IP and Trade Secret Risks Rise with AI in Smart Manufacturing
New legal risks emerge around IP and trade secrets in AI-driven smart manufacturing.
Why it matters: Legal teams advising manufacturers must navigate complex IP and trade secret issues to protect innovations and data as AI becomes integral to production processes.
- USPTO guidelines (Feb 2026) exclude AI as an inventor on patents, limiting inventorship to natural persons.
- Defend Trade Secrets Act (DTSA) allows companies to sue for theft with potential double damages for willful misappropriation.
- Ninth Circuit’s 2025 Quintara ruling lowers trade secret pleading standards, enabling delayed full disclosure until summary judgment.
- Experts warn against including trade secrets in patents since publication destroys secrecy under 35 U.S.C. § 122(b).
As AI technologies become embedded in smart manufacturing, legal questions about intellectual property and data ownership multiply. The National Law Review detailed these challenges on May 27, 2026, highlighting risks around patenting AI-assisted inventions, protecting trade secrets, and controlling ownership of manufacturing data.
In February 2026, the USPTO issued new guidelines stating that AI cannot be named as an inventor. Instead, inventorship remains a legal status reserved for natural persons. This means innovations created with AI assistance must attribute invention rights only to humans, complicating patent strategy for AI-driven products.
Trade secrets face additional scrutiny. The Defend Trade Secrets Act (DTSA), enacted in 2016, offers private rights of action to companies whose trade secrets are stolen, including injunctions and damages—potentially doubled for willful theft. As noted by legal expert Spranklen, "AI could create a trade secret that is a legally enforceable right." However, Spranklen cautions not to include trade secrets in patent filings, as public disclosure under 35 U.S.C. § 122(b) destroys their secrecy.
The Ninth Circuit’s 2025 Quintara decision further shapes trade secret litigation by allowing plaintiffs to defer detailed identification of their secrets until the summary judgment phase, easing pre-discovery pleading burdens compared to California’s standard. This can be critical in AI contexts where complex datasets or algorithms are involved and full disclosure may risk exposure.
For legal teams advising manufacturing clients, staying current on these evolving policies and rulings is crucial. Early litigation may be advantageous, as Spranklen advises: "If you're a plaintiff, file your case early." Balancing patent protection with trade secret strategy requires cautious assessment to avoid unintended loss of IP rights in AI-driven smart manufacturing.
By the numbers:
- Feb 2026 — USPTO issued AI inventorship guidelines
- 2016 — Enactment of Defend Trade Secrets Act (DTSA)
- 2025 — Ninth Circuit's Quintara decision on trade secret pleading standards
Yes, but: While the DTSA facilitates trade secret protection, deferring full disclosure until later litigation stages may prolong uncertainty about the exact scope of protected information.
What's next: Legal teams should watch for further USPTO updates on AI patentability standards and any emerging case law applying Quintara principles to AI-driven manufacturing trade secrets.