20111ip survey – trade secrets trade secret segment prof. janicke 2011

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2011 1 IP Survey – Trade Secrets TRADE SECRET SEGMENT PROF. JANICKE 2011

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2011 1IP Survey – Trade Secrets

TRADE SECRET SEGMENT

PROF. JANICKE2011

2011 2IP Survey – Trade Secrets

SOURCES OF LAW

• 45 STATES: UNIFORM TRADE SECRETS ACT – CIVIL

• TEXAS: CASELAW DOCTRINES BASED ON 1st REST. OF TORTS (1939); ALSO CRIMINAL STATUTE TEX. PENAL CODE § 32.05

2011 3IP Survey – Trade Secrets

• FEDERAL:

– GOVERNMENT CIVIL ACTIONS AND CRIM. PROCEEDINGS – ECONOMIC ESPIONAGE ACT (1997)

– NO PRIVATE CIVIL ACTION

2011 4IP 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

2011 5IP Survey – Trade Secrets

EXAMPLES

• MFG. METHODS

• MFG. MATERIALS

• BUSINESS PLANS

2011 6IP Survey – Trade Secrets

• USE, OR EVEN PLANNED USE, IN POSSESSOR’S BUSINESS IS NOT NEEDED

• SECRECY OF INDIVIDUAL COMPONENTS OR STEPS IS NOT NEEDED

2011 7IP 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.

2011 8IP Survey – Trade Secrets

HARD-TO-GET REQUIREMENT

• LIBERALLY CONSTRUED TO HELP TRADE SECRET OWNER

• EXAMPLE: OBSCURE PUBLICATION OR SUPPLIER NAME

2011 9IP Survey – Trade Secrets

REASONABLE-MEASURES-FOR-SECRECY

REQUIREMENTTYPICAL:

• EMPLOYEE AGREEMENTS

• MARKING DOCUMENTS AND DRAWINGS “CONFIDENTIAL”

• CIRCULATING WRITTEN POLICY

• POSTING WRITTEN POLICY

2011 10IP Survey – Trade Secrets

TYPICAL MEASURES (CONT’D):

• LIMIT TYPES OF EMPLOYEES WHO HAVE ACCESS

• LIMIT ACCESS TO PROJECT MEMBERS

• EXIT INTERVIEWS

2011 11IP Survey – Trade Secrets

• PROTECTIVE MEASURES CAN BE BY IMPLICATION RATHER THAN EXPRESS, BUT RISKY TO LITIGATE

2011 12IP Survey – Trade Secrets

OWNERSHIP OF ON-THE-JOB DEVELOPMENTS

• CONTRACT PROVISION 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– DEFINING THESE IS DIFFICULT

2011 13IP 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]

2011 14IP Survey – Trade Secrets

WHAT IS NOT

• 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

2011 15IP 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

2011 16IP 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

2011 17IP 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

2011 18IP Survey – Trade Secrets 18

REMEDIES• INJUNCTION

• PREVAILING U.S. VIEW: IF INFO HAS BEEN MADE PUBLIC BY OWNER, INJUNCTION SHOULD: – BE LIMITED TO LEAD-TIME, NOT

PERPETUAL– TIME IT TOOK P minus TIME IT TOOK D IS

A ROUGH RULE OF THUMB

2011 19IP Survey – Trade Secrets

TEXAS VIEW WHERE OWNER PUBLISHES THE SECRET

• HYDE v. HUFFINES TEX. S. CT. 1958 IS AMBIGUOUS

• WHERE OWNER OF SECRET PUBLISHES:– MODERN INTERPRETATION OF HYDE (PER

RESTATEMENT OF UNFAIR COMPETITION) IS THAT LEAD-TIME INJUNCTION IS THE TEXAS RULE AS WELL AS THE NATIONAL RULE

– HYDE WAS ENJOINED LONGER ONLY BECAUSE HE SUBMITTED NO EVIDENCE OF LEAD-TIME

– PLAINTIFFS STILL ARGUE FOR A BROADER READING

2011 20IP Survey – Trade Secrets

WHERE WRONGDOER PUBLISHES THE SECRET

• CASES SEEM TO INDICATE LONGER-TERM INJUNCTION IS POSSIBLE, MAYBE EVEN PERPETUAL

• SITUATION IS UNCLEAR

2011 21IP Survey – Trade Secrets

DAMAGES

• ARE AVAILABLE– COMPENS. AND PUNITIVE [UTSA: TREBLING]

• CAN BE UNJUST ENRICHMENT OR P’S LOSS OF BUSINESS

• HIGH SETTLEMENT RATE• TR. SEC. CASES SOMETIMES INVOLVE

PRELIM. INJUNC. HEARING – SELDOM GO TO TRIAL

2011 22IP Survey – Trade Secrets

INJUNCTION AGAINST WORKING FOR A PARTICULAR COMPETITOR

• CAN BE HANDLED PER CONTRACT

• WHERE NO CONTRACT, THIS TYPE OF INJUNCTION IS COMMONLY SOUGHT TO PROTECT THE SECRET

– ARGUMENT: WORKING FOR “THEM” WILL INHERENTLY DIVULGE

– COUNTER-ARGUMENT: NEED TO EARN A LIVING

2011 23IP Survey – Trade Secrets

NON-COMPETE INJUNCTION WHERE NO CONTRACT PROVISION

• POSSIBLE SOLUTIONS:– INJUNCTION REQUIRES KEEPING

PERSON ON PAYROLL AND WORKING– INJUNCTION REQUIRES PROVIDING

MINIMUM CONSULTING FEES AND POSSIBLE WORK

– INJUNCTION LIMITED TO COMPETITOR DIVISION MOST LIKELY TO CAUSE BREACH

2011 24IP Survey – Trade Secrets

SPECIAL PROBLEM: CONTINUING TO ENJOIN WRONGDOER WHEN

OWNER HAS PUBLISHED

• COMMONLY UNDERSTOOD: NON-WRONGDOERS ARE RELIEVED OF COVENANTS WHEN OWNER PUBLISHES

• WHEN A WRONGDOER MOVES TO DISSOLVE: – SHOULD PREVIOUS WRONGDOER NOW BE

THE ONLY ONE PRECLUDED FROM USE?

2011 25IP 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

2011 26IP Survey – Trade Secrets

SPECIAL PROBLEM: STATUTE OF LIMITATIONS

• ANOTHER VIEW: ORIGINAL MISAPPROPRIATION STARTS THE ONLY CLOCK; WHEN IT RUNS, ALL ACTION IS BARRED

• TEXAS SOLUTION: SINGLE WRONG, SINGLE RUNNING -- BUT FROM DISCOVERY DATE (KNEW OR SHOULD HAVE KNOWN)