Secrets and Lies: The Role of Trade Secrets and Espionage in IP Affairs AIPLA 2016 1.

Click here to load reader

download Secrets and Lies: The Role of Trade Secrets and Espionage in IP Affairs  AIPLA 2016 1.

of 52

description

Blair Jacobs How Enforcing a Trade Secret is Different From Enforcing a Patent? © AIPLA

Transcript of Secrets and Lies: The Role of Trade Secrets and Espionage in IP Affairs AIPLA 2016 1.

Secrets and Lies: The Role of Trade Secrets and Espionage in IP Affairs AIPLA Speakers Moderator John Lyon Thomas Horstemeyer, LLP Speaker Blair Jacobs Paul Hastings, LLP Speaker Elizabeth Rowe Univ. of Florida Speaker Marcela Trigo Trench Rossi AIPLA Blair Jacobs How Enforcing a Trade Secret is Different From Enforcing a Patent? AIPLA Overview AIPLA What We will discuss today: Identify information that is protectable Evaluate whether and how much to protect it. Weigh benefits of trade secret versus patent protection. Protect your rights and guard against loss. Enforce your rights. What is a Trade Secret? Any information that: Is maintained in secret Is not generally known by competitors Provides a competitive advantage Examples: Customer lists, manufacturing processes, software, marketing and pricing AIPLA What is a Covered By a Patent? Types: Process, machine, article of manufacture, composition of matter, business method Standard: new, useful, nonobvious Limitations: Cannot patent the invention if it has been offered for sale, publicly disclosed or commercially exploited for more than one year before filing AIPLA Differences Between Trade Secrets and Patents Patent Lasts 20 years Standard to obtain in high (nonobvious) Must apply and disclose to protect Rights exclusive AIPLA Trade Secret Can last forever Quality of the info need not be high; lower standard Must take steps to protect (limit access) Rights not exclusive; can be independently developed or reverse engineered Differences In Obtaining Trade Secrets and Patents Patent Cost to obtain high Time to get is 2-3 years Only the first inventor can get a patent AIPLA Trade Secret Cost to obtain is nothing Time to obtain is fairly instantaneous More than one company can own the same trade secret, and trade secrets can be non-patentable Key factors to evaluate Does it give you a competitive edge? If others had it, would it damage you? Can it be reverse engineeered? Can you keep it a secret and, if so, for how long? Is it key to your business? Is it too late to patent it? AIPLA Factors that Might Suggest Patent Protection Patents have deterrent effect on competitors Protects against reverse engineering Protects against independent development Allows company to market and advertise without complete security Useful for cross licensing, defensive measures in patent litigation, VC funding for start-ups, etc. AIPLA Factors that Might Suggest Trade Secret Protection Expense of obtaining patents Patents disclose to public for limited time If injunctive relief might be preferred Product launch may need to be delayed for patent process Patentability concerns because of possible abstract idea The idea is something that you want to protect more than 20 years AIPLA Can a Party Have Both Trade Secret and Patent Protection For the Same Idea? Christianson v. Colt Industries Operation Corp., 822 F. 2d 1544 (Fed. Cir. 1987). Yes, nine patents issued relating to M-16 rifle and trade secret protection for process to mass produce the rifles. Court stated that certain inventive features could be afforded patent protection while others subject to trade secret principles. Patents are not production documents, and nothing in the patent law requires that a patentee must disclose data on how to mass produce the invented product, in patents obtained on either individual parts of the product or on the entire product. Id. at 1562 AIPLA How Are Potential Damages Different When Enforcing Trade Secrets Versus Patents Federal courts have restricted damages in patent cases over last 10 years. Apportionment, complexity of proving lost profits, and numerous cases criticizing speculative testimony of experts has had chilling effect Limited recoveries in patents lost profits or reasonable royalty, and reasonable royalty is floor on damages Trade secrets allow plaintiff to pursue damages based on unjust enrichment. Leads to much broader scope of potential damages Trade secrets also afford enhancement of damages for willful and malicious misappropriation Finally, an injunction is typical if trade secret misappropriation is proven, while injunctions are challenging in patent cases as a result of Ebay and its progeny AIPLA Trade Secret Checklist Can you keep it a secret? How many people need to know the secret to make it function? Ability to reverse engineer What is employee turnover rate in company? How many partners do you rely upon for manufacturing? Market life of concept Is invention embedded in product OR is it part of internal manufacturing process? Is product regularly observed in public settings? AIPLA Enforcement Strategies Sales and marketing will often be the first to know if IP is being used by someone else Pursue infringers diligently Track competitors data sheet and patent filings to look for adoption of your ideas Establish comprehensive out-processing process for departing employees Pursue ex-employees or consultants who take your trade secrets Consider notifying FBI under Economic Espionage Act if circumstances are appropriate AIPLA The Economic Espionage Act Can Be Your Friend FBI and US Attorney have broad range of subpoena powers A plea deal worked out as part of an EEA investigation can lead to substantial evidence in subsequent civil suit EEA can punish attempt and conspiracy, so broader scope of wrongs is implicated A company that has civil action can ride on coat tails of government investigation to create significant trial themes adverse to a company that has wrongly obtained trade secrets AIPLA Rise of Private Right of Action under EEA 1. No private cause of action historically 2. July 29, 2014 HR 5233, approved by House Judiciary Committee, proposes civil action under EEA 3. Bill proposes 5 year statute of limitations and ex parte civil seizure 4. Senate Bill (Defend Trade Secrets Act of 2014) also would create uniform private right of action for trade secret theft. Introduced on April 29, 2014 Also provides for ex parte seizure and 5 year statute of limitations AIPLA Elizabeth Rowe Role of the EEA in Combatting Misappropriation The Economic Espionage Act signed in 1996 AIPLA Domestic Misappropriation AIPLA Most prosecutions involve employees, former employees, and other company insiders AIPLA Attempts and Conspiracies + Prosecution possible without actual theft of trade secrets + Most cases charged as an attempt to or conspiracy to steal AIPLA Third parties are also culprits... AIPLA Foreign Misappropriation EEAs reach extends outside the United States if a) the defendant is a US citizen or corporation or b) any act in furtherance of the offense committed within the US AIPLA Foreign Governments Strategic cyberattacks growing (geopolitical assaults?) AIPLA China [the Chinese] are stealing everything that isnt bolted down, and its getting exponentially worse. The Chinese are the worlds most active and persistent perpetrators of economic espionage. The Chinese Governments response: - groundless accusations - baseless, unwarranted, and irresponsible AIPLA Limitations of the EEA 1. No private cause of action 2. Reporting problems 3. Technology 1. Intangible information 2. Architecture of the Internet 3. Increased likelihood of foreign offenders 4. Small companies left out 1. Underrepresented in prosecutions 2. Most vulnerable to misappropriation and attacks AIPLA From 2008 2013, companies classified as large were represented as victims in over 90% of trade secret prosecutions. Global perspective: differences in enforcing trade secrets in different regions of the world Marcela Trigo AIPLA - La Quinta January 29th AIPLA The Law Protection Grounds AIPLA 2016 Trade Secret Definition WTO TRIPs definition: not generally known among or readily accessible to persons within the circles that normally deal with the kind of information in question; has commercial value has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret. AIPLA 2016 Trade Secret Definition Brazilian Law definition (in the negative): confidential knowledge, information or data usable in industry, commerce or service rendering expect those that are of public knowledge or obvious to a person skilled in the art. AIPLA 2016 IP Law: three different cases The violation of a trade secret is considered an act of unfair competition: civil and criminal offenses. Disclosure, exploitation or use of confidential information, without the authorization of its rightful owner (provided that the information was not of public knowledge and was not obvious to an expert on the subject) to which the infringer gained access by means of: 1. a contractual or employment relationship (even after the termination of the contract); or 2. through unlawful means; or 3. access to test results or other undisclosed data submitted to government entities as a condition for approval of commercialization of products (data package exclusivity ~ WTO TRIPs Section 39.3). AIPLA 2016 Enforcement in Brazil Remedies: search and seizure (preparatory or incidental); anticipated production of evidence (exhibition of documents, interrogation of a party, witnesses hearing and expert examinations); preliminary (even ex parte) and permanent injunctions Damages (material and moral); Criminal sanctions (imprisonment and fine). Burden of proof: As a general rule, the burden of proof generally falls on the plaintiff. The defendant will only carry such burden if and when argues there are facts that would hinder, modify or terminate the plaintiffs right (which will need to be proven). AIPLA 2016 Enforcement in Brazil Requirements for a preliminary injunction: i. likelihood of success on merit; ii. the need for an urgent decision from courts to avoid irreparable damages; and, iii. balance of hardships (courts shall assess if the damage to be suffered by the defendant due to the injunction is not greater than the benefits it will provide to plaintiff). Court may request plaintiff to post a bond or a fiduciary guarantee, in case it is deemed necessary. If injunction is reversed, plaintiff may be liable for damages it may have caused. AIPLA 2016 Enforcement in Brazil AIPLA 2016 Labor Law The act of disclosing trade secrets and confidential information from the employer, when acquired in service is considered a serious fault and authorizes the employer to terminate the employment contract; The employee's duty of confidence should remain in effect as long as the information remains in secret, has commercial value and has been subject to reasonable protection measures (undefined term). Non-compete agreements are possible, but there are court decisions limiting term (up to 2 or 5 years, depending on the context). In the absence of a non-compete agreement, the employee is not prevented from using such knowledge, provided that the information is not secret (confidential / trade secret). AIPLA 2016 Current Protection and Enforcement in Brazil Material damages: (i) actual damages stemming from the violation of trade secret rights; and (ii) loss of profit or loss of commercial opportunities. The compensation for actual damages, shall be determined by the benefits that the injured party would have gained had the infringement not occurred. The compensation for loss of profits may be calculated by the most favorable and adequate of the following standards (which the plaintiff may choose or leave the decision up to the judge): I. The benefits that the injured party would have gained had the infringement not occurred; II. The benefits that were gained by the infringer of the right; or III. The licensing fees that the infringer would have paid the owner of the trade secret for the lawful use of the trade secret. Moral damages (e.g. damage to the companys reputation with clients, partners, franchisees, investors, furnishers and/or damages to its general credit). AIPLA 2016 Technology Transfer Agreements: the BPTOs practice Registration before the BPTO is a condition for remittance of royalties abroad, tax deductibility of payments, and validity against third parties. In addition, for payments to be actually remitted to Assignor, registration with the Brazilian Central Bank is also required. The BPTO condutes a thorough and restrictive analysis of such agreements, which must detail the reasons why the technology/ knowledge is valuable and the benefits that will derive from it. AIPLA 2016 Technology Transfer Agreements: the BPTOs practice BPTO does not recognize the concept of licensing in such agreements. Said agreements are considered a permanent transfer of rights. Limitations concerning the assignees rights to use the technology will only be allowed when the agreement is terminated by its own fault. Otherwise, the recepient will be free to use the technology as it pleases, without violation any confidentiality clauses previously foreseen (territorial limitations allowed); Limited term (5 years, renewable for an addition 5-year term, upon detailed justification concerning the need to renew such agreement); Limited term of confidentiality clause (maximum of 20 years, which is the duration of a patent protection); All imported equipment (and parts thereof) shall be excluded from the calculation of the royalties. Depending on the type of business activity and relation between parties, BPTO provides a limitation for remittance of royalties that may vary from 1% to 5% of the net sales price. Main restrictions: AIPLA 2016 Best practices: Effective TS Program includes: NDAs (with employees and third party service provides) Restrictions of access (IT and physical) Track and mark documents confidential Training and education Surveillance and monitorment Attention when dealing with universities and public entities Attention with BPTOs practice Major importance of an effective TS program for enforcement purposes. AIPLA 2016 Current Situation EU Commission Study on Trade Secrets April 2013 (MARKT/2011/128/D) authored by Baker & McKenzie increasing threat to business owners no harmonized law on trade secret protection different definitions and statutory classifications among Member States obstruct cross-border protection different scope of remedies AIPLA 2016 Current Situation Excerpt from: Baker & McKenzie, Study on Trade Secrets for the European Commission, 2013, p 23. AIPLA 2016 Current Situation Excerpt from: Baker & McKenzie, Study on Trade Secrets for the European Commission, 2013, p 30 f. AIPLA 2016 Case for Harmonization There are important differences in the Member States legislation as regards the protection of trade secrets... The differences in the legal protection of trade secrets imply that trade secrets do not enjoy an equivalent level of protection throughout the Union, thus weakening the overall deterrent effect of the rules. The internal market is affected in so far as such differences lower businesses incentives to undertake innovative-related cross-border economic activity,. - Council of the EU - Proposal (9870/14, 19 May 2014) AIPLA 2016 Proposed Draft Directive Proposed Draft Directive on the Protection of Trade Secrets still work in progress introduced by Commission in November 2013 opinion of Council of the EU in May 2014 voted on in the European Parliament in June 2015 next steps: talks on first-reading agreement in November 2015 entry into force expected in 2016 AIPLA 2016 Proposed Draft Directive Main Goals increase confidence and amount of investment in innovation encourage cross border collaboration in R&D projects discourage theft and misuse of trade secrets Key Provisions uniform definition following Art. 39 TRIPS civil law remedies harmonized procedural rules harmonized AIPLA 2016 Proposed Draft Directive Art. 2: Uniform definition secrecy of information commercial value reasonable steps to protect secrecy significant change in many national jurisdictions requires substantial efforts in areas such as IT and physical security NDAs training, documentation AIPLA 2016 Proposed Draft Directive Art. 4: Exceptions independent discovery legitimate use of freedom of expression or information reverse engineering legitimate whistle-blowing AIPLA 2016 Proposed Draft Directive Art : Remedies injunctive relief recall of infringing goods destruction of infringing goods and documents damages AIPLA 2016 Proposed Draft Directive Art. 8: Preservation of trade secrets in legal proceedings Common dilemma: claimant needs to disclose trade secrets in order to substantiate infringement Solution is still under discussion Proposal 1: total exclusion of defendant, only its legal counsel has access Proposal 2: only one representative of defendant and legal counsel have access (more likely to pass) AIPLA 2016 Summary and Outlook AIPLA 2016 Thank you! Marcela Trigo Questions and Answers?