1. Trade secrets
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7. Do-it-yourself form of IP
What are trade secrets?
Do-it-yourself form of IP
Idea: By keeping valuable information secret, you can prevent competitors from learning about and using it and thereby enjoy a competitive advantage in the marketplace.
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8. This trade secret is a form of IP
Thus these IP’s look like
Designed and Developed by IP Laboratory, MNNIT Allahabad , Uttar Pradesh, India

9. Trade secret is any valuable information or secret for a business which provide competative edge.
Example : For a Car company, technology of Car is a trade secret which has to be hidden from its competitors.
Designed and Developed by IP Laboratory, MNNIT Allahabad , Uttar Pradesh, India

10. General principles:
Information that has commercial value and that has been scrupulously kept confidential will be considered a trade secret (TS).
Owner will be entitled to court relief against those who have stolen or divulged it in an illegal manner.
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12. Provides competitive advantage Potential to make money
TRADE
SECRET
Provides competitive advantage
Potential to make money
Kept confidential
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13. TRADE SECRET Technical & scientific information Financial information
Negative information
Commercial information
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14. Typical examples in the software industry
Computer technology
hardware + software (esp. source code)
whether < patent or copyright protection
algorithms, formulas, data flow charts, specific procedures that are implemented in the software or website
Software design documents
Technical data about product performance
Software development agreements
Pending patent applications
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15. Business plans & strategies New product names Financial projections
Marketing plans, unpublished promotional material
Cost & pricing information
Sales data
Customer lists
Info re: new business opportunities
Personnel performance
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16. When do you have legal protection?
WHAT MAKES SOMETHING A TRADE SECRET ?
When do you have legal protection?
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18. Three essential legal requirements:
1. The information must be secret
2. It must have commercial value because it’s secret
3. Owner must have taken reasonable steps to keep it secret
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19. 1. Secret
“not generally known among or easily accessible to persons within the circles that normally deal with this kind of information”
What is ‘generally known’ in the software industry?
matters of common knowledge
information you find at library, online database, trade journals, patent information, etc
price list on website
graphics & object code of software application you sell off-the-shelf
Not required that be known only by one person
e.g. based on supplier relationship, joint development agreement, due diligence investigation, etc.
If you license software which has limited distribution  possible to protect object code by contractual means
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20. 2. Commercial value Must confer some economic benefit on the holder
This benefit must derive specifically from the fact that it is not generally known (not just from the value of the information itself)
How to demonstrate:
benefits derived from use
costs of developing the TS
licensing offers; etc.
actual or potential
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21. 3. Reasonable steps
Under most TS regimes, you cannot have a TS unless you have taken reasonable precautions to keep the information confidential
‘Reasonable’  case by case
reasonable security procedures
Non-disclosure agreements (NDA)
such that the information could be obtained
by others only through improper means
Importance of proper TS management program
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24. COURT RELIEF if: TS + “THEFT”
Courts will only grant relief if someone has improperly acquired, disclosed or used the information
Only theft if wrongful !
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25. What is typically considered wrongful?
1. Duty of trust
implied or imposed by law
e.g., employees, directors, lawyers
2. Confidentiality agreement or NDA
e.g., employees, suppliers, consultants, financial advisors
3. Industrial espionage, theft, bribery, hacking
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26. What is lawful?  Discovery of the secret by fair and honest means
1. Independent creation
without using illegal means or violating agreements or law
 patent
TS protection provides no exclusivity !
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27. What is lawful?
2. Reverse engineering
Common practice among software companies: studying competitors' products
to make software that can interoperate with the software being studied
to make a product that will compete with it
E.g. decompile object code to reveal its structure and figure out the interface specifications for interoperability purposes
E.g. look at a program's input and outputs.
Solution: contractually forbid reverse engineering (in software license agreement)
Technological protection measures
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28. Trade Secret Policies & Law
Formula
Pattern
Compilation
Program
Device
Method
Technique
Process
Uniform Trade Secrets Act (UTSA)
Information
Derives independent economic value from secrecy
Subject of reasonable efforts to maintain secrecy
Contrast with patent (“patent” means “open”)
Unauthorized use of trade secret can lead to civil tort for misappropriation
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29. UTSA Remedies for Misappropriation
Damages ($)
Amount needed to compensate the trade secret holder for losses
Amount of unjust enrichment earned by unlawful use or disclosure
Injunctions
Preventing use
Including “threatened misappropriation”
To obtain preliminary injunction, must prove:
Irreparable harm
Strong likelihood of success of winning if case goes to trial
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30. International Trade Secret Protection
TRIPS agreement
Agreement on Trade-Related Aspects of Intellectual Property Rights
Members of the World Trade Organization (WTO) must protect “undisclosed information”
Does not use trade secret term
WTO members required to enforce their own trade secret laws with remedies
Issues
Enforcing contractual obligations / confidentiality agreements
Determining damages
Durational periods – variation in time limits for maintaining secrecy of info
Need to exercise caution with trade secrets overseas
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32. departing or disgruntled employees intentional (malicious)
80% of trade secret loss
< employees, contractors, trusted insiders!
departing or disgruntled employees
intentional (malicious)
inevitable (knowledge acquired)
by ignorance
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34. 1. Identify trade secrets
Factors to determine if information is a TS
Is it known outside the company?
Is it widely known by employees and others involved within the company?
Have measures been taken to guard its secrecy?
What is the value of the information for your company?
What is the potential value for your competitors?
How much effort/money spent in developing it?
How difficult would it be for others to acquire, collect of duplicate it?
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35. 2. Develop a protection policy
Advantages of a written policy:
Clarity (how to identify and protect)
How to reveal (in-house or to outsiders)
Demonstrates commitment to protection  important in litigation
Educate and train:
Clear communication and repetition
Copy of policy, intranet, periodic training & audit, etc.
Make known that disclosure of a TS may result in termination and/or legal action
Monitor compliance, prosecute violators
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36. to only those persons having a
3. Restrict Access
to only those persons having a
need to know
the information
 computer system should limit each
employee’s access to data actually
utilized or needed for a transaction
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37. 4. Mark Document Help employees recognize TS
 prevents inadvertent disclosure
Uniform system of marking documents
paper based
electronic (e.g. ‘confidential’ button on standard screen)
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38. 5. Physically isolate and protect
Separate locked depository
Authorization
Access control
log of access: person, document reviewed
biometric palm readers
Surveillance of depository/company premises
guards, surveillance cameras
Shredding
Oversight; audit trail
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39. 6. Maintain computer security
Secure online transactions, intranet, website
Password; access control
Mark confidential or secret (legend pop, or before and after sensitive information)
Physically isolate and lock: computer tapes, discs, other storage media
No external drives and USB ports
Monitor remote access to servers
Firewalls; anti-virus software; encryption
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41. SALE LICENSE Most TS sales occur as part of the sale of the business
e.g. in combination with patent license
e.g. software license for highly specialized program
Advantage: additional revenues
Disadvantage: risk of disclosure (potential loss)
In some countries, restrictions
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42. TS Licensing Definition of the secret subject matter Permitted use
what is to be kept confidential?
marked as such or broad clause?
Permitted use
disclosure to employees, professional advisors?
modification of technology?
Precautions to be taken
Exclusions
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43. TS Licensing Duration of secrecy obligations Royalties Sanctions
Should not be subject to alternative dispute resolution
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45. TS protection may be based on...
1. Contract law
When there is an agreement to protect the TS
NDA/CA
anti-reverse engineering clause
Where a confidential relationship exists
attorney, employee, independent contractors
2. Principle of tort / unfair competition
Misappropriation by competitors who have no contractual relationship
theft, espionage, subversion of employees
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46. 4. Specific trade secret laws
3. Criminal laws
e.g. for an employee to steal trade secrets from a company
e.g. unauthorized access to computers
theft, electronic espionage, invasion of privacy, etc.
circumvention of technical protection systems
4. Specific trade secret laws
US: Uniform Trade Secrets Act; Economic Espionage Act
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47. Remedies 1. Order to stop the mise 2. Monetary damages
actual damages caused as a result of the misuse (lost profits)
amount by which defendant unjustly benefited from the misappropriation (unjust enrichment)
3. Seizure order
can be obtained in civil actions to search the defendant's premises in order to obtain the evidence to establish the theft of TS at trial
4. Precautionary impoundment
of the articles that include misused TS, or the products that resulted of misusing
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52. As in this Case of Coca-Cola Trade Secret
Prosecutors say a former Coca-Cola secretary took confidential documents from the beverage giant and samples of products that hadn't been launched with the aim of selling them to rival Pepsi
Faces up to 10 years in prison if convicted of conspiracy.
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55. Case Company accused of misappropriating TS from an inventor
Inventor of new design for vacuum cleaner presented design to vacuum cleaner manufacturer. Signed NDA covering the design.
Manufacturer obtained patent on the design one year after the inventor disclosed the design to them, and made estimated sale profits of $100,000,000.
2004: lawsuit settled. Company paid $30,000,000 to inventor.
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56. DeCSS Trade Secret Dispute
1999: 15 year old Norwegian Jon Johannsen
Studied DVD Software Player
Determined how CSS anti-copy system worked
Ascertained encryption keys to descramble CSS protection
Posted DeCSS software on Internet
5 years of litigation involving DMCA; issues:
Reverse engineering,
Injunctive relief
Misappropriation
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57. Microsoft and Google (2000)
Microsoft hired Kai-Fu Lee
VP for R&D
Lee agreed if he left Microsoft he wouldn’t work for 1 year in competitive capacity
Quit and worked for Google
TRO (temporary restraining order) issued
Dispute eventually settled
UTSA – Civil provisions
Doesn’t authorize government to bring criminal actions
Some states have separate criminal statutes for trade secret theft
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58. First Amendment Issues
Opponents of corporate actions have revealed trade secrets to press
Concerned or disgruntled employees
Journalists or activists using social engineering (e.g., Ciarelli)
Can corporations impose prior restraint to prevent publication?
Generally, no: 1st Amendment protects such publication absent compelling reasons to interfere
May still prosecute for industrial espionage after the fact
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59. Borland & Symantec 1992 Eugene Wang
Former CEO of Borland Int’l
Resigned 2 months after management shuffle
Became VP of Symantec
Borland officials searched his
Found files sent via MCI Mail
10 msgs sent to Symantec CEO
Contained confidential info
Borland filed civil & criminal charges
Scotts Valley Police Department
Provisions of CA penal code applied
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63. Thank you
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