Intellectual Property Intellectual Property RightsRights

Chapter – 5Chapter – 5B.Tech , Mech. 3/1B.Tech , Mech. 3/1

Professor & Lawyer Puttu. Guru Prasad

M.B.A., M.Com., M.Phil., PGDFTM., APSET., PhD at JNTUK

Professor & Lawyer Puttu. Guru Prasad

M.B.A., M.Com., M.Phil., PGDFTM., APSET., PhD at JNTUK

Trade secretes Trade secretes

Financial information

Technical & scientific

information

Commercialinformation

Negativeinformation

A trade secret is a formula, pattern, physical device, idea, process, or compilation of information which is not generally known or reasonably ascertainable, by which a business can obtain an economic advantage over competitors or customers.

A formula for a sports drink Survey methods used by professional

pollsters, and Recipes (food) A new invention for which a patent

application has not yet been filed Marketing strategies Manufacturing techniques Computer algorithms

Secrecy

Restrict access to the information (lock it away in a secure place, such as a bank vault)

Limit the number of people who know the information

Have the people who know the trade secret agree in writing not to disclose the information (sign non-disclosure agreements)

Have anyone that comes in contact with the trade secret, directly or indirectly, sign non-disclosure agreements

Mark any written material pertaining to the trade secret as proprietary

Unlimited duration -trade secrets could potentially last longer than patents (20 years) and copyrights

Your protection is theoretically worldwide No application required No registration costs No public disclosure or registration with

government agency Effective immediately

Formula for Coca-Cola

The Big Mac Special Sauce

KFC Chicken RecipeWD-40 Formula

Secret RecipesKentucky fried chicken

The secret recipe of “11 herbs and spices” lies in a bank vault. Few people know it, and they are contractually obligated to secrecy. The ingredients are mixed by two different companies in two different locations and then combined elsewhere in a third, separate location. To mix the final formula, a computer processing system is used to blend the mixtures together and ensure that no one outside KFC has the complete recipe

Secret !

Initially Later stage

Not patentable patentable

patent

TS

Strategic business decision

TS•Part of the idea

TS

© ID

no registration- le s s co s ts (b u t: c o s ts to ke e p se c re t)

- im m e d ia te ly a va ila b le

can last longer- b u t: lim ite d to e c on o m ic life

- u n ce rta in lifes p a n: le a k o u t is irre m e d ia b le

no public d isclosure- b u t: p rac tic a l n ee d to d isc lo se

- if lea k o u t: T S lo st

Trade Secrets

registration- fe e s (re g is tra t io n + m a in te n an ce)

- ta ke s t im e to g e t p a te n t

lim ited in tim e- g e ne ra lly: m ax 2 0y

- b u t: c an be inv a lid ed

public d isclosure- p u b lic a tio n 18 m a fte r f iling

- if P n o t a llo we d : no TS

Patents

What is difference between TS and Patent

1 Court Order to stop the misuse 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

Remedies to Misappropriation

1. Independent Creation- similar formula created with his own knowledge.

2.Unclean hands – The owners behavior is morally wrong.

3.Laches- unreasonable delay in asserting a claim, which may result in its dismissal.

4.Absence of secrecy protection measures- failed in protecting its trade secret, sharing it through publication.

5.Privileges- sharing the information before media at court trail.

1. Contract law • When there is an agreement to protect the TS

NDA/CAanti-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 relationshiptheft, espionage, subversion of employees

TS protection may be based on...

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

TS protection may be based on...

Trade secret litigation comprises of two aspects.

1. violation of trade secret law takes place, when the confidential information is obtained through misappropriation.

2. violation of nondisclosure agreement takes place when a party in the contract breached the agreement.

The law of unfair competition is to safeguard the interest of the customers from unfair or misleading trade practices.

Types of Unfair Competition: Passing off Misappropriation Right of Publicity False Advertising Product Disparagement Dilution Infringement of Trade Dress

Infringement of Trade Dress:- the unique and distinctive feature of a product , service, or business which differentiates it from others is known as “Trade Dress”.

Trade Dress protection is needed to restrict others from duplicating a product.

Dilution: Basically , Tarnishment and Blurring are the two important aspects which are responsible for dilution of a product.

The unauthorized use of a mark on a dissimilar product which damages the distinctiveness of the that mark is known as ‘Blurring’.

‘Tarnishment’ refers to the unauthorized use of mark for a poor quality product which effects the products of mark owner.

Product Disparagement: when a false statement is made with an intention to harm a company or its products or its services, then it is known as “product disparagement”.

It is also known as ‘Trade Libel’ or “Commercial Disparagement”.

Right of Publicity: Allows individuals to protect their identities from being used for commercial purpose by other parties. Many companies misuse the celebrities name in fake to sell their products

Passing off occurs when one party sells his goods and services by affixing another company’s trade mark on them.

Passing off is confined to registered and unregistered trademarks , symbols , signs and devices etc.,

Passing off is an offence which is done by misrepresenting the goods and services for creating confusion in customers mind which effects the image or good will of the original manufacturer.

Misappropriation exists when one party uses the property of other party without informing them.

Misappropriation means unauthorized use of person's name or likeness for advertising purpose, which effects the image of other persons.

The plaintiff does not possess any copy right for it and he cannot claim any damages; ex- stock market rumors , new paper report etc.,

The Clean Room:- The clean room refers to a room in which a team of engineers, designers, researchers or scientists work together for a specific purpose. Each and every activity is documented .

The clean room act as an evidence to prove that the information which is identical to some other’s trade secret has derived through team efforts.

It also ensures that the information was not copied , theft or gained through any other improper means

Reverse Engineering: Any information which is obtained through reverse engineering of a product, will also be unprotectable under TS.

Ex:- A Gel Pen company has a secret formula for making Gel used in pens. If a person purchases the pen and analyze the Gel chemically and come to knew about the secret formula, then it is called “Reverse Engineering”

HOW ARE TRADE SECRETS LOST OR STOLEN ?

– departing or disgruntled employees– intentional (malicious)– inevitable (knowledge acquired)– by ignorance

80% of trade secret loss

< employees, contractors, trusted insiders!

A Growing Problem. A Growing Problem. Why Does It Occur?Why Does It Occur?

A Growing ProblemA Growing Problem. . Why Does It Occur?Why Does It Occur?

– The Way we do business today (increased use of contractors, temporary workers, out-sourcing)

– Declining employee loyalty: more job changes

– Organized crime : discovered the money to be made in stealing high tech IP

– Storage facilities (DVD, external memories, keys)

– Expanding use of wireless technology

Trade secrets may be legally discovered by the following proper means: Independent invention Reverse engineering:- that is, starting with the known product and

working backward to find the method by which it was developed (assuming the reverse engineering is not prohibited by contract) Observing the item in public use or on public display Obtaining the trade secret from published literature

29

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 !

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

2. Confidentiality agreement or NDA e.g., employees, suppliers,

consultants, financial advisors

What is typically considered wrongful?

1. Duty of trust – implied or imposed by law– e.g., employees, directors, lawyers

3. Industrial espionage, theft, bribery, hacking

A partial list of improper means includes theft, bribery, misrepresentation, breach, or inducement of a breach of a duty to maintain secrecy or espionage through electronic or other means

33

A springboard injunction is a type of injunction designed to remove or limit the advantage or head-start that an employee has gained through unlawful activities, typically through the misuse of the employer’s confidential information.

The individual is placed “under a special disability” by the injunction in order to “ensure that he does not get an unfair start”

A springboard injunction is unlike any other kind of injunction, because it is not targeted at preventing future unlawful activity but rather its purpose is to restore a level playing field between the parties.

Mr Ellis, Bullivant’s Managing Director, left to set up a competing business, taking confidential information with him including a card index with the contact details of Bullivant’s contacts, which he used to contact those clients in direct competition.

The High Court granted an injunction prohibiting Ellis from entering into or fulfilling any contract made with or through any of the contacts in the card index until judgment or further order.

Ellis appealed to the Court of Appeal, arguing that the injunction should not apply to any customers that he was able to make contact with without using the card index.

His appeal failed on this point, the court concluding that “having made deliberate and unlawful use of Bullivant’s property, he cannot complain if he finds that the eye of the law is unable to distinguish between those whom, had he so chosen, he could have contacted lawfully and those whom he could not”.

CDA= Confidentiality Agreement NDA= Non Disclosure Agreement The important elements included in the

written agreement of CDA & NDA are: 1. Ownership of Inventions 2. Non Disclosure Provisions 3. Non Solicitation Provisions 4. Non Competition Provisions

Complaint is a first document which is brought into the notice of the court by the plaintiff and asks for the corrective measures.

The defendant is required to give response to such complaint after receiving the summons from the court with in stipulated time period mentioned by the relevant court .

All the case data will be kept in Civil Cover Sheet.

The trail note book has to be maintained by paralegal for future assistance.

The trail note book is a binder used to index and provide reference to the necessary information required to handle the case.

It contains all the relevant and important and legal information regarding the lawsuit.

Breach of contract takes place when a party fails to fulfill the promise made in an agreement.

For example the employee fails to fulfill the promise and discloses the trade secret to other parties, then it is known as breach of contract.

This is also treated as Breach of Fiduciary duty that employee is failed in maintaining the secrecy

Contract is nothing but An Agreement Enforceable by Law.

The Ten Essential Conditions for a Contract:

1. Offer, 2. Acceptance, 3.Concensus-Ad-Idam, 4. Lawful Consideration, 5. Capacity to Contract, 6. Free consent, 7.Legal object, 8. Possibility of Performance, 9. Intention to create a legal relation ship 10. Writing and Registration.

In India , violation of trade secrets will be covered under Sec 27 of the Indian Contract act. It restricts parties in contract from Disclosing any kind of Information.

The Special Contract Acts like , Agency law clearly defines the Duties and Responsibilities of the Employer and Employee.

And it provides the eligible Remedies for the possible Damages occurred to the Owner from the agent .

The Agent is Liable to the Owner for the loss occurred due to him.

Always read an NDA before signing. Some agreements are titled Nondisclosure or Confidentiality agreements, yet their terms have the opposite effect.

People who sign nondisclosure agreements promising not to disclose trade secrets without authorization from the owner.

All the employees are bound under an Implied duty not to disclose sensitive information and should be kept it confidential from Stake Holders.

The Diljeet Titus case,1997. The conflict: Illegal and unauthorized copying

of material and information belong to Titus and company by it’s four employees.

Advocate: Arun Jaitly Page number – 195, Annexure 1– Model Non disclosure or

Confidentiality Agreement – 203 page. Annexure 2-Trade Secret Bond – 210 page.

For further Questions or Doubts- Call me or Mail Prof. Puttu Guru Prasad , VVIT.Prof. Puttu Guru Prasad , VVIT.Cell : 93 94 96 98 98. 767 40 60 336, 90 59

457 336Mail: puttuvvit@gamil.com.Reference : BS Publication ; Fundamentals of Intellectual

Property for Engineers.Cengage Learning: Intellectual Property by

Deborah.