SSHHHH! It’s a Trade Secret Steve Baron April 3, 2003

What Is A Trade Secret?

Information Economic value Not generally known Reasonable efforts to maintain secrecy

Types of Trade Secret Information Technical or non-technical data Formula Pattern Compilation Program Device Method Technique Drawing Process Financial data List of actual or potential customers

Economic Value Actual Potential

Availability of Information Not generally known by competitors

“Reasonable” Efforts to Maintain Secrecy Absolute secrecy not required Reasonable under the circumstances Comprehensive program

Examples of Methods to Maintain Secrecy Lock & Key Passwords Restricted access Sign-in sheets Confidential stamps Non-Disclosure Agreements

The sum may be a trade secret, even if each part is not.

Famous Trade Secrets Formula for Coca-Cola Recipe for Kentucky Fried Chicken Formula for Smith’s Cough Drops

Advantages of a Trade Secret No time limit No public disclosure No governmental filing process

What Law Governs Historically – Common Law Uniform Trade Secrets Act Illinois Trade Secrets Act Economic Espionage Act

Historically – Common Law – Six Factor Test Extent known outside company Extent known by employees Measures taken to guard secrecy Value to company and competitors Time, effort and money to develop Difficulty of proper acquisition

Uniform Trade Secrets Act Adopted by nearly 40 states

Illinois Trade Secrets Act Effective since 1988 Adjunct to common law Gives “teeth” to infringement claims

Illinois Trade Secrets Act Remedies Injunction Compensatory damages Punitive damages Attorney’s fees

Economic Espionage Act Gives U.S. Attorney sweeping powers to prosecute any person or company involved in trade secret misappropriation Punishes intentional stealing, copying or receiving of trade secrets For product produced or placed in interstate commerce

Economic Espionage Act Penalities Individual fines up to $500,000 Company fines up to $5 million Prison – up to 10 years for individuals and 15 years if theft performed for foreign government

Proper Methods to Obtain Trade Secrets Legitimate Observation Reverse Engineering Independent Invention