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TRADE SECRET SEGMENT

TRADE SECRET SEGMENT. PROF. JANICKE JUNE 2007. SOURCES OF LAW. 45 STATES: UNIFORM TRADE SECRETS ACT TEXAS: COURT-BUILT DOCTRINES AROUND REST. OF TORTS (1 ST – 1939) FEDERAL: GOVERNMENT CIVIL ACTIONS AND CRIM. PROCEEDINGS – ECONOMIC ESPIONAGE ACT (1997). WHAT IS A “TRADE SECRET”.

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TRADE SECRET SEGMENT

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  1. TRADE SECRET SEGMENT PROF. JANICKE JUNE 2007

  2. SOURCES OF LAW • 45 STATES: UNIFORM TRADE SECRETS ACT • TEXAS: COURT-BUILT DOCTRINES AROUND REST. OF TORTS (1ST – 1939) • FEDERAL: GOVERNMENT CIVIL ACTIONS AND CRIM. PROCEEDINGS – ECONOMIC ESPIONAGE ACT (1997) Trade Secret Segment

  3. WHAT IS A “TRADE SECRET” • (1) ANY COMPETITIVELY VALUABLE INFORMATION • (2) THAT’S NOT WIDELY KNOWN OR EASILY FOUND OUT • (3) THAT THE POSSESSOR HAS TAKEN REASONABLE STEPS TO KEEP FROM DISCLOSURE Trade Secret Segment

  4. EXAMPLES • MFG. METHODS • MFG. MATERIALS • BUSINESS PLANS Trade Secret Segment

  5. USE, OR EVEN PLANNED USE, IN POSSESSOR’S BUSINESS IS NOT NEEDED • SECRECY OF INDIVIDUAL COMPONENTS OR STEPS IS NOT NEEDED Trade Secret Segment

  6. THE PROBLEM OF CUSTOMER LISTS • HAS CAUSED A CASE LAW QUAGMIRE • OFTEN ARE EASILY LEARNED BY RIGHTFUL MEANS; HENCE NOT A “TRADE SECRET” • CAN BECOME A SECRET BY ADDING PURCHASE DATA, PLANS, ETC. Trade Secret Segment

  7. HARD-TO-GET REQUIREMENT • LIBERALLY CONSTRUED TO HELP TRADE SECRET OWNER • EXAMPLE: OBSCURE PUBLICATION OR SUPPLIER Trade Secret Segment

  8. REASONABLE-MEASURES-FOR-SECRECY REQUIREMENT TYPICAL: • EMPLOYEE AGREEMENTS • MARKING DOCUMENTS AND DRAWINGS “CONFIDENTIAL” • CIRCULATING WRITTEN POLICY • POSTING WRITTEN POLICY Trade Secret Segment

  9. TYPICAL (CONT’D): • LIMIT TYPES OF EMPLOYEES WHO HAVE ACCESS • LIMIT ACCESS TO PROJECT MEMBERS MEASURES CAN BE BY IMPLICATION, BUT RISKY TO LITIGATE Trade Secret Segment

  10. OWNERSHIP OF ON-THE-JOB DEVELOPMENTS • CONTRACT CONTROLS IF THERE IS ONE • IF THERE IS NO CONTRACT, RESULT GOES BY THE EQUITIES • SKILLS OF A CALLING ARE ALWAYS OK FOR EMPLOYEE TO TAKE WITH HIM Trade Secret Segment

  11. WHAT IS “MISAPPROPRIATION” • USING UNDER WRONGFUL CONDITIONS: • OBTAIN BY FRAUD OR BREACH OF CONFIDENCE • OBTAIN RIGHTFULLY, BUT USE IN BREACH OF CONFIDENCE Trade Secret Segment

  12. WHAT IS NOT • REVERSE ENGINEERING • DESIGN IT YOURSELF • COPYING PRODUCT • STEALING, WITH CONTRACTUAL NEGATION OF CONFIDENCE Trade Secret Segment

  13. MOST CASES INVOLVE RIGHTFUL LEARNING, AND THEN MISAPPROPRIATING TYPICAL PATTERNS: • EMPLOYEES LEARN, THEN JUMP • JOINT VENTURE PARTNER LEARNS • POTENTIAL BUYER OF BUSINESS LEARNS Trade Secret Segment

  14. TYPICAL PATTERNS (CONT’D): • EXECUTIVE LEARNS, THEN JUMPS • HARDER: EXECUTIVE DRIVES THE DEVELOPMENT, THEN JUMPS • VENDOR, AGENT, ADVISOR LEARNS Trade Secret Segment

  15. HARD CASES: • FLY-OVERS • TRAILING • TRASH COLLECTING Trade Secret Segment

  16. REMEDIES • INJUNCTION • BETTER VIEW IS IT SHOULD BE LIMITED TO LEAD-TIME • TIME IT TOOK P minus TIME IT TOOK D IS A ROUGH RULE OF THUMB Trade Secret Segment

  17. DAMAGES • ARE THEORETICALLY AVAILABLE • CAN BE UNJUST ENRICHMENT OR P’S LOSS OF BUSINESS • REALITY: TR. SEC. CASES NEARLY NEVER GO TO TRIAL; SETTLED AFTER PRELIM. INJUNC. RULING Trade Secret Segment

  18. NON-COMPETE INJUNCTION • IS COMMONLY SOUGHT AS A NECESSARY VEHICLE TO PROTECT THE SECRET • WORKING FOR “THEM” WILL INHERENTLY DIVULGE • PROBLEM: EARNING A LIVING Trade Secret Segment

  19. NON-COMPETE INJUNCTION • POSSIBLE SOLUTIONS: • INJUNCTION REQUIRES KEEPING PERSON ON PAYROLL AND WORK • INJUNCTION REQUIRES PROVIDING MINIMUM CONSULTING FEES AND WORK • INJUNCTION TAILORED TO DIVISION MOST LIKELY TO CAUSE BREACH Trade Secret Segment

  20. SPECIAL PROBLEM: HOW LONG TO ENJOIN WRONGDOER WHEN OWNER PUBLISHES • COMMONLY UNDERSTOOD NON-WRONGDOERS ARE RELIEVED OF COVENANTS WHEN OWNER PUBLISHES • PREVIOUS WRONGDOER IS A PROBLEM: SHOULD HE BE ONLY ONE PRECLUDED FROM USE? Trade Secret Segment

  21. SPECIAL PROBLEM: STATUTE OF LIMITATIONS • ONE VIEW: MISAPPROPRIATION IS AN ONGOING TORT, NEW VIOLATION EVERY DAY • HENCE, ONLY OLD MISUSES ARE CUT OFF; INJUNCTION IS AVAILABLE FOR TOMORROW’S VIOLATION Trade Secret Segment

  22. SPECIAL PROBLEM: STATUTE OF LIMITATIONS • ANOTHER VIEW: ORIGINAL MISAPPROPRIATION STARTS THE ONLY CLOCK; WHEN IT RUNS, ALL ACTION IS BARRED • TEXAS SOLUTION: SINGLE WRONG, SINGLE RUNNING – BUT FROM DISCOVERY DATE Trade Secret Segment

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