Trade Secrets Protection and Planning

Trade secret protection includes all types of information that the owner has taken steps to keep secret, including commercial, financial, and technical information.  While traditionally trade secret protection for technical information has been regarded as “second best” to patent protection, this may be changing.   The America Invents Act has removed two disincentives to use of trade secret protection that had existed previously.  First, by providing a prior commercial user defense to a patent infringement claim, it has reduced the risk that someone else will obtain a patent for the same idea that will require stopping something that one had been doing secretly for years.  Second, the repeal of provisions that prevented one from obtaining a patent for an idea that one had previously abandoned, suppressed, or concealed means that, as long as no one else had previously published or publicly used the idea, it may still be possible to obtain a patent for it if one decides at some point to do so.  Internationally, increased interest in trade secrets is evidenced by the European Commission’s proposal for harmonizing trade secret law among the member states of the European Union that was published at the end of 2013.

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10.Aug.17On August 7, 2017, Thailand acceded to the Madrid Protocol. The change will take effect on November...

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+ The Nature of Trade Secrets

Trade secrets are protectable under two broad legal concepts: tort and contract.  Within the area of tort law, two different approaches may apply. The first is based on the concept that a trade secret is a property right so that misappropriation, publication, or unauthorized use is actionable and in some cases criminal.  The second is founded on the idea that misuse or publication of a trade secret is an act of unfair competition.  The application of these concepts differs from country to country.  Ladas & Parry’s long experience in these fields can help navigate them successfully and avoid pitfalls for the unwary.

When relying on a contract to protect a trade secret, one has some freedom to define the secret oneself, subject to any laws outlawing contracts in restraint of trade, such as antitrust laws in the United States. Otherwise, a key requirement is that what is being protected meets the requirement of being “secret.”  This does not, however, mean that it must necessarily meet the requirements for novelty in the patent sense. Trade secrets are, in large respects, different from other types of intellectual property because there are no external means for creating, recognizing, or protecting them.   While one can file a patent, trademark, or copyright application after the invention or brand is developed, or the art or literature created, protection of trade secrets is in large part a function of identifying the subject and internally maintaining security measures to keep them secret.

Ladas & Parry has worked with clients to identify the subjects that provide an advantage in trade and to develop means, both legal and security, to maintain the secrets.  We can also identify business information that is not technology oriented, such as marketing plans.  By maintaining the secrets, unauthorized taking is reduced, and if there are breaches, the remedy follows identification of the subject and evaluating the extent of steps taken to keep the secrets.   This can include a review of current business practices regarding the storage, use of, and access to business information, as well as the complementary area of appropriate confidentiality (non-disclosure) agreements.

+ Trade Secret Policy

Too often clients realize the importance of trade secrets only after the information has escaped.  Ladas & Parry prides itself on its long term relationships with its clients and we are always pleased to be able to assist in developing appropriate company policies before the wrongful taking occurs.   With our broad experience in a variety of industries, we can audit current practices and recommend changes, which can be anything from locking blueprint drawers and limiting areas viewed in plant visits to deciding which documents on a computer system should be password protected.

Trade secret cases are frequently lost where treatment of confidentiality is lax.  We can review and determine which improvements can underscore the importance of business information, which additionally establishes an essential element in an enforcement case.

We also advise on, and where appropriate draft, agreements for protection of trade secrets where it is desired to tell others about them for a particular purpose and advise on the risks associated with attempts to obtain overbroad protection that may come into conflict with other aspects of the law.

+ A Multi-Disciplinary Approach

Building on the historic question of “patent or trade secret” in today’s business world, with complex systems for manufacturing and a premium on efficiency, let us critically analyze what needs to be disclosed to get a patent and what should be kept to oneself.

Complementing the patent and trade secret relationship, recognize that with nearly everything committed to computer, there is nearly always copyrighted content on that computer.  We can evaluate methods of copyright registration while preserving trade secrecy and change the consequences for making an unauthorized copy, sent in an email or copied to a thumb drive.

With our familiarity with unfair competition law, we can develop theories for enforcement, or as business needs require, memorialize fair competition in appropriate confidentiality provisions in joint development and licensing situations.   While we do not practice in traditional labor and employment areas, the trade secrets aspects of the employment relationship can often be handled best by one with an overview of all aspects of intellectual property protection.

+ Jurisdictional Approaches

Trade secret law varies between individual countries, and within the United States, between states.   Within the United States, there are, therefore, more than 50 sets of trade secret law – state and federal.

While there is much commonality between them, and all states except New York and Massachusetts have adopted the Uniform Trade Secrets Act, there are differences.   For example, states vary on “inevitable disclosure,” which presumes that when a top executive has the secret information and takes a job for a competing company, the wrongful act of disclosure will inevitably occur.  Some states make the presumption, while others require additional proof of wrongful use or disclosure.

Another example is the treatment of non-technical information that could be reconstructed, such as customer lists.  Some states find that customer lists are almost never trade secrets because any mobile employee can reconstruct them, while others treat the information no differently than other business information, judging based on factors such as the extent of knowledge in the industry, the steps taken to preserve secrecy, and the wrongful disclosure or use made.

 

As of this writing, in 2014 there is no federal trade secrets act, although legislation is pending.   Federal protection would be limited only to  situations where federal law governs.  A related act is the Computer Fraud and Abuse Act (CFAA) which, in some federal circuits has been used to apply to unauthorized, but internal access, while most limit the CFAA to outside “hacking.”

+ Mobility and Competition

As business and competition becomes more demanding, clients continue to look for the best and brightest employees and every research advantage.   Trade secrets are different from patents, trademarks, and copyrights, those rights having some level of public searchability.  The opinion about whether something is a trade secret, or a normal part of employee knowledge and mobility may also vary between the originator and the competitor.   Where our clients are accused of taking something that we believe was publicly available, we can also assist in the evaluation and defense of a competitor’s claim.