The sole issue in this decision was whether Rowland’s Statement of Claim lacked a cause of action. [8]

Analysis

Rowland argued that there was no cause of action because Stephan had no confidential information or “trade secrets” on the uses of shilajit with vitamins/minerals. [8] Any confidentiality that may previously have existed ceased to do so when the patent protection was obtained. [9] A Supreme Court of Canada definition of a trade secret is generally given as “a secret formula or process not patented but known only to certain individuals using it in compounding some article of trade having a commercial value.” [10] Based on this, the ONSC accepted Stephan’s argument that Rowland had forfeited any right to claim a trade secret for the invention. [11]

At the same time, Rowland had moved to be permitted to substitute “intellectual property” for “trade secret” throughout his Statement of Claim, [14] arguing that Stephan was trying to strike his Statement of Claim simply over “phraseology.” [12] The ONSC, despite knowing that Rowland was a self-represented litigant, decided that his Statement of Claim should be struck as it was certain to fail. [15]

Any issue of a cause of action for the period when the patents were in force was also rejected, as it was found that Rowland had in fact assigned all of his rights, title and interest in the shilajit invention to a company called Creative Nutrition Corp. [18] This assignment took place in December 1991, presumably some short time after applying for the patents. [18] The patents produced during the case listed Rowland as the inventor, but Creative Nutrition Corp. as the owner.

The ONSC was thoroughly convinced that the reason Rowland never brought the proceeding as patent infringement was because he never owned the patents for the shilajit invention. [19] Rowland was deemed to have no proprietary interest in the shilajit invention and thus had no rights to assert against Stephan’s use of the invention. [21]

Conclusion

The ONSC granted the motions brought by Stephan, striking Rowland’s Statement of Claim without leave to amend, and denying Rowland’s motion for leave to amend its Statement of Claim. [23] Stephan was entitled to it’s costs for the motions. [24]

Commentary

This case explores two very important aspects about intellectual property. The first is a truism on the difference between a trade secret and patent protection. When a patent application pertaining to a particular invention is made public, that invention can no longer be protected by a trade secret. The word patent is ultimately derived from the Latin patere, meaning to lie open or be open. Once an invention has been laid open, it is part of the public domain and there is no going back to secrecy for it. Therefore, when Rowland obtained patents for the shilajit invention, he forfeited the right and indeed the ability to maintain it as a trade secret. The second point is that assigning rights to another entity will leave the original owner/inventor without any enforceable proprietary interest in the invention. Even under the Patent Act, patentee “means the person for the time being entitled to the benefit of a patent” – someone Rowland was not. Hence why, according to the ONSC, Rowland likely knew that he would not be able to bring a claim for patent infringement.

patent