TRADE SECRETS

Outline of Presentation

What are trade secretsKeeping them secretTrade secrets or patentsLegal protection for trade secrets and

remedies for their misappropriation

What are Trade Secrets

Trade secrets are confidential information that has commercial value by virtue of being kept secret and reasonable steps have been taken to keep it secret.

Trade secret audit

Conducting an TS audit is to determine whether or not you have any trade secret assets; then to identify them; and final to take measures to make sure they retain their status as protectable trade secrets

Should be done periodicallyTeam – trusted people who know the

company

Why should you conduct a TS audit

Identify assets that would otherwise be unknown

By identifying and protecting prevent their loss

A court is more likely to give TS status to information identified internally as TS

Establish clarity

Potential trade secrets

Technical and scientific informationFinancial, legal and HR informationCommercial information

Technical and Scientific Information

product information technical composition of a product (medicine, paint,

recipe for a sauce), data about product performance, product design information

manufacture information manufacturing methods and processes (weaving

technique, device process), production costs, refinery processes, raw materials, machinery

know-how necessary to perform a particular operation

Commercial Information

customer listbusiness strategies/plansmarketing strategy/researchcustomer buying preferences and

requirementsconsumer profiles sales methods

Financial, Legal and HR Information

Pricing informationSalary and compensation plansEmployee evaluation

Monday April 9 3:45 AM ETFruit of the Loom Sues Competitor

CHICAGO (AP) - Fruit of the Loom is suing competitor Gildan Activewear Inc., accusing the Montreal company of stealing trade secrets to grab a competitive edge in the cutthroat apparel business.

Fruit of the Loom contends the reports include production goals for plants in El Salvador, Honduras and Mexico that would allow Gildan to estimate production costs. They detail sales to specific customers, trends in demand and budget information.

Develop a trade secret protection policyHR policyRestrict access“Confidential”

Human Resource Policy

Awareness creation/strong enforcement of breaches

Confidential agreements/clausesStaff manualExit interviews, non compete agreementsSimilar expectations vis-à-vis third party

consultants

Restrict Access

Documents under lock and key password protection Disclosure on a “need to know”basis Registration at reception/visitor logs/escorts Use “keep out” “authorized personnel only”signs Access controlled photocopiers, scanners,

computers. Use of shredders Nothing on the internet

“Confidential”

“This document contains confidential and proprietary information of [COMPANY] and is protected by copyright, trade secret and other national laws. Its receipt or possession does not convey any rights to reproduce, disclose its contents, or to manufacture, use or sell anything it may describe. Reproduction, disclosure, or use without specific written authorization of [COMPANY] is strictly forbidden”

Example – Coca Cola

Said to be the best kept secretFormula kept in a bank vault

Can only be opened by a resolution of the company Board of Directors

Only two people know the secretTheir identities are unknown

They cannot travel together

They oversee the production

Patent or Trade Secret Protection

Such information may qualify for patent protection or trade secret protection. A company may choose trade secret protection even for information that qualify for patent protection.

Trade Secrets or Patents

No registration (costs/time factor)

Duration is not limited to specified period of time

No disclosure Wider information Difficult to enforce No protection against

independent discovery or RE

Registration required (cost/time factor)

Limited duration Disclosure required Limited to claims Easier to enforce Exclusive rights

As to whether TS or patent is the more appropriate protection depends on the kind of product, nature of the business and the policies of the company. Some products have a short commercial life (TS better), some information may be difficult to keep secret and some products may be more easily reverse engineered than others (patent better).

Protection for Trade Secrets

Often no specific lawWhere there is a contract; employees with

express provisions in their contracts or an implied duty of confidentiality or those who have signed NDA or CA

Where there is no contract; information imparted in confidence and used in breach of that confidence or information obtained by unlawful or improper means (theft, industrial espionage, bribery)

Remedies

Civil remedies based on breach of contract or tort law; damages, injunctions, seizures and impoundment

Criminal remedies - rarely a criminal offense in its own right but could attract criminal liability by committing criminal offenses for procuring the information (theft, trespass etc)

Final thought

You may not know that you have valuable business information recognized by law as trade secrets till it is too late.

Identify and protect themThey may be the key to your

competitiveness