Protecting Trade Secrets in the Current Economy
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Transcript of Protecting Trade Secrets in the Current Economy
PROTECTING TRADE SECRETS IN THE CURRENT ECONOMY
BY:KIRBY DRAKE
Trade Secrets
• Protection extends to confidential information that gives a company a competitive edge
• No formal registration requirement• Balancing test
Trade Secrets
• Disclosure may destroy protection• Trade secrets usually endure as long as
the information is kept secret
Trade Secrets
Commercial Life of Product
Reverse Engineering
Independent Development
Tipping Off Competitors
Type of Subject Matter/Industry
Ease of Keeping Secret
Time Needed to Obtain Patent
Economic Effects
Trade Secrets Considerations
• Non-exclusive rights• Independent development not
actionable• Must breach non-disclosure obligation
or obtain trade secret via improper means to be actionable
Trade Secrets Considerations
• Commercial life of product• Economic considerations
• Patents may give a signal that IP was created – good for future investments, competitive positioning
• Less upfront investment to maintain as trade secret but loss may be financially devastating
The Overlap – Patents and Trade Secrets
• Innovations protectable with patents or trade secrets
• Cannot usually protect same innovation by both patents and trade secrets
Patent?
Trade Secret?
Both?
Neither?
What Is Protectable as a Trade Secret?
• Manufacturing processes• Ideas• Manufacturing drawings• Software• Chemical formulae and processes
Examples of Possible Trade Secrets
Customer Lists Know-How
Pricing Information Negative Know-How
Product Technical Specs
Computer Hardware
Marketing Plans Computer Software
Business Methods Chemical Formulae
Effects of Trade Secret Disclosure
• Claim for Trade Secret Misappropriation• Preliminary Injunction• Reassignment of Patent• Destruction of Trade Secret Protection
Remedies
• Injunctive relief• Monetary damages (royalty)• Attorneys’ fees• Punitive damages
Remedies
Damages for Trade Secret Misappropriation
• Remedies are state-specific (whether in federal or state court), though most have some version of the UTSA and include:
1. Actual loss by plaintiff• Lost profits• Out-of-pocket expenses• Loss-in-value of business or trade
secrets• Other losses (consequential)
Damages for Trade Secret Misappropriation
2.Alternatively, or in addition, to actual loss • Unjust enrichment by the defendant
• Defendant’s profits• Market value of misappropriated trade secrets• Cost savings or value of “head start” benefit
gained by defendant
3.Alternatively…• Reasonable royalty for use of trade secrets• Use of patent damages construct
Change in Employment – The English Muffin Injunction
• Chris Botticella (former employee of Bimbo Bakeries) prevented from working for competitor (Hostess Brands)
• Conduct after acceptance of job offer indicated likelihood of trade secret misuse
DuPont, Competitor, and Employees
• DuPont lawsuit against former employee• DuPont lawsuit against Invista• Invista lawsuit against DuPont partner• DuPont lawsuit against Kolon Industries
Coca-Cola and Pepsi
• Coca-Cola sued former employee for trade secret misappropriation (formula for Coke)
• Former employee had offered knowledge of formula to Pepsi but Pepsi did not use
The New Economy – Trade Secrets
• Opting for trade secret protection in lieu of other forms of intellectual property protection
• Rise of trade secret audits• Increased enforcement of non-competes
and NDAs• Modifications to damages model in
litigation• Other considerations?