1. IP Survey – Trade Secrets
TRADE SECRET SEGMENT
PROF. JANICKE
2014
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2. IP 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
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3. IP Survey – Trade Secrets
FEDERAL:
GOVERNMENT CIVIL ACTIONS AND CRIM. PROCEEDINGS – ECONOMIC ESPIONAGE ACT (1997)
NO PRIVATE CIVIL ACTION
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4. 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
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5. IP Survey – Trade Secrets
EXAMPLES
MFG. METHODS
MFG. MATERIALS
BUSINESS PLANS
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6. IP Survey – Trade Secrets
USE, OR EVEN PLANNED USE, IN POSSESSOR’S BUSINESS IS NOT NEEDED
SECRECY OF INDIVIDUAL COMPONENTS OR STEPS IS NOT NEEDED
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7. 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.
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8. HARD-TO-GET REQUIREMENT
LIBERALLY CONSTRUED TO HELP TRADE SECRET OWNER
EXAMPLE: OBSCURE PUBLICATION OR SUPPLIER NAME
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9. REASONABLE-MEASURES-FOR- SECRECY REQUIREMENT
TYPICAL:
EMPLOYEE AGREEMENTS
MARKING DOCUMENTS AND DRAWINGS “CONFIDENTIAL”
CIRCULATING WRITTEN POLICY
POSTING WRITTEN POLICY
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10. IP Survey – Trade Secrets
TYPICAL MEASURES (CONT’D):
LIMIT TYPES OF EMPLOYEES WHO HAVE ACCESS
LIMIT ACCESS TO PROJECT MEMBERS
EXIT INTERVIEWS
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11. IP Survey – Trade Secrets
PROTECTIVE MEASURES CAN BE BY IMPLICATION RATHER THAN EXPRESS, BUT RISKY TO LITIGATE
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12. SECRETS GIVEN TO EMPLOYEE
IF OWNED BY THE EMPLOYER, THESE REMAIN OWNED BY EMPLOYER, UNTIL PUBLISHED BY EMPLOYER
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13. IP Survey – Trade Secrets
CASES
LAMB-WESTON
LEARNING CURVE
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14. 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
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15. 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]
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16. 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”
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17. 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
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18. 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
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19. IP Survey – Trade Secrets
THE INFORMATION PER SE IS NOT PROTECTED
ONLY THE IMPROPER OBTAINING OR USING IS BARRED
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20. IP Survey – Trade Secrets
CASES
MANGREN
CROUCH
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21. 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
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22. 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
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23. 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
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24. IP Survey – Trade Secrets
CASES
CHICAGO LOCK
SMITH v. DRAVO
DUPONT v. CHRISTOPHER
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25. 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
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26. 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
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27. 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]
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28. IP Survey – Trade Secrets
TR. SEC. CASES SOMETIMES INVOLVE PRELIM. INJUNC. HEARING
SELDOM GO TO TRIAL
VERY HIGH SETTLEMENT RATE
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29. 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
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30. 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
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31. 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
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32. 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
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33. 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)
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34. IP Survey – Trade Secrets
CASES
STENSTROM
SCHALK
McGOWAN
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IP Survey – Trade Secrets