1 Protecting Trade Secrets Before, During and After Trial Michael Clarke, Esq. – E.I. duPont de Nemours and Company Rod Satterwhite – McGuireWoods LLP Brian Riopelle – McGuireWoods LLP

Trade Secrets in the Spotlight Significant verdicts –St. Jude Medical Chinese medical device company No show at trial – $2.3 billion –DuPont v. Kolon Aramid fiber technology – Kevlar® $920 million –Mattel v. MGA (Bratz) $309 million including fees 2

Themes Foreign competition Value of trade secrets Agenda – How to Protect – Effectively –Before litigation – pitfalls –During litigation –In cooperation with law enforcement

Trade Secret Va. Code §

5 To be more precise... Must be “the subject of efforts that are reasonable under the circumstances to maintain its secrecy.”

6 Employee Confidentiality Agreements Employee education is key Agreement better than policy –Commitment –Evidence Universally recognized as reasonable

Confidentiality Agreements - Risks Too long –Not followed Too specific –Exclusionary –Static 7

Agreements – Strike a Balance Detailed enough to educate –Purpose of the agreement “Employer has developed commercially valuable technical and non-technical information.” “The aforesaid information is vital to the success of the Employer’s business.” –Provide examples, but not exhaustive list 8

All Employees Sign –Administrative employees will have access –Critical to show culture of organization

Policies Reinforce agreements Opportunity for education 10

Risks Not following Too much detail 11

Policy Risk – Narrow Definitions “Such information includes technical and financial data developed by or for the Company and not generally known to others. It can also include source and computer code, test results on new or modified software and any technical information and data pertaining to Company software or its implementation/integration.” 12

Updating Policies Reflect changes in confidential information New storage methods – technology Improvements to protective measures 13

Overzealous Training Justification for policy improvement Highlights weakness in prior policy “Our information is at risk.” “Our protections are not adequate.” “We have had severe security breaches.” Can undercut prior efforts 14

Federal Rule of Evidence 407 Excludes evidence of “subsequent remedial measures” Product liability context Original purpose: ongoing safety improvements Used in DuPont v. Kolon –After Mitchell, DuPont further tightened security –Kolon wanted to use it to attack prior efforts –Court excluded evidence 15

Confidentiality Markings Surprisingly tricky area 16

Default Treatment “No special designation is assigned to the large majority of documents which contain Company business or technical information but to which access should still be limited to [Company] personnel. Absence of a formal designation does not of itself exempt any information or document from the broad rule of ‘internal use only.’”

Distribution of Policy Proof of receipt – testimony –Opposing witness Acknowledgement

Physical Security Overlooked –Trade secrets not sole purpose Failure to address can be fatal –Edgewater – unlocked rooms

Physical Security Measures Fences / gates / guards Locked doors / offices / cabinets Badges Restrictions on visitor access

Visitor Access Sometimes necessary Precautions –Approval –Confidentiality agreement –Escort –Restricted areas –Photo / video prohibition

Third Party Agreements Sharing may be required Customers / partners / suppliers / vendors Non-disclosure Agreements common –Limit use of information –Sometimes require return or destruction

Third Party Agreements – Risks Agreements expire Relationship continues Problem: agreement describes information as “valuable” or “critical to process” No restriction on use after expiration KEY: monitoring & renewal

Electronic Security Password security for network access Additional security for sensitive materials Firewalls, network security Smart Cards – helpful, not required Encryption – helpful, not required “Reasonable” measures

Electronic Security – Risks Travel –Theft while abroad Work at home Retrieval of materials at termination

Education & Training Orientation Informal Reminders – OTJ Formal follow-up Mandatory attendance Documented attendance

Exit Interviews Tool for –Gathering information –Policy reminder –Return of materials –Reaffirm written commitment Risk: inconsistent application

Publications & Presentations Legitimate business reasons –Market presence –Academic / scientific community Policy requiring review Can send powerful message about culture

Unnecessary Precautions Trade Secret inventory Tracking every copy of a document De-designating dated information

In any Trade Secrets case: Protective measures will be challenged “Otherwise they wouldn’t have been able to steal the information.”

Litigating Trade Secret Claims

Filing Other Claims in a Trade Secret Case Preemption Can avoid dismissal by distinguishing confidential information from trade secret –Unjust enrichment –Conversion –Breach of contract

Defining Trade Secrets Law requires trade secret to be identified with “reasonable particularity” Constant tension throughout case

Discovery Developing legal elements –Misappropriation Acquisition Use –Trade secret Derives independent economic value from –Not being generally known –Not readily ascertainable Subject to reasonable efforts to maintain secrecy

Discovery Developing legal elements –Damages Actual damages Unjust enrichment Reasonable royalty

Discovery Develop themes/stories –What –Why –Who

Foreign Defendants Familiarity with U.S. discovery process Depositions –Interpreters Translations –Informal –Certified

Protecting Trade Secrets During Litigation Protective order During trial

Trial – Telling the Story Balancing technical details with simple themes/story Incorporate technical details into story DO NOT incorporate story into technical details

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