But the researchers backed out of the idea on the advice of our patent lawyers. The reasoning goes like this: Sending anything over the Internet is equivalent to placing it into the public domain, since the message can be viewed by other than the intended recipient. So, proprietary information *even encrypted* will be rendered unpatentable if sent over the Internet.

You may want to send these guys back to do their homework. For corporate communications, crypto is not new. Messages have been sent in cipher over telegraph lines since the civil war. Ask if a trade secret becomes exposed (in the legal sense) if it is transmitted over telegraph lines in code. I fail to see what the difference is between enciphering something in dots and dashes and enciphering it in 1's and 0's.