I haven’t seen Iron Man 2, but Robert Farley and Davida H. Isaacs have, and they’ve written a great column about the legal issues at the heart of the story, The Stark Reality of Defense Contracting:

Iron Man 2 is the most expensive movie ever made about an intellectual property dispute….

In the United States, inventors are supposed to profit from their creations, as emphasized in the original comics. But Iron Man 2 takes a different tack. While trying to fend off Vanko, Stark is pressured by the U.S. government to give up the secrets of the Iron Man suit. After Stark refuses a senator’s demand that he relinquish his body-armor technology, the government forcibly takes it from him, only to turn it over to a competitor that then uses the technology to fulfill its own defense contract. Consciously or no, this echoes the real world; the United States government can take such actions with almost total legal impunity.

In real life, most inventors aren’t trying to "privatize peace." Many just want to get a government contract. Their inventions are kept as trade secrets, like the Iron Man suit, or they are patented. (In the film, Pepper Potts, played by Gwyneth Paltrow, demands action from "patent attorneys," but Stark Industries obviously hadn’t patented the technology, or else the government would already have access to the information needed to reproduce the armor.) It is not unheard of for a potential contractor to provide the government with product specifications, only to then watch the government award the contract to a competitor that has suddenly and suspiciously generated remarkably similar technology. For example, Crater Corporation charged that Lucent Technologies improperly used its tennis-inspired coupler to fulfill a Defense Department contract.

These inventors theoretically have their own superpower at their disposal: the Fifth Amendment’s "Takings Clause," which requires compensation for government appropriation. But it has one weakness: the military and state secrets privilege, which has been invoked with increasing frequency in the past 25 years.

… [Courts] have treated the privilege as legal Kryptonite, dismissing inventors’ lawsuits. In Iron Man 2, Stark’s competitor Hammer could have immediately begun production after acquiring the Iron Man suit, insisting that it had generated the technology itself. Had Stark sued, the government could have claimed state-secrets privilege, protecting details of the contract and production design from Stark’s lawyers. Stark would have been left without recourse to obtain the evidence needed to prove his case.

I would have quoted more, but for my respect of their intellectual property rights.

Indeed, in Crater Corp. v. Lucent Technologies, the United States officially intervened and tried to halt the case entirely, because, it asserted, "any information to be obtained in [discovery regarding the manufacture or use of the coupler by or on behalf of the United States] was protected by the state secrets privilege." The Court of Appeals for the Federal Circuit didn’t rule on that claim, because it dismissed the case under 28 U.S.C. § 1498(a), which:

provides "an affirmative defense for applicable government contractors." Va. Panel Corp., 133 F.3d at 869, 45 USPQ2d at 1232. If a patented invention is used or manufactured for the government by a private party, that private party cannot be held liable for patent infringement. Trojan, Inc. v. Shat-R-Shield, Inc., 885 F.2d 854, 856, 12 USPQ2d 1132, 1134-35 (Fed.Cir.1989); W.L. Gore & Assocs., Inc. v. Garlock, Inc., 842 F.2d 1275, 1282-83, 6 USPQ2d 1277, 1283-84 (Fed.Cir.1988).

And that’s just what happened:

We affirm the district court’s dismissal of Crater’s patent infringement claims because there is no genuine issue of material fact that Lucent’s use and manufacture of the allegedly infringing coupler was for the government. Because Lucent established its affirmative defense under 28 U.S.C. § 1498(a), Lucent’s activities cannot be held to be infringing.

All’s fair in love and war-for-profit.

Let’s get back to the patent infringement versus trade secret issue.

Once Tony Stark invents his Iron Man suit, he has two legal options to protect his intellectual property: file for a patent or treat the suit as a trade secret. The law protects both patents and trade secrets, but in different ways.

With a patent, the inventor publicly discloses the invention by filing a patent. If the patent is granted, the inventor is granted exclusive legal domain over the use of the patent for a limited amount of time. If someone wants to build the same device, they can do so by simply reviewing the patent, but they will have to pay the inventor for the use or sale of that device. As a reward for making the instructions public, the inventor is granted a plethora of legal protections, such as the ability to file for injunctions against infringement, and to recover attorney’s fees and treble damages in a lawsuit.

With a trade secret, the inventor is required to "take reasonable measures to keep the information secret." If they do that, and "the information derives independent economic value… from not being generally known to, and not being readily ascertainable through proper means by, the public," then federal law makes it a crime to misappropriate that information. Here’s an example of the types of things that can get you indicted, such as under the Economic Espionage Act:

Taking the allegations in the Superseding Indictment as true, the defendant engineers were to design tire manufacturing equipment for "off the road" (OTR) tires for their employer Wyko. The defendants formed a plan to take unauthorized photographs of Goodyear’s OTR manufacturing equipment under the guise of evaluating Wyko equipment. While at the Goodyear facility, defendant Roberts falsely told the security guard that he had signed a nondisclosure agreement within the past year. The defendants then falsely stated to the Goodyear engineer that they were there to evaluate Wyko-made equipment. Defendant Howley used his cellular telephone to take photographs of Goodyear’s OTR manufacturing equipment while defendant Roberts acted as lookout. Defendant Howley emailed the photographs to his work email account and then sent them to defendant Roberts’ work email account. Defendant Roberts emailed the photographs to Wyko employees in England.

With a trade secret, state common law allows compensatory relief, through typically not attorney’s fees or treble damages. Similarly, it’s harder to get an injunction for misuse of a trade secret than for infringement of a patent. (Here’s an example in the Second Circuit of misappropriation being clear, but there being no clear risk of "irreparable harm," and so no injunction.)

So, Tony Stark gets to choose: disclose the details of the invention in a patent and correspondingly get superior civil (i.e. monetary) relief if someone copies it, or try to keep the invention secret himself and hope that criminal law dissuades people from stealing it.

In his case it’s a no-brainer. He has no intent to sell the technology and he’d lose his advantage if others had it, too. A trade secret it is.

Update: over in the comments at Hacker News, decode points out:

This implies something that isn’t true: that Tony Stark has to choose between the two strategies. In reality, he could choose to patent parts of the Iron Man suit and keep other parts trade secrets. As we software developers well know, you are allowed to patent each individual innovation, not just the whole of a product.

For example, Stark Industries could get multiple patents on the suit software. They could get separate utility patents on the thrusters, the briefcase fold-up design, and some of the suit-specific weapons. Additionally, they’d try to get design patents on each of the suit designs. But, they could still keep the power generation unit and the navigation software secret. 

That’s a valid point. I discussed the suit as a single invention; Stark could indeed patent parts of it while treating other parts as trade secrets.

  • I haven’t seen the movie – but I really enjoy your analysis. This is another great example of why the patent system (and trade secret law) needs some overhaul. Even though the story is fiction, there are lots of real examples in the real world as you have pointed out.
    Gavin Craig

  • Tim Drake

    This is extremely interesting – especially in regards to the first movie where Stane says, “Do you think just because you had an idea, it belongs to you,” but I wanted to add: [I am aware I am being ridiculous here.] I completely agree it’s a trade secret.
    The government isn’t just asking for access to Tony’s ideas but the actual tech as it’s almost impossible for other people to replicate. They aren’t just trying to steal his ideas, but his possessions as well. [So in theory he could patent large sections of it and then point and laugh.]
    However, in this specific example, repulser technology is so dangerous that I don’t think he would have a choice but to keep as much of it a trade secret as possible just to prevent other people from turning it into super weapons.
    Even if he can get individual patents, I can’t see him wanting anyone to have access to his JARVIS system which he extended to the suit. Much less access to the vibranium metal he creates at the end of the second movie. He would have to go with trade secret on most of the suit to protect his home/self as he needs palladium and vibranium to live.

  • John Nagle

    You write: “These inventors theoretically have their own superpower at their
    disposal: the Fifth Amendment’s “Takings Clause,” which requires
    compensation for government appropriation.” Not since Zoltek. An implication of that decision is that, in administrative claims against the Government for patent infringement, there is no right to due process. It is the practice of DoD to reject essentially all administrative claims for patent infringement. (We have FOIA documents which establish this for the Navy and Army. USAF data is not available at this time.) You can still litigate in the Court of Federal Claims, of course.

    • That’s a fair point, I glossed over everything relating to Zoltek, given the length of the post, though you’re right that Zoltek could apply.

      I glossed over it because (1) I think Zoltek is just plain wrong, and if it made it up to the SCOTUS it would be overruled and that (2) in the big picture, 28 U.S.C. § 1498(a) still permits:

      “Whenever an invention described in and covered by a patent of the United States is used or manufactured by or for the United States without license of the owner thereof or lawful right to use or manufacture the same, the owner’s remedy shall be by action against the United States in the United States Court of Federal Claims for the recovery of his reasonable and entire compensation for such use and manufacture.”

      Thus, the money would come, just not under the Takings Clause, but under 28 U.S.C. § 1498(a). It would, as you note, likely require litigation through the Court of Federal Claims.