TRADE SECRET SEGMENT PROF. JANICKE 2017

IP Survey – Trade Secrets SOURCES OF LAW 46 STATES HAVE: UNIFORM TRADE SECRETS ACT – CIVIL ACTIONS TEXAS: 2013: adopted Uniform Trade Secrets Act Earlier: Caselaw Doctrines Based On 1st Rest. Of Torts (1939) ALSO HAS A CRIMINAL STATUTE TEX. PENAL CODE § 32.05 2017 IP Survey – Trade Secrets 2

IP Survey – Trade Secrets FEDERAL LAW TOO: GOVERNMENT CIVIL ACTIONS AND CRIM. PROCEEDINGS – ECONOMIC ESPIONAGE ACT (1997) PRIVATE CIVIL ACTIONS – AVAILABLE UNDER PROTECT TRADE SECRETS ACT OF 2016 2017 IP Survey – Trade Secrets

WHAT IS A “TRADE SECRET” (1) ANY COMPETITIVELY VALUABLE INFORMATION (2) THAT’S NOT WIDELY KNOWN OR EASILY FOUND OUT (3) THAT THE POSSESSOR HAS TAKEN REASONABLE STEPS TO KEEP FROM DISCLOSURE 2017 IP Survey – Trade Secrets 4

IP Survey – Trade Secrets EXAMPLES MFG. METHODS MFG. MATERIALS BUSINESS PLANS PRODUCT DESIGN, BEFORE PUBLIC ACCESS 2017 IP Survey – Trade Secrets 5

IP Survey – Trade Secrets USE, OR EVEN PLANNED USE, IN POSSESSOR’S BUSINESS IS NOT REQUIRED SECRECY OF INDIVIDUAL COMPONENTS OR PROCESS STEPS IS NOT REQUIRED 2017 IP Survey – Trade Secrets 6

THE PROBLEM OF CUSTOMER LISTS HAS CAUSED A CASE LAW QUAGMIRE OFTEN ARE EASILY LEARNED BY RIGHTFUL MEANS; HENCE NOT A “TRADE SECRET” BUT: CAN BECOME A SECRET BY ADDING PURCHASE HISTORY, PLANS, CONTACTS, ETC. 2017 IP Survey – Trade Secrets 7

HARD-TO-GET REQUIREMENT LIBERALLY CONSTRUED TO HELP TRADE SECRET OWNER EXAMPLE: OBSCURE PUBLICATION OR SUPPLIER’S NAME 2017 IP Survey – Trade Secrets 8

REASONABLE-MEASURES-FOR- SECRECY REQUIREMENT TYPICAL: EMPLOYEE AGREEMENTS MARKING DOCUMENTS AND DRAWINGS “CONFIDENTIAL” CIRCULATING WRITTEN POLICY POSTING WRITTEN POLICY 2017 IP Survey – Trade Secrets 9

IP Survey – Trade Secrets TYPICAL MEASURES (CONT’D): LIMIT TYPES OF EMPLOYEES WHO HAVE ACCESS LIMIT ACCESS TO PROJECT MEMBERS EXIT INTERVIEWS 2017 IP Survey – Trade Secrets 10

IP Survey – Trade Secrets PROTECTIVE MEASURES CAN BE BY IMPLICATION RATHER THAN EXPRESS, BUT RISKY TO LITIGATE 2017 IP Survey – Trade Secrets

SECRETS GIVEN TO EMPLOYEE IF OWNED BY THE EMPLOYER, THESE REMAIN OWNED BY EMPLOYER, UNTIL PUBLISHED BY EMPLOYER 2017 IP Survey – Trade Secrets

IP Survey – Trade Secrets CASES LAMB-WESTON LEARNING CURVE 2017 IP Survey – Trade Secrets

IP Survey – Trade Secrets 2017 IP Survey – Trade Secrets

IP Survey – Trade Secrets 2017 IP Survey – Trade Secrets

NEW SECRETS DEVELOPED ON-THE-JOB CONTRACT PROVISION FOR OWNERSHIP CONTROLS, IF THERE IS ONE IF THERE IS NO CONTRACT PROVISION, RESULT GOES BY THE EQUITIES “GENERAL SKILLS OF A CALLING” ARE ALWAYS OK FOR EMPLOYEE TO TAKE WITH HIM AND USE DEFINING THESE IS DIFFICULT 2017 IP Survey – Trade Secrets 16

WHAT IS “MISAPPROPRIATION” USING UNDER WRONGFUL CONDITIONS: OBTAIN RIGHTFULLY, BUT USE IN BREACH OF AGREEMENT [MANY CASES] OBTAIN BY FRAUD OR INDUCING A BREACH OF CONFIDENCE [A FEW CASES] 2017 IP Survey – Trade Secrets 17

THE KNOWLEDGE REQUIREMENT WHERE SECRET IS IMPARTED TO AN EMPLOYEE OR OTHER PERSON IN CONFIDENCE: MISAPPROPRIATION UNDER UTSA (INCLUDING TEXAS) REQUIRES RECIPIENT “knew or had reason to know” THE INFO WAS “acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use” >>> 2017 IP Survey – Trade Secrets

IP Survey – Trade Secrets MOST DEFENDANTS SAY THEY DIDN’T KNOW OF ANY “DUTY” BUT, “HAD REASON TO KNOW” IS GIVEN BROAD INTERPRETATION BY COURTS AND JURIES 2017 IP Survey – Trade Secrets

WHAT IS NOT A MISAPPROPRIATION COPYING AN OPENLY AVAILABLE PRODUCT REVERSE ENGINEERING OF AN OPENLY AVAILABLE PRODUCT WHOLLY INDEPENDENT DESIGN ADOPTING THE DESIGN, AFTER DISCLOSURE UNDER CONTRACT OF NON-CONFIDENCE 2017 IP Survey – Trade Secrets 20

IP Survey – Trade Secrets THE INFORMATION PER SE IS NOT PROTECTED ONLY THE IMPROPER OBTAINING OR USING IS BARRED 2017 IP Survey – Trade Secrets

IP Survey – Trade Secrets CASES MANGREN CROUCH 2017 IP Survey – Trade Secrets

MOST CASES INVOLVE RIGHTFUL LEARNING, AND THEN MISAPPROPRIATING TYPICAL PATTERNS: EMPLOYEES LEARN, THEN JUMP JOINT VENTURE PARTNER LEARNS, THEN VENTURE TERMINATES POTENTIAL BUYER OF BUSINESS LEARNS, AND SALE FALLS THROUGH 2017 IP Survey – Trade Secrets 23

IP Survey – Trade Secrets TYPICAL PATTERNS (CONT’D): HARDER TO DECIDE: EXECUTIVE DRIVES THE DEVELOPMENT, THEN JUMPS HARDER TO DECIDE: VENDOR, AGENT, ADVISOR CONTRIBUTES THE SECRET – THEN USES FOR OTHER CLIENTS 2017 IP Survey – Trade Secrets 24

IP Survey – Trade Secrets HARDEST CASES: FLY-OVERS ONE DECIDED CASE TRAILING SHOULD BE OK TRASH COLLECTING MAY BE OK ON THE TRADE SECRET FRONT; PERILOUS ON CRIMINAL FRONT; AND BAD PRESS 2017 IP Survey – Trade Secrets 25

IP Survey – Trade Secrets CASES CHICAGO LOCK SMITH v. DRAVO DUPONT v. CHRISTOPHER 2017 IP Survey – Trade Secrets

IP Survey – Trade Secrets REMEDIES INJUNCTION IS THE KEY REMEDY PREVAILING U.S. VIEW (AND NEW TEXAS STATUTE VIEW): IF INFO HAS BEEN MADE PUBLIC BY OWNER, INJUNCTION SHOULD: BE LIMITED TO LEAD-TIME, NOT PERPETUAL TIME IT TOOK P IS A ROUGH RULE OF THUMB; SHOULD TAKE D AS LONG 2017 IP Survey – Trade Secrets 27 27

IP Survey – Trade Secrets EXAMPLE OF LEAD-TIME INJUNCTION: P SPENT 3 YEARS IN DEVELOPING THE INFO D NEEDED ONLY 1 YEAR, DUE TO MISAPPROP. D SHOULD BE ENJOINED FROM USE FOR 2 YEARS 2017 IP Survey – Trade Secrets

IP Survey – Trade Secrets DAMAGES ARE AVAILABLE COMPENS. AND PUNITIVE [UTSA: UP TO TREBLING] CAN BE UNJUST ENRICHMENT PLUS P’S LOSS OF BUSINESS CAN BE TREBLED IF WILLFUL OR MALICIOUS [TWICE THE ACTUAL DAMAGES, AS PUNITIVE COMPONENT] 2017 IP Survey – Trade Secrets 29

IP Survey – Trade Secrets TR. SEC. CASES SOMETIMES INVOLVE PRELIM. INJUNC. HEARING SELDOM GO TO TRIAL VERY HIGH SETTLEMENT RATE 2017 IP Survey – Trade Secrets

INJUNCTION AGAINST WORKING FOR A PARTICULAR COMPETITOR CAN BE HANDLED PER NO-COMPETE CONTRACT IN MOST STATES, INCLUDING TEXAS WHERE NO CONTRACT, THIS TYPE OF INJUNCTION IS COMMONLY SOUGHT TO PROTECT THE SECRET ARGUMENT: WORKING FOR “THEM” IN “THIS MANNER” WILL INHERENTLY DIVULGE COUNTER-ARGUMENT: NEED TO EARN A LIVING 2017 IP Survey – Trade Secrets 31

IP Survey – Trade Secrets COMMON JUDICIAL RELUCTANCE RE. NO-COMPETE INJUNCTION WHERE NO CONTRACT PROVISION JUDGES DO NOT WANT TO KILL JOBS JUDGES DO NOT WANT TO DEPRIVE FAMILIES OF LIVELIHOODS >>> 2017 IP Survey – Trade Secrets 32

IP Survey – Trade Secrets POSSIBLE SOLUTIONS: INJUNCTION REQUIRES KEEPING PERSON ON PAYROLL AND WORKING INJUNCTION REQUIRES PROVIDING MINIMUM CONSULTING FEES AND POSSIBLE WORK INJUNCTION LIMITED TO WORKING IN COMPETITOR DIVISION MOST LIKELY TO CAUSE BREACH 2017 IP Survey – Trade Secrets

IP Survey – Trade Secrets CASE WEED-EATER 2017 IP Survey – Trade Secrets

SPECIAL PROBLEM: STATUTE OF LIMITATIONS ONE VIEW: MISAPPROPRIATION IS AN ONGOING TORT, NEW VIOLATION EVERY DAY HENCE, ONLY OLD MISUSES ARE CUT OFF; DAMAGES AND INJUNCTION ARE AVAILABLE FOR RECENT/FUTURE VIOLATIONS 2017 IP Survey – Trade Secrets 35

SPECIAL PROBLEM: STATUTE OF LIMITATIONS ANOTHER VIEW: ORIGINAL MISAPPROPRIATION STARTS A SINGLE CLOCK; WHEN IT RUNS, ALL ACTION IS BARRED TEXAS SOLUTION: SINGLE WRONG, SINGLE RUNNING -- BUT FROM DISCOVERY DATE (KNEW OR SHOULD HAVE KNOWN) 2017 IP Survey – Trade Secrets 36

IP Survey – Trade Secrets CASE SCHALK 2017 IP Survey – Trade Secrets