20151IP Survey – Trade Secrets TRADE SECRET SEGMENT PROF. JANICKE 2015

2IP Survey – Trade Secrets SOURCES OF LAW 45 STATES: UNIFORM TRADE SECRETS ACT – CIVIL TEXAS: –2013 adopted Uniform Trade Secrets Act –Earlier: Caselaw Doctrines Based On 1st Rest. Of Torts (1939) –ALSO A CRIMINAL STATUTE TEX. PENAL CODE § 32.05

20153IP Survey – Trade Secrets FEDERAL: –GOVERNMENT CIVIL ACTIONS AND CRIM. PROCEEDINGS – ECONOMIC ESPIONAGE ACT (1997) –NO PRIVATE CIVIL ACTION

20154IP 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

20155IP Survey – Trade Secrets EXAMPLES MFG. METHODS MFG. MATERIALS BUSINESS PLANS

20156IP Survey – Trade Secrets USE, OR EVEN PLANNED USE, IN POSSESSOR’S BUSINESS IS NOT NEEDED SECRECY OF INDIVIDUAL COMPONENTS OR STEPS IS NOT NEEDED

20157IP Survey – Trade Secrets THE PROBLEM OF CUSTOMER LISTS HAS CAUSED A CASE LAW QUAGMIRE OFTEN ARE EASILY LEARNED BY RIGHTFUL MEANS; HENCE NOT A “TRADE SECRET” CAN BECOME A SECRET BY ADDING PURCHASE HISTORY, PLANS, CONTACTS, ETC.

20158IP Survey – Trade Secrets HARD-TO-GET REQUIREMENT LIBERALLY CONSTRUED TO HELP TRADE SECRET OWNER EXAMPLE: OBSCURE PUBLICATION OR SUPPLIER NAME

20159IP Survey – Trade Secrets REASONABLE-MEASURES-FOR- SECRECY REQUIREMENT TYPICAL: EMPLOYEE AGREEMENTS MARKING DOCUMENTS AND DRAWINGS “CONFIDENTIAL” CIRCULATING WRITTEN POLICY POSTING WRITTEN POLICY

201510IP Survey – Trade Secrets TYPICAL MEASURES (CONT’D): LIMIT TYPES OF EMPLOYEES WHO HAVE ACCESS LIMIT ACCESS TO PROJECT MEMBERS EXIT INTERVIEWS

201511IP Survey – Trade Secrets PROTECTIVE MEASURES CAN BE BY IMPLICATION RATHER THAN EXPRESS, BUT RISKY TO LITIGATE

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

CASES LAMB-WESTON LEARNING CURVE IP Survey – Trade Secrets

201514IP 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

201515IP Survey – Trade Secrets 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]

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” >>> 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 IP Survey – Trade Secrets

201518IP 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

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

CASES MANGREN CROUCH IP Survey – Trade Secrets

201521IP 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

201522IP 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

201523IP 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

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

201525IP Survey – Trade Secrets 25 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

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 IP Survey – Trade Secrets

201527IP 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]

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

201529IP 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

201530IP 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 >>>

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 IP Survey – Trade Secrets

CASE WEED-EATER IP Survey – Trade Secrets

201533IP 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

201534IP Survey – Trade Secrets 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)

CASE SCHALK IP Survey – Trade Secrets