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Premium member Presentation Transcript Trade Secret Law: Trade Secret Law Dr. Tabrez Ahmad Professor of Law www.technolexindia.com tabrezahmad7@gmail.com http://technolexindia.blogspot.com 1 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 2 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Agenda: What is Trade Secret? When Trade Secrets are preferred? How to guard Trade Secret? Trade secret as a property Threat to trade secret due to Internet Trade secret law Remedies Cases 3 Agenda Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Trade Secret: Trade Secret 4 The best kept secret till date Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: “Don’t miss a good chance to keep quiet.” Professor Jerome Shuman 5 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,TRADE SECRETS: TRADE SECRETS “ (T)rade secret protection is an important part of intellectual property, a form of property that is of growing importance to the competitiveness of American industry…The future of the nation depends in no small part on the efficiency of industry, and the efficiency of industry depends in no small part on the protection of intellectual property.” - Rockwell Graphics 6 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,What is Trade Secret: What is Trade Secret Some inventions, data, information cannot be protected by any of the available means of IPRs. Such information is held confidential as a trade secret. Trade secret can be an invention, idea, survey method, manufacturing process, experiment results, chemical formula, recipe, financial strategy, client database etc. In general, a trade secret can be defined as any commercially valuable information or compilation of information that is not generally known to others who can profit from its disclosure or use Art. 39 of TRIPS agreement “ Secret” includes what is not generally known in interested circles. Art. 39(3) has a special provision on pharmaceutical and agricultural test data submitted in order to gain approval; these must be protected against “unfair commercial use”. 7 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,TRIPS, Art. 1(2) : TRIPS, Art. 1(2) For the purposes of this Agreement, the term “intellectual property” refers to all categories of intellectual property that are the subject of Sections 1 through 7 of Part II. 8 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Part II Section 7: protection of undisclosed information : Part II Section 7: protection of undisclosed information Article 39 1. In the course of ensuring effective protection against unfair competition as provided in Article 10 bis of the Paris Convention (1967), Members shall protect undisclosed information in accordance with paragraph 2 and data submitted to governments or governmental agencies in accordance with paragraph 3. 2. Natural and legal persons shall have the possibility of preventing information lawfully within their control from being disclosed to, acquired by, or used by others without their consent in a manner contrary to honest commercial practices so long as such information: (a) is secret in the sense that it is not, as a body or in the precise configuration and assembly of its components, generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question; (b) has commercial value because it is secret; and (c) has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret. 9 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 3. Members, when requiring, as a condition of approving the marketing of pharmaceutical or of agricultural chemical products which utilize new chemical entities, the submission of undisclosed test or other data, the origination of which involves a considerable effort, shall protect such data against unfair commercial use. In addition, Members shall protect such data against disclosure, except where necessary to protect the public, or unless steps are taken to ensure that the data are protected against unfair commercial use. 10 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,When Trade Secrets are preferred? : When Trade Secrets are preferred? When invention is not patentable; Patent protection is limited to 20 years, when secret can be kept beyond that period; When cost of patent protection are prohibitive; When it is difficult to reverse engineer 11 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Origin of Trade Secret Protection: Origin of Trade Secret Protection The Roman Empire and misappropriation or theft of trade secrets The Roman courts recognized a cause of action for “ actio servi corrupti ,” which means an action for corrupting a slave Slave owners relied on the cause to protect them from theft of confidential business information by third parties who would intimidate, bribe, or “corrupt” their slaves into disclosing the information 12 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,From the Roman Empire to Western Capitalism: From the Roman Empire to Western Capitalism Presently, what entities require trade secret protection? Who is most likely to disclose a trade secret? Who is most likely to benefit from disclosure? 13 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Source of Law for Trade Secret Protection: Source of Law for Trade Secret Protection Common law tort of improper use or disclosure of trade secrets Restatement of Torts, §§ 757-758, which were adopted by most courts in most states is now supplanted by the Restatement (Third) of Unfair Competition, § 39 In 1979, a model act was promulgated and is called the Uniform Trade Secrets Act, which was amended in 1985 (civil remedies) Through implementation of GATT-TRIPs, Congress provided national protection for owners of trade secrets with the 1996 Economic Espionage Act, 15 U.S.C.A. §§ 1831-1839 (federal criminal remedies) 14 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Two Theories of Trade Secret Protection: Two Theories of Trade Secret Protection Utilitarian Theory Property Rights Protecting against theft, improper use or disclosure of proprietary information encourages investment in such information Deterrence Theory Commercial Morality or duty-based obligation Discourage wrongful or illicit commercial behavior that undermines trust How do each of these theories view the nature of intellectual property? 15 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Drafting and Evaluating a Trade Secret Claim: Drafting and Evaluating a Trade Secret Claim What is a trade secret? Is there a threshold requirement of creativity or innovation before protection becomes available? What elements are required to state a claim for misappropriation, theft, or improper use? What are the tests for each of these elements? 16 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Answers: Answers A trade secret means information, including a formula, patent, compilation, program, device, method, technique, or process, that: derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and is the subject of efforts that are reasonable under circumstances to maintain its secrecy No, a threshold is not required; the only requirement is secrecy of information that derives independent economic value from remaining secret 17 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Answers: Answers Generally, there are three elements (and their tests) to a trade secret claim: the subject matter involved must qualify for trade secret protection it must be the type of knowledge or information that trade secret law was meant to protect; and it must not be generally known to all a showing of misappropriation through deception or theft through breach of an explicit obligation through breach of an implied duty a showing of reasonable precautions to prevent disclosure diligence constructive knowledge standard 18 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,How to guard Trade Secret?: How to guard Trade Secret? Restricting number of people having access to secret information Signing confidentiality agreements with business partners and employees Using protective techniques like digital data security tools and restricting entry into area where trade secret is worked or held National legislations provide protection in form of injunction and damages if secret information is illegally acquired or used. 19 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 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. What are trade secrets? Do-it-yourself form of IP 20 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 1. What information qualifies as a TS? 2. What makes something a TS? 3. When can you get court relief? 4. How are TS lost or stolen? 5. How to protect your TS? 6. May TS be sold? 7. How is TS protection enforced? 8. If you have the choice: TS or patent? 9. What to bear in mind if you sign CA? 21 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: WHAT KIND OF INFORMATION QUALIFIES AS A TRADE SECRET ? 22 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: TRADE SECRET Provides competitive advantage Potential to make money Kept confidential 23 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,TRADE SECRET: TRADE SECRET Financial information Technical & scientific information Commercial information Negative information 24 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,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 Typical examples in the software industry 25 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 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 26 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: WHAT MAKES SOMETHING A TRADE SECRET ? When do you have legal protection? 27 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 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 28 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: “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 1. Secret 29 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 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 1. Secret 30 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 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 2. Commercial value 31 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 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 3. Reasonable steps 32 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: Caution: Who owns the TS? TS (e.g. new technology or software) developed by employee … TS developed by external contractor To avoid disputes : WRITTEN AGREEMENT + ASSIGN in advance all trade secrets developed during employment or commission 33 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: WHEN CAN YOU GET COURT RELIEF ? 34 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: COURT RELIEF if: TS + “THEFT” Courts will only grant relief if someone has improperly acquired, disclosed or used the information Only theft if wrongful ! 35 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 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 36 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 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 ! 37 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 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 38 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 2. Reverse engineering Solution: contractually forbid reverse engineering (in software license agreement) Technological protection measures BUT! Legality in question Inconsistent with copyright or antitrust laws? 39 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: HOW ARE TRADE SECRETS LOST OR STOLEN ? 40 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: A Growing Problem. Why Does It Occur? 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 41 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: Reverse engineering, independent discovery Improper licensing Burglaries by professional criminals targeting specific technology Network attacks (hacking) Laptop computer theft Inducing employees to reveal TS Examples 42 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: departing or disgruntled employees intentional (malicious) inevitable (knowledge acquired) by ignorance 80% of trade secret loss < employees, contractors, trusted insiders! 43 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Case Coca-Cola Trade Secret Trial: Case Coca-Cola Trade Secret Trial 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. AP Business, January 15, 2006 44 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Case Company accused of misappropriating TS from an inventor: 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. 45 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Case High-Tech Company vs. Employee: Case High-Tech Company vs. Employee Technical manager (employee) of high-tech company X resigned Went to work for another high-tech company Y Departing employee used and disclosed TS Company X filed suit against departing employee Court order: Departing employee prevented from performing work for his new employer (Y) in connection with any product that competes with X’s products. 46 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: HOW TO PROTECT YOUR TRADE SECRETS? 47 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 1. Identify trade secrets Accurate record keeping is important. 48 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 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? 49 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 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 50 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 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 51 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 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 52 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 4. Mark documents Help employees recognize TS p revents inadvertent disclosure Uniform system of marking documents paper based electronic (e.g. ‘confidential’ button on standard email screen) 53 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 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 54 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 6. Restrict public access to facilities Log and visitor’s pass Accompany visitor Sometimes NDA/CA Visible to anyone walking through a company’s premises type of machinery, layout, physical handling of work in progress, etc Overheard conversations Documents left in plain view Unattended waste baskets 55 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 7. Maintain computer secrecy 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 56 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 8. Measures for employees 1. New employees Brief on protection expectations early Obligations towards former employer! Assign all rights to inventions developed in the course of employment NDA/CA Non-compete provision Reqts Limits 57 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 2. Current employees Prevent inadvertent disclosure (ignorance) Train and educate NDA for particular task 3. Departing employees further limit access to data exit interview letter to new employer treat fairly & compensate reasonably for patent work 58 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 9. Measures for third parties Sharing for exploitation Consultants, financial advisors, computer programmers, website host, designers, subcontractors, joint ventures, etc. Confidentiality agreement, NDA Limit access on need-to-know basis 59 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: MAY TRADE SECRETS BE SOLD OR LICENSED? 60 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: SALE Most TS sales occur as part of the sale of the business LICENSE 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 61 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,TS Licensing: TS Licensing Definition of the secret subject matter 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 62 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,TS Licensing: TS Licensing Duration of secrecy obligations Royalties Sanctions Should not be subject to alternative dispute resolution 63 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,TS Licensing: TS Licensing Can licensee be obligated to continue paying TS royalties even if the information has entered the public domain ? In case of license for patent + related TS: Can licensee be obligated to continue paying TS royalties when patent expires or is invalidated ? 64 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,TS Licensing: TS Licensing Mass-marketed software : Possible to negotiate NDA with every end-user? Software Escrow : A viable alternative to source code license? 65 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: HOW IS TRADE SECRET PROTECTION ENFORCED? What can you do if someone steals or improperly discloses your TS? 66 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 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 TS protection may be based on... 67 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 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 68 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 1. 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 69 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: To establish violation, the owner must be able to show : infringement provides competitive advantage reasonable steps to maintain secret information obtained, used or disclosed in violation of the honest commercial practices ( misuse ) 70 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: PROTECTING INVENTIONS: TRADE SECRETS OR PATENTS? 71 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,What is difference between TS and Patent?: What is difference between TS and Patent? 72 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 1. ANY innovative idea should be kept as a secret in the beginning to preserve option of patenting (or industrial design) at later stage Things to bear in mind 75 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,INNOVATIVE IDEA: INNOVATIVE IDEA Secret ! Initially Later stage Not patentable patentable patent TS Strategic business decision TS Part of the idea TS © ID 76 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 2. Choice between patent or TS must be made both from legal and business perspectives (if patentable) Things to bear in mind 77 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: Patentable idea Public disclosure necessary? Technology changing rapidly? Easy to RI, independ. discover? TS P Def.publ Revenue potential > IP costs? New area of technology? Licensing opportunity? N N N N N N Y Y Y Y Y © Mark Sokoloff 78 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 3. If you apply for a patent, only give up what is necessary The decision to apply for a patent does not necessarily require giving up all of one’s TS! However, patent application must contain : enough to enable skilled person to practice the invention the best mode known to the applicant for practicing the invention (Software P in USA: required to disclose source code?) Things to bear in mind 79 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: INNOVATIVE IDEA inventions on A, B, C A C TS B TS P A B C Applying for patent on C may not require giving up TS on A & B 80 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 4. If you apply for a patent, your TS may still be protected for a while In most countries: only publication after 18m . You may withdraw application any time < publication In USA: possible to request non-publication of the patent application until the patent is issued Things to bear in mind 81 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 5. Once patent published TS lost in ALL COUNTRIES patent documents “easily accessible” to public if patent application published and later rejected you lose both patent and TS rights some technology (e.g. software) may be patentable in USA but not in Europe or other countries… Things to bear in mind 82 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: WHAT TO BEAR IN MIND IF YOU SIGN A CONFIDENTIALITY AGREEMENT FOR A CLIENT ? 83 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: “Developer may be given access to Client’s confidential information while working for Client. Developer agrees not to use or disclose such information except as directed by Client.” 84 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: Software or web developers who work for clients asking to sign CA Insist on CA that is : - reasonable in scope - defines precisely what information you must keep confidential - limited in time (max. 5 years) - exceptions 85 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: TRADE SECRETS FOR SOFTWARE COMPANIES CONCLUSIONS 86 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: TS protection for financial, commercial & (secret) technical information: develop effective internal TS program to maintain trade secret status TS protection for Software: restrict access impose obligation of confidentiality to anyone who has access 87 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: Certain aspects of software cannot be maintained as a trade secret information or technology that must be disclosed to the public in order to market the product information or technology which is part of a product sold to the public and can be reverse-engineered mass-marketed software where competition is so intense, that very likely to be independently developed by others within short time if great deal of personnel movement between competitors if customers require access to software for archive, back-up, updating, maintenance, debugging, etc. 88 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: Alternative or additional protection for software : make reverse engineering difficult (compiled code) technological protection measures copyright protection software patents Be careful about signing confidentiality agreements 89 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: Remember... TS: No registration, but 3 requirements for legal protection No need for absolute secrecy, but ‘ reasonable measures’ Developing and maintaining TS program < good business practice to prevent < legal requirement to enforce TS protection 90 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: TS: Only legal protection against dishonest acquisition/disclosure/use You can sue someone who violated your TS, but that often doesn’t save the TS Consider alternative protection Remember... 91 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: The choice between TS and patent protection for an invention is irrevocable Therefore: carefully consider all relevant advantages and disadvantages from each choice both from legal and business viewpoint Remember... 92 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Remember...: Patent and TS are often complementary to each other: Patent applicants generally keep inventions secret until the patent application is published by the patent office. A lot of valuable know-how on how to exploit a patented invention successfully is often kept as a trade secret. Some businesses disclose their trade secret to ensure that no one else is able to patent it ( defensive publication ). Remember... 93 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Trade Secret Law: Trade Secret Law Standards of Common Law Protection Employment Relation and Contract Considerations Instead, common law exists to protect trade secrets as well as the Uniform Trade Secrets Act which has been adopted by many states of USA. 94 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,TRADE SECRETS State Law Protection Uniform Trade Secrets Act: TRADE SECRETS State Law Protection Uniform Trade Secrets Act Unlike patents, copyrights and trademarks, trade secrets are protected under state law Uniform Trade Secrets Act - Model Act Amended in 1985 41 states have enacted statutes modeled after UTSA 2 states (AL and MA) have separate state statutes protecting trade secrets 7 states protect trade secrets under the common law 95 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Trade Secrets: Trade Secrets Half Tort Law & Half Property Law Tort Law : One can be held liable for breaching a duty not to disclose the trade secret Property Law : One has valuable information one wants to protect 96 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Tort Side of Trade Secrets: Tort Side of Trade Secrets A duty must exist 97 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Property Side of Trade Secrets: Property Side of Trade Secrets A trade secret must be a secret A trade secret must have value 98 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,How do we know if it is a secret?: How do we know if it is a secret? The court looks into: The measures the company took to keep the information secret The cost to the company of keeping the information secret The number of people who know the secret The subjective belief that the trade secret is in fact a secret 99 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,How do we know if the secret has value?: How do we know if the secret has value? The court may consider: Expert witness testimony Whether the information is common knowledge 100 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,“Secrecy” in a Trade Secret: “Secrecy” in a Trade Secret Secrecy must be “substantially secret,” it does not have to be absolute. Metallurgic . One must take “reasonable means” to protect one’s secret. Dupont & Rockwell. 101 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Liability for Using or Disclosing Another’s Trade Secret: Liability for Using or Disclosing Another’s Trade Secret One is liable for using or disclosing another’s trade secret if: One uses improper means to discover the trade secret The disclosure or use constitutes a breach of confidential relationship One is not liable if: One discovers the trade secret by reverse engineering One discovers the trade secret independently 102 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Basics of Uniform Trade Secrets Act: Basics of Uniform Trade Secrets Act In those states which have enacted UTSA statutes, the statutes displace conflicting tort, restitutionary, and other law of the State providing civil remedies for misappropriation of trade secrets HOWEVER: The statutes do not affect: Contractual remedies, whether or not based upon misappropriation of a trade secret Other civil remedies that are not based upon misappropriation of a trade secret Criminal remedies, whether or not based upon misappropriation of a trade secret 103 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Basics of the Uniform Trade Secrets Act: Basics of the Uniform Trade Secrets Act “Trade secret” defined as: information, including a formula, pattern, compilation, program, device, method, technique, or process, that: derives independent economic value from not being generally known or readily ascertainable by proper means by other persons and; is the subject of efforts that are reasonable under the circumstances to maintain its secrecy 104 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Basics of Uniform Trade Secrets Act: Basics of Uniform Trade Secrets Act Provides cause of action for “misappropriation” of trade secrets 3 year statute of limitations - action must be brought within 3 years after misappropriation is discovered or should have been discovered "Misappropriation” defined as: (i) acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means or; 105 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,(continued): (continued) (ii) disclosure or use of a trade secret of another without express or implied consent by a person who: Improperly acquired trade secret At the time of disclosure or use, knew or had reason to know that his knowledge of the trade secret was: Derived from improper means Acquired under a duty to maintain secrecy Acquired by accident or mistake 106 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Basics of Uniform Trade Secrets Act: Basics of Uniform Trade Secrets Act In an action under the act, a court is authorized to preserve the secrecy of an alleged trade secret by: granting protective orders in connection with discovery proceedings holding in-camera hearings sealing the records of the action and ordering any person involved in the litigation not to disclose an alleged trade secret without prior court approval. 107 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,TRADE SECRETS/VALUES Restatement of Unfair Competition-Relevant Provisions: TRADE SECRETS/VALUES Restatement of Unfair Competition-Relevant Provisions Restatement of the Law, Third, Unfair Competition, published by The American Law Institute Commentary on trade secrets and rights of publicity The rules are applicable to both statutory and common law trade secret cases The rules closely mirror the Uniform Trade Secrets Act 108 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,TRADE SECRETS/VALUES/ Unfair Competition: TRADE SECRETS/VALUES / Unfair Competition “Trade secret” defined as: Any information that can be used in the operation of a business or other enterprise and that is sufficiently valuable and secret to afford an actual or potential economic advantage over others Liability for appropriation occurs when: Trade secret is acquired by improper means 109 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,TRADE SECRETS/VALUES/ Unfair Competition: TRADE SECRETS/VALUES / Unfair Competition At the time of disclosure or use, the actor knew or had reason to know that his knowledge of the trade secret was: Derived from improper means Acquired under a duty of confidence Acquired by accident or mistake Duty of confidence arises from both express and implied duty and includes employees 110 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,TRADE SECRETS/VALUES/ Unfair Competition: TRADE SECRETS/VALUES / Unfair Competition REMEDIES Injunctive relief may be awarded to prevent a continuing or threatened appropriation of another's trade secret under appropriate circumstances Monetary relief may be awarded in an amount equal to the pecuniary loss to the other caused by the appropriation or for the actor's own pecuniary gain resulting from the appropriation, whichever is greater 111 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,TRADE SECRETS/VALUES/ Unfair Competition: TRADE SECRETS/VALUES / Unfair Competition Right of Publicity Protects against misappropriation of the commercial value of a person’s identity Provides liability for misuse of person’s name, likeness, or other indicia of identity for purposes of trade Use for purposes of trade includes: use for advertising, placement on merchandise, or use in connection with services rendered. Does not include: news reporting, commentary, entertainment or use in advertising that is incidental to such uses. 112 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Part B Case Law: Part B Case Law 113 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,The Case of: Kewanee Oil v. Bicron Corporation 416 U.S. 470 : The Case of: Kewanee Oil v. Bicron Corporation 416 U.S. 470 Facts : Kewanee Oil had developed processes and techniques related to the production of synthetic crystals. Former employees of Kewanee Oil appropriated 20 trade secrets to a competitor, Bicron Corporation. Ohio law enjoined the employees from disclosure or use of the trade secrets until they had been released to the public. The process and techniques were appropriate subject matter for patent protection, but was not longer available for protection because it had been in commercial use for a year. Issue: Does federal patent law preempt state trade secret protection? 114 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Kewanee, continued: Kewanee, continued Holding : The Court held that the trade secret protection would not be preempted by the federal patent law because: Trade secret protection provided more incentive for businesses to create and benefit from this such things a individualized plans of operation and business methods By definition a trade secret is a secret and not in the public domain. Thus, Congress’ object to keep information in the public domain would not be disrupted. The availability of an alternative plan would not deter individuals from applying for patent protection because trade secret is a weaker form of protection. In short, the Court found that trade secret law did not create and obstacle to the objectives of patent law. 115 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,The Case of: Bryce Associates Inc. v. Gladstone 319 N.W.2d 907: The Case of: Bryce Associates Inc. v. Gladstone 319 N.W.2d 907 Facts : Bryce Associates contends that Harley-Davidson took and used for their own benefit Bryce’s trade secret contained in a methodology for design of management information systems-PRIDE. Bryce held an information session and provided manuals including a copyright notice that described the capabilities and advantages of PRIDE to the Harley-Davidson business. Issue : Does Bryce’s voluntary use of the federal copyright notice on PRIDE’S manuals and forms prevents the state of Wisconsin from applying its trade secret law to bar use by other of the information contain in the work? 116 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Bryce, continued: Bryce, continued Holding : The Court explained “trade secret law prohibits unauthorized disclosure or use of protected ideas while copyright prohibits unauthorized copying by anyone of the form of expression in which the ideas are fixed by the author.” The Court concluded that there is clear demarcation between trade secret protection and copyright protection and thus no preemption. 117 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Conclusion of the Law:: Conclusion of the Law: Federal does not prevail over state law as long as the state law does not stand as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress. 118 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: * Economic Espionage Act of 1996 * Uniform Computer Information Transactions Act (UCITA) 119 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,What is UCITA?: What is UCITA? Uniform Computer Information Transactions Act Proposed state contract law designed to standardize the law of software and all forms of digital info A “computer information transaction” is one in which computer info is sold, leased or licensed. Enables shrink-wrap/click-on licenses 120 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Economic Espionage Act of 1996: Economic Espionage Act of 1996 18 U.S.C.A. secs 1831-1839 (West Supp. 1999), signed October 11, 1996 Protects trade secrets Only if owner has taken steps to ensure that the info remains secret Why Care? Use it offensively to protect your secrets Bring your company into compliance with the act and avoid becoming a defendant 121 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,EEA, (continued): EEA, (continued) EEA, sec.1831, makes it illegal for a foreign entity to knowingly steal, copy, receive secrets Punishment is up to 15 years in prison and a substantial fine Individuals: $500,000. Organizations: $10 million! EEA, sec.1832, makes it illegal for anyone to convert a TS “that is related to or included in a product…in interstate or foreign commerce…” Individuals: $500,000. Organizations: $5 million! Forfeit of all proceeds derived from such a violation (sec. 1834). 122 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,How to Protect Your Secrets : How to Protect Your Secrets Be aware of company insiders, former employees, and competitors milling your hallways Keep your employees informed of the value of discretion Have them sign and agree to a Policy Statement Create key management teams who oversee the compliance with security Train employees via orientation Maintain an auditing and reporting system Limit Discretion of key secrets Enforce and Discipline Violations 123 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,How to Avoid becoming a Defendant: How to Avoid becoming a Defendant Avoid patterns of hiring away your competitor’s employees! Inform new employees that your company respects the proprietary info of its competitors, and will not seek to exploit that info Thus far, cases have involved the most EGREGIOUS attempts to steal. 124 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Enforcement Examples: Enforcement Examples Thus far has been used in the most egregious cases First published opinion directly addressing Congress’ intent of the EEA: U.S. v. Hsu , 155 F.3d 189 (3 rd Cir. 1998) Mr. Hsu, an employee of a paper company, met with an undercover FBI agent in LA. Mr. Hsu allegedly asked the agent to find a Bristol-Myers Squibb employee willing to sell secrets related to their cancer drug, Taxol. A meeting was arranged, where Mr. Hsu met with undercover FBI agents, where he was arrested. At trial, Mr. Hsu wanted to see whether the info was in fact a trade secret. The court rejected his argument, noting that the EEA makes it illegal to attempt or conspire to steal TS. In this respect, the actual info he was attempting to buy was irrelevant. 125 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Other Case Law : Other Case Law U.S. v. Yang 1999 U.S. Dist. Lexis 7130 (N.D. Ohio 1999) President, Mr. Yang, of Four Pillars Company attempted to buy the trade secrets related to new adhesive technology developed by Avery-Dennison . FBI used undercover operation using an A-D assistant who had been selling the company’s TS for 8 years. The assistant agreed to cooperate, and the FBI caught Mr. Yang’s attempt on videotape. Court noted that the loss of TS status during the investigation does not preclude an EEA violation. Mr. Yang was sentenced to 6 months of home confinement, 18 months probation, and $250,000. Avery-Dennison filed civil suit, receiving judgment of $10 million for theft and $30 million for punitive damages. 126 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Case Law, (continued): Case Law, (continued) In U.S. v. Martin, 228 F.3d 1 (1 st Cir. 2000), the court rejected Mr. Martin’s defense that he had not actually received the trade secrets. Court noted here that even if true, that is irrelevant. 127 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Do you have any question?: Do you have any question? 128 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 129 Thanks Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com, You do not have the permission to view this presentation. In order to view it, please contact the author of the presentation.
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Premium member Presentation Transcript Trade Secret Law: Trade Secret Law Dr. Tabrez Ahmad Professor of Law www.technolexindia.com tabrezahmad7@gmail.com http://technolexindia.blogspot.com 1 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 2 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Agenda: What is Trade Secret? When Trade Secrets are preferred? How to guard Trade Secret? Trade secret as a property Threat to trade secret due to Internet Trade secret law Remedies Cases 3 Agenda Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Trade Secret: Trade Secret 4 The best kept secret till date Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: “Don’t miss a good chance to keep quiet.” Professor Jerome Shuman 5 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,TRADE SECRETS: TRADE SECRETS “ (T)rade secret protection is an important part of intellectual property, a form of property that is of growing importance to the competitiveness of American industry…The future of the nation depends in no small part on the efficiency of industry, and the efficiency of industry depends in no small part on the protection of intellectual property.” - Rockwell Graphics 6 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,What is Trade Secret: What is Trade Secret Some inventions, data, information cannot be protected by any of the available means of IPRs. Such information is held confidential as a trade secret. Trade secret can be an invention, idea, survey method, manufacturing process, experiment results, chemical formula, recipe, financial strategy, client database etc. In general, a trade secret can be defined as any commercially valuable information or compilation of information that is not generally known to others who can profit from its disclosure or use Art. 39 of TRIPS agreement “ Secret” includes what is not generally known in interested circles. Art. 39(3) has a special provision on pharmaceutical and agricultural test data submitted in order to gain approval; these must be protected against “unfair commercial use”. 7 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,TRIPS, Art. 1(2) : TRIPS, Art. 1(2) For the purposes of this Agreement, the term “intellectual property” refers to all categories of intellectual property that are the subject of Sections 1 through 7 of Part II. 8 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Part II Section 7: protection of undisclosed information : Part II Section 7: protection of undisclosed information Article 39 1. In the course of ensuring effective protection against unfair competition as provided in Article 10 bis of the Paris Convention (1967), Members shall protect undisclosed information in accordance with paragraph 2 and data submitted to governments or governmental agencies in accordance with paragraph 3. 2. Natural and legal persons shall have the possibility of preventing information lawfully within their control from being disclosed to, acquired by, or used by others without their consent in a manner contrary to honest commercial practices so long as such information: (a) is secret in the sense that it is not, as a body or in the precise configuration and assembly of its components, generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question; (b) has commercial value because it is secret; and (c) has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret. 9 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 3. Members, when requiring, as a condition of approving the marketing of pharmaceutical or of agricultural chemical products which utilize new chemical entities, the submission of undisclosed test or other data, the origination of which involves a considerable effort, shall protect such data against unfair commercial use. In addition, Members shall protect such data against disclosure, except where necessary to protect the public, or unless steps are taken to ensure that the data are protected against unfair commercial use. 10 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,When Trade Secrets are preferred? : When Trade Secrets are preferred? When invention is not patentable; Patent protection is limited to 20 years, when secret can be kept beyond that period; When cost of patent protection are prohibitive; When it is difficult to reverse engineer 11 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Origin of Trade Secret Protection: Origin of Trade Secret Protection The Roman Empire and misappropriation or theft of trade secrets The Roman courts recognized a cause of action for “ actio servi corrupti ,” which means an action for corrupting a slave Slave owners relied on the cause to protect them from theft of confidential business information by third parties who would intimidate, bribe, or “corrupt” their slaves into disclosing the information 12 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,From the Roman Empire to Western Capitalism: From the Roman Empire to Western Capitalism Presently, what entities require trade secret protection? Who is most likely to disclose a trade secret? Who is most likely to benefit from disclosure? 13 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Source of Law for Trade Secret Protection: Source of Law for Trade Secret Protection Common law tort of improper use or disclosure of trade secrets Restatement of Torts, §§ 757-758, which were adopted by most courts in most states is now supplanted by the Restatement (Third) of Unfair Competition, § 39 In 1979, a model act was promulgated and is called the Uniform Trade Secrets Act, which was amended in 1985 (civil remedies) Through implementation of GATT-TRIPs, Congress provided national protection for owners of trade secrets with the 1996 Economic Espionage Act, 15 U.S.C.A. §§ 1831-1839 (federal criminal remedies) 14 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Two Theories of Trade Secret Protection: Two Theories of Trade Secret Protection Utilitarian Theory Property Rights Protecting against theft, improper use or disclosure of proprietary information encourages investment in such information Deterrence Theory Commercial Morality or duty-based obligation Discourage wrongful or illicit commercial behavior that undermines trust How do each of these theories view the nature of intellectual property? 15 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Drafting and Evaluating a Trade Secret Claim: Drafting and Evaluating a Trade Secret Claim What is a trade secret? Is there a threshold requirement of creativity or innovation before protection becomes available? What elements are required to state a claim for misappropriation, theft, or improper use? What are the tests for each of these elements? 16 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Answers: Answers A trade secret means information, including a formula, patent, compilation, program, device, method, technique, or process, that: derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and is the subject of efforts that are reasonable under circumstances to maintain its secrecy No, a threshold is not required; the only requirement is secrecy of information that derives independent economic value from remaining secret 17 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Answers: Answers Generally, there are three elements (and their tests) to a trade secret claim: the subject matter involved must qualify for trade secret protection it must be the type of knowledge or information that trade secret law was meant to protect; and it must not be generally known to all a showing of misappropriation through deception or theft through breach of an explicit obligation through breach of an implied duty a showing of reasonable precautions to prevent disclosure diligence constructive knowledge standard 18 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,How to guard Trade Secret?: How to guard Trade Secret? Restricting number of people having access to secret information Signing confidentiality agreements with business partners and employees Using protective techniques like digital data security tools and restricting entry into area where trade secret is worked or held National legislations provide protection in form of injunction and damages if secret information is illegally acquired or used. 19 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 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. What are trade secrets? Do-it-yourself form of IP 20 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 1. What information qualifies as a TS? 2. What makes something a TS? 3. When can you get court relief? 4. How are TS lost or stolen? 5. How to protect your TS? 6. May TS be sold? 7. How is TS protection enforced? 8. If you have the choice: TS or patent? 9. What to bear in mind if you sign CA? 21 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: WHAT KIND OF INFORMATION QUALIFIES AS A TRADE SECRET ? 22 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: TRADE SECRET Provides competitive advantage Potential to make money Kept confidential 23 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,TRADE SECRET: TRADE SECRET Financial information Technical & scientific information Commercial information Negative information 24 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,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 Typical examples in the software industry 25 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 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 26 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: WHAT MAKES SOMETHING A TRADE SECRET ? When do you have legal protection? 27 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 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 28 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: “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 1. Secret 29 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 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 1. Secret 30 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 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 2. Commercial value 31 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 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 3. Reasonable steps 32 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: Caution: Who owns the TS? TS (e.g. new technology or software) developed by employee … TS developed by external contractor To avoid disputes : WRITTEN AGREEMENT + ASSIGN in advance all trade secrets developed during employment or commission 33 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: WHEN CAN YOU GET COURT RELIEF ? 34 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: COURT RELIEF if: TS + “THEFT” Courts will only grant relief if someone has improperly acquired, disclosed or used the information Only theft if wrongful ! 35 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 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 36 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 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 ! 37 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 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 38 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 2. Reverse engineering Solution: contractually forbid reverse engineering (in software license agreement) Technological protection measures BUT! Legality in question Inconsistent with copyright or antitrust laws? 39 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: HOW ARE TRADE SECRETS LOST OR STOLEN ? 40 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: A Growing Problem. Why Does It Occur? 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 41 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: Reverse engineering, independent discovery Improper licensing Burglaries by professional criminals targeting specific technology Network attacks (hacking) Laptop computer theft Inducing employees to reveal TS Examples 42 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: departing or disgruntled employees intentional (malicious) inevitable (knowledge acquired) by ignorance 80% of trade secret loss < employees, contractors, trusted insiders! 43 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Case Coca-Cola Trade Secret Trial: Case Coca-Cola Trade Secret Trial 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. AP Business, January 15, 2006 44 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Case Company accused of misappropriating TS from an inventor: 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. 45 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Case High-Tech Company vs. Employee: Case High-Tech Company vs. Employee Technical manager (employee) of high-tech company X resigned Went to work for another high-tech company Y Departing employee used and disclosed TS Company X filed suit against departing employee Court order: Departing employee prevented from performing work for his new employer (Y) in connection with any product that competes with X’s products. 46 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: HOW TO PROTECT YOUR TRADE SECRETS? 47 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 1. Identify trade secrets Accurate record keeping is important. 48 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 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? 49 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 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 50 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 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 51 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 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 52 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 4. Mark documents Help employees recognize TS p revents inadvertent disclosure Uniform system of marking documents paper based electronic (e.g. ‘confidential’ button on standard email screen) 53 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 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 54 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 6. Restrict public access to facilities Log and visitor’s pass Accompany visitor Sometimes NDA/CA Visible to anyone walking through a company’s premises type of machinery, layout, physical handling of work in progress, etc Overheard conversations Documents left in plain view Unattended waste baskets 55 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 7. Maintain computer secrecy 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 56 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 8. Measures for employees 1. New employees Brief on protection expectations early Obligations towards former employer! Assign all rights to inventions developed in the course of employment NDA/CA Non-compete provision Reqts Limits 57 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 2. Current employees Prevent inadvertent disclosure (ignorance) Train and educate NDA for particular task 3. Departing employees further limit access to data exit interview letter to new employer treat fairly & compensate reasonably for patent work 58 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 9. Measures for third parties Sharing for exploitation Consultants, financial advisors, computer programmers, website host, designers, subcontractors, joint ventures, etc. Confidentiality agreement, NDA Limit access on need-to-know basis 59 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: MAY TRADE SECRETS BE SOLD OR LICENSED? 60 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: SALE Most TS sales occur as part of the sale of the business LICENSE 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 61 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,TS Licensing: TS Licensing Definition of the secret subject matter 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 62 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,TS Licensing: TS Licensing Duration of secrecy obligations Royalties Sanctions Should not be subject to alternative dispute resolution 63 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,TS Licensing: TS Licensing Can licensee be obligated to continue paying TS royalties even if the information has entered the public domain ? In case of license for patent + related TS: Can licensee be obligated to continue paying TS royalties when patent expires or is invalidated ? 64 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,TS Licensing: TS Licensing Mass-marketed software : Possible to negotiate NDA with every end-user? Software Escrow : A viable alternative to source code license? 65 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: HOW IS TRADE SECRET PROTECTION ENFORCED? What can you do if someone steals or improperly discloses your TS? 66 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 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 TS protection may be based on... 67 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 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 68 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 1. 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 69 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: To establish violation, the owner must be able to show : infringement provides competitive advantage reasonable steps to maintain secret information obtained, used or disclosed in violation of the honest commercial practices ( misuse ) 70 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: PROTECTING INVENTIONS: TRADE SECRETS OR PATENTS? 71 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,What is difference between TS and Patent?: What is difference between TS and Patent? 72 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 1. ANY innovative idea should be kept as a secret in the beginning to preserve option of patenting (or industrial design) at later stage Things to bear in mind 75 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,INNOVATIVE IDEA: INNOVATIVE IDEA Secret ! Initially Later stage Not patentable patentable patent TS Strategic business decision TS Part of the idea TS © ID 76 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 2. Choice between patent or TS must be made both from legal and business perspectives (if patentable) Things to bear in mind 77 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: Patentable idea Public disclosure necessary? Technology changing rapidly? Easy to RI, independ. discover? TS P Def.publ Revenue potential > IP costs? New area of technology? Licensing opportunity? N N N N N N Y Y Y Y Y © Mark Sokoloff 78 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 3. If you apply for a patent, only give up what is necessary The decision to apply for a patent does not necessarily require giving up all of one’s TS! However, patent application must contain : enough to enable skilled person to practice the invention the best mode known to the applicant for practicing the invention (Software P in USA: required to disclose source code?) Things to bear in mind 79 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: INNOVATIVE IDEA inventions on A, B, C A C TS B TS P A B C Applying for patent on C may not require giving up TS on A & B 80 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 4. If you apply for a patent, your TS may still be protected for a while In most countries: only publication after 18m . You may withdraw application any time < publication In USA: possible to request non-publication of the patent application until the patent is issued Things to bear in mind 81 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 5. Once patent published TS lost in ALL COUNTRIES patent documents “easily accessible” to public if patent application published and later rejected you lose both patent and TS rights some technology (e.g. software) may be patentable in USA but not in Europe or other countries… Things to bear in mind 82 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: WHAT TO BEAR IN MIND IF YOU SIGN A CONFIDENTIALITY AGREEMENT FOR A CLIENT ? 83 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: “Developer may be given access to Client’s confidential information while working for Client. Developer agrees not to use or disclose such information except as directed by Client.” 84 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: Software or web developers who work for clients asking to sign CA Insist on CA that is : - reasonable in scope - defines precisely what information you must keep confidential - limited in time (max. 5 years) - exceptions 85 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: TRADE SECRETS FOR SOFTWARE COMPANIES CONCLUSIONS 86 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: TS protection for financial, commercial & (secret) technical information: develop effective internal TS program to maintain trade secret status TS protection for Software: restrict access impose obligation of confidentiality to anyone who has access 87 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: Certain aspects of software cannot be maintained as a trade secret information or technology that must be disclosed to the public in order to market the product information or technology which is part of a product sold to the public and can be reverse-engineered mass-marketed software where competition is so intense, that very likely to be independently developed by others within short time if great deal of personnel movement between competitors if customers require access to software for archive, back-up, updating, maintenance, debugging, etc. 88 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: Alternative or additional protection for software : make reverse engineering difficult (compiled code) technological protection measures copyright protection software patents Be careful about signing confidentiality agreements 89 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: Remember... TS: No registration, but 3 requirements for legal protection No need for absolute secrecy, but ‘ reasonable measures’ Developing and maintaining TS program < good business practice to prevent < legal requirement to enforce TS protection 90 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: TS: Only legal protection against dishonest acquisition/disclosure/use You can sue someone who violated your TS, but that often doesn’t save the TS Consider alternative protection Remember... 91 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: The choice between TS and patent protection for an invention is irrevocable Therefore: carefully consider all relevant advantages and disadvantages from each choice both from legal and business viewpoint Remember... 92 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Remember...: Patent and TS are often complementary to each other: Patent applicants generally keep inventions secret until the patent application is published by the patent office. A lot of valuable know-how on how to exploit a patented invention successfully is often kept as a trade secret. Some businesses disclose their trade secret to ensure that no one else is able to patent it ( defensive publication ). Remember... 93 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Trade Secret Law: Trade Secret Law Standards of Common Law Protection Employment Relation and Contract Considerations Instead, common law exists to protect trade secrets as well as the Uniform Trade Secrets Act which has been adopted by many states of USA. 94 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,TRADE SECRETS State Law Protection Uniform Trade Secrets Act: TRADE SECRETS State Law Protection Uniform Trade Secrets Act Unlike patents, copyrights and trademarks, trade secrets are protected under state law Uniform Trade Secrets Act - Model Act Amended in 1985 41 states have enacted statutes modeled after UTSA 2 states (AL and MA) have separate state statutes protecting trade secrets 7 states protect trade secrets under the common law 95 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Trade Secrets: Trade Secrets Half Tort Law & Half Property Law Tort Law : One can be held liable for breaching a duty not to disclose the trade secret Property Law : One has valuable information one wants to protect 96 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Tort Side of Trade Secrets: Tort Side of Trade Secrets A duty must exist 97 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Property Side of Trade Secrets: Property Side of Trade Secrets A trade secret must be a secret A trade secret must have value 98 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,How do we know if it is a secret?: How do we know if it is a secret? The court looks into: The measures the company took to keep the information secret The cost to the company of keeping the information secret The number of people who know the secret The subjective belief that the trade secret is in fact a secret 99 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,How do we know if the secret has value?: How do we know if the secret has value? The court may consider: Expert witness testimony Whether the information is common knowledge 100 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,“Secrecy” in a Trade Secret: “Secrecy” in a Trade Secret Secrecy must be “substantially secret,” it does not have to be absolute. Metallurgic . One must take “reasonable means” to protect one’s secret. Dupont & Rockwell. 101 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Liability for Using or Disclosing Another’s Trade Secret: Liability for Using or Disclosing Another’s Trade Secret One is liable for using or disclosing another’s trade secret if: One uses improper means to discover the trade secret The disclosure or use constitutes a breach of confidential relationship One is not liable if: One discovers the trade secret by reverse engineering One discovers the trade secret independently 102 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Basics of Uniform Trade Secrets Act: Basics of Uniform Trade Secrets Act In those states which have enacted UTSA statutes, the statutes displace conflicting tort, restitutionary, and other law of the State providing civil remedies for misappropriation of trade secrets HOWEVER: The statutes do not affect: Contractual remedies, whether or not based upon misappropriation of a trade secret Other civil remedies that are not based upon misappropriation of a trade secret Criminal remedies, whether or not based upon misappropriation of a trade secret 103 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Basics of the Uniform Trade Secrets Act: Basics of the Uniform Trade Secrets Act “Trade secret” defined as: information, including a formula, pattern, compilation, program, device, method, technique, or process, that: derives independent economic value from not being generally known or readily ascertainable by proper means by other persons and; is the subject of efforts that are reasonable under the circumstances to maintain its secrecy 104 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Basics of Uniform Trade Secrets Act: Basics of Uniform Trade Secrets Act Provides cause of action for “misappropriation” of trade secrets 3 year statute of limitations - action must be brought within 3 years after misappropriation is discovered or should have been discovered "Misappropriation” defined as: (i) acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means or; 105 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,(continued): (continued) (ii) disclosure or use of a trade secret of another without express or implied consent by a person who: Improperly acquired trade secret At the time of disclosure or use, knew or had reason to know that his knowledge of the trade secret was: Derived from improper means Acquired under a duty to maintain secrecy Acquired by accident or mistake 106 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Basics of Uniform Trade Secrets Act: Basics of Uniform Trade Secrets Act In an action under the act, a court is authorized to preserve the secrecy of an alleged trade secret by: granting protective orders in connection with discovery proceedings holding in-camera hearings sealing the records of the action and ordering any person involved in the litigation not to disclose an alleged trade secret without prior court approval. 107 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,TRADE SECRETS/VALUES Restatement of Unfair Competition-Relevant Provisions: TRADE SECRETS/VALUES Restatement of Unfair Competition-Relevant Provisions Restatement of the Law, Third, Unfair Competition, published by The American Law Institute Commentary on trade secrets and rights of publicity The rules are applicable to both statutory and common law trade secret cases The rules closely mirror the Uniform Trade Secrets Act 108 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,TRADE SECRETS/VALUES/ Unfair Competition: TRADE SECRETS/VALUES / Unfair Competition “Trade secret” defined as: Any information that can be used in the operation of a business or other enterprise and that is sufficiently valuable and secret to afford an actual or potential economic advantage over others Liability for appropriation occurs when: Trade secret is acquired by improper means 109 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,TRADE SECRETS/VALUES/ Unfair Competition: TRADE SECRETS/VALUES / Unfair Competition At the time of disclosure or use, the actor knew or had reason to know that his knowledge of the trade secret was: Derived from improper means Acquired under a duty of confidence Acquired by accident or mistake Duty of confidence arises from both express and implied duty and includes employees 110 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,TRADE SECRETS/VALUES/ Unfair Competition: TRADE SECRETS/VALUES / Unfair Competition REMEDIES Injunctive relief may be awarded to prevent a continuing or threatened appropriation of another's trade secret under appropriate circumstances Monetary relief may be awarded in an amount equal to the pecuniary loss to the other caused by the appropriation or for the actor's own pecuniary gain resulting from the appropriation, whichever is greater 111 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,TRADE SECRETS/VALUES/ Unfair Competition: TRADE SECRETS/VALUES / Unfair Competition Right of Publicity Protects against misappropriation of the commercial value of a person’s identity Provides liability for misuse of person’s name, likeness, or other indicia of identity for purposes of trade Use for purposes of trade includes: use for advertising, placement on merchandise, or use in connection with services rendered. Does not include: news reporting, commentary, entertainment or use in advertising that is incidental to such uses. 112 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Part B Case Law: Part B Case Law 113 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,The Case of: Kewanee Oil v. Bicron Corporation 416 U.S. 470 : The Case of: Kewanee Oil v. Bicron Corporation 416 U.S. 470 Facts : Kewanee Oil had developed processes and techniques related to the production of synthetic crystals. Former employees of Kewanee Oil appropriated 20 trade secrets to a competitor, Bicron Corporation. Ohio law enjoined the employees from disclosure or use of the trade secrets until they had been released to the public. The process and techniques were appropriate subject matter for patent protection, but was not longer available for protection because it had been in commercial use for a year. Issue: Does federal patent law preempt state trade secret protection? 114 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Kewanee, continued: Kewanee, continued Holding : The Court held that the trade secret protection would not be preempted by the federal patent law because: Trade secret protection provided more incentive for businesses to create and benefit from this such things a individualized plans of operation and business methods By definition a trade secret is a secret and not in the public domain. Thus, Congress’ object to keep information in the public domain would not be disrupted. The availability of an alternative plan would not deter individuals from applying for patent protection because trade secret is a weaker form of protection. In short, the Court found that trade secret law did not create and obstacle to the objectives of patent law. 115 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,The Case of: Bryce Associates Inc. v. Gladstone 319 N.W.2d 907: The Case of: Bryce Associates Inc. v. Gladstone 319 N.W.2d 907 Facts : Bryce Associates contends that Harley-Davidson took and used for their own benefit Bryce’s trade secret contained in a methodology for design of management information systems-PRIDE. Bryce held an information session and provided manuals including a copyright notice that described the capabilities and advantages of PRIDE to the Harley-Davidson business. Issue : Does Bryce’s voluntary use of the federal copyright notice on PRIDE’S manuals and forms prevents the state of Wisconsin from applying its trade secret law to bar use by other of the information contain in the work? 116 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Bryce, continued: Bryce, continued Holding : The Court explained “trade secret law prohibits unauthorized disclosure or use of protected ideas while copyright prohibits unauthorized copying by anyone of the form of expression in which the ideas are fixed by the author.” The Court concluded that there is clear demarcation between trade secret protection and copyright protection and thus no preemption. 117 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Conclusion of the Law:: Conclusion of the Law: Federal does not prevail over state law as long as the state law does not stand as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress. 118 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: * Economic Espionage Act of 1996 * Uniform Computer Information Transactions Act (UCITA) 119 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,What is UCITA?: What is UCITA? Uniform Computer Information Transactions Act Proposed state contract law designed to standardize the law of software and all forms of digital info A “computer information transaction” is one in which computer info is sold, leased or licensed. Enables shrink-wrap/click-on licenses 120 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Economic Espionage Act of 1996: Economic Espionage Act of 1996 18 U.S.C.A. secs 1831-1839 (West Supp. 1999), signed October 11, 1996 Protects trade secrets Only if owner has taken steps to ensure that the info remains secret Why Care? Use it offensively to protect your secrets Bring your company into compliance with the act and avoid becoming a defendant 121 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,EEA, (continued): EEA, (continued) EEA, sec.1831, makes it illegal for a foreign entity to knowingly steal, copy, receive secrets Punishment is up to 15 years in prison and a substantial fine Individuals: $500,000. Organizations: $10 million! EEA, sec.1832, makes it illegal for anyone to convert a TS “that is related to or included in a product…in interstate or foreign commerce…” Individuals: $500,000. Organizations: $5 million! Forfeit of all proceeds derived from such a violation (sec. 1834). 122 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,How to Protect Your Secrets : How to Protect Your Secrets Be aware of company insiders, former employees, and competitors milling your hallways Keep your employees informed of the value of discretion Have them sign and agree to a Policy Statement Create key management teams who oversee the compliance with security Train employees via orientation Maintain an auditing and reporting system Limit Discretion of key secrets Enforce and Discipline Violations 123 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,How to Avoid becoming a Defendant: How to Avoid becoming a Defendant Avoid patterns of hiring away your competitor’s employees! Inform new employees that your company respects the proprietary info of its competitors, and will not seek to exploit that info Thus far, cases have involved the most EGREGIOUS attempts to steal. 124 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Enforcement Examples: Enforcement Examples Thus far has been used in the most egregious cases First published opinion directly addressing Congress’ intent of the EEA: U.S. v. Hsu , 155 F.3d 189 (3 rd Cir. 1998) Mr. Hsu, an employee of a paper company, met with an undercover FBI agent in LA. Mr. Hsu allegedly asked the agent to find a Bristol-Myers Squibb employee willing to sell secrets related to their cancer drug, Taxol. A meeting was arranged, where Mr. Hsu met with undercover FBI agents, where he was arrested. At trial, Mr. Hsu wanted to see whether the info was in fact a trade secret. The court rejected his argument, noting that the EEA makes it illegal to attempt or conspire to steal TS. In this respect, the actual info he was attempting to buy was irrelevant. 125 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Other Case Law : Other Case Law U.S. v. Yang 1999 U.S. Dist. Lexis 7130 (N.D. Ohio 1999) President, Mr. Yang, of Four Pillars Company attempted to buy the trade secrets related to new adhesive technology developed by Avery-Dennison . FBI used undercover operation using an A-D assistant who had been selling the company’s TS for 8 years. The assistant agreed to cooperate, and the FBI caught Mr. Yang’s attempt on videotape. Court noted that the loss of TS status during the investigation does not preclude an EEA violation. Mr. Yang was sentenced to 6 months of home confinement, 18 months probation, and $250,000. Avery-Dennison filed civil suit, receiving judgment of $10 million for theft and $30 million for punitive damages. 126 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Case Law, (continued): Case Law, (continued) In U.S. v. Martin, 228 F.3d 1 (1 st Cir. 2000), the court rejected Mr. Martin’s defense that he had not actually received the trade secrets. Court noted here that even if true, that is irrelevant. 127 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,Do you have any question?: Do you have any question? 128 Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,PowerPoint Presentation: 129 Thanks Dr. Tabrez Ahmad, Blog: http://iplexindia.blogspot.com,