TRADE SECRETS

Outline of Presentation What are trade secrets Keeping them secret Trade secrets or patents Legal protection for trade secrets and remedies for their misappropriation

What are Trade Secrets Trade secrets are confidential information that has commercial value by virtue of being kept secret and reasonable steps have been taken to keep it secret.

Trade secret audit Conducting an TS audit is to determine whether or not you have any trade secret assets; then to identify them; and final to take measures to make sure they retain their status as protectable trade secrets Should be done periodically Team – trusted people who know the company

Why should you conduct a TS audit Identify assets that would otherwise be unknown By identifying and protecting prevent their loss A court is more likely to give TS status to information identified internally as TS Establish clarity

Potential trade secrets Technical and scientific information Financial, legal and HR information Commercial information

Technical and Scientific Information product information technical composition of a product (medicine, paint, recipe for a sauce), data about product performance, product design information manufacture information manufacturing methods and processes (weaving technique, device process), production costs, refinery processes, raw materials, machinery know-how necessary to perform a particular operation

Commercial Information customer list business strategies/plans marketing strategy/research customer buying preferences and requirements consumer profiles sales methods

Financial, Legal and HR Information Pricing information Salary and compensation plans Employee evaluation

Monday April 9 3:45 AM ET Fruit of the Loom Sues Competitor CHICAGO (AP) - Fruit of the Loom is suing competitor Gildan Activewear Inc., accusing the Montreal company of stealing trade secrets to grab a competitive edge in the cutthroat apparel business. Fruit of the Loom contends the reports include production goals for plants in El Salvador, Honduras and Mexico that would allow Gildan to estimate production costs. They detail sales to specific customers, trends in demand and budget information.

Develop a trade secret protection policy HR policy Restrict access Confidential

Human Resource Policy Awareness creation/strong enforcement of breaches Confidential agreements/clauses Staff manual Exit interviews, non compete agreements Similar expectations vis-à-vis third party consultants

Restrict Access Documents under lock and key password protection Disclosure on a need to knowbasis Registration at reception/visitor logs/escorts Use keep out authorized personnel onlysigns Access controlled photocopiers, scanners, computers. Use of shredders Nothing on the internet

Confidential This document contains confidential and proprietary information of [COMPANY] and is protected by copyright, trade secret and other national laws. Its receipt or possession does not convey any rights to reproduce, disclose its contents, or to manufacture, use or sell anything it may describe. Reproduction, disclosure, or use without specific written authorization of [COMPANY] is strictly forbidden

Example – Coca Cola Said to be the best kept secret Formula kept in a bank vault Can only be opened by a resolution of the company Board of Directors Only two people know the secret Their identities are unknown They cannot travel together They oversee the production

Patent or Trade Secret Protection Such information may qualify for patent protection or trade secret protection. A company may choose trade secret protection even for information that qualify for patent protection.

Trade Secrets or Patents No registration (costs/time factor) Duration is not limited to specified period of time No disclosure Wider information Difficult to enforce No protection against independent discovery or RE Registration required (cost/time factor) Limited duration Disclosure required Limited to claims Easier to enforce Exclusive rights

As to whether TS or patent is the more appropriate protection depends on the kind of product, nature of the business and the policies of the company. Some products have a short commercial life (TS better), some information may be difficult to keep secret and some products may be more easily reverse engineered than others (patent better).

Protection for Trade Secrets Often no specific law Where there is a contract; employees with express provisions in their contracts or an implied duty of confidentiality or those who have signed NDA or CA Where there is no contract; information imparted in confidence and used in breach of that confidence or information obtained by unlawful or improper means (theft, industrial espionage, bribery)

Remedies Civil remedies based on breach of contract or tort law; damages, injunctions, seizures and impoundment Criminal remedies - rarely a criminal offense in its own right but could attract criminal liability by committing criminal offenses for procuring the information (theft, trespass etc)

Final thought You may not know that you have valuable business information recognized by law as trade secrets till it is too late. Identify and protect them They may be the key to your competitiveness