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SSHHHH! It’s a Trade Secret

SSHHHH! It’s a Trade Secret. Steve Baron April 6, 2006. What Is A Trade Secret?. Information. Economic value Not generally known Reasonable efforts to maintain secrecy. Technical or non-technical data Formula Pattern Compilation Program Device. Method Technique Drawing Process

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SSHHHH! It’s a Trade Secret

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  1. SSHHHH! It’s a Trade Secret Steve Baron April 6, 2006

  2. What Is A Trade Secret?

  3. Information • Economic value • Not generally known • Reasonable efforts to maintain secrecy

  4. Technical or non-technical data Formula Pattern Compilation Program Device Method Technique Drawing Process Financial data List of actual or potential customers Types of Trade Secret Information

  5. Economic Value • Actual • Potential

  6. Availability of Information • Not generally known by competitors

  7. “Reasonable” Efforts to Maintain Secrecy • Absolute secrecy not required • Reasonable under the circumstances • Comprehensive program

  8. Examples of Methods to Maintain Secrecy • Lock & Key • Passwords • Restricted access • Sign-in sheets • Confidential stamps • Non-Disclosure Agreements

  9. The sum may be a trade secret, even if each part is not.

  10. Famous Trade Secrets • Formula for Coca-Cola • Recipe for Kentucky Fried Chicken • Formula for Smith’s Cough Drops • Specifications for a product with the code name “Asteroid”

  11. Advantages of a Trade Secret • No time limit • No public disclosure • No governmental filing process

  12. What Law Governs • Historically • Uniform Trade Secrets Act • Illinois Trade Secrets Act • Economic Espionage Act

  13. Historically – Common Law – Six Factor Test • Extent known outside company • Extent known by employees • Measures taken to guard secrecy • Value to company and competitors • Time, effort and money to develop • Difficulty of proper acquisition

  14. Uniform Trade Secrets Act • Adopted by nearly 40 states

  15. Illinois Trade Secrets Act • Effective since 1988 • Adjunct to common law • Gives “teeth” to infringement claims

  16. Illinois Trade Secrets Act Remedies • Injunction • Compensatory damages • Punitive damages • Attorney’s fees

  17. Economic Espionage Act • Gives U.S. Attorney sweeping powers to prosecute any person or company involved in trade secret misappropriation • Punishes intentional stealing, copying or receiving of trade secrets • For product produced or placed in interstate commerce

  18. Economic Espionage Act • Penalities • Individual fines up to $500,000 • Company fines up to $5 million • Prison – up to 10 years for individuals and 15 years if theft performed for foreign government

  19. Proper Methods to Obtain Trade Secrets • Legitimate Observation • Reverse Engineering • Independent Invention

  20. Inevitable Disclosure Doctrine • Pepsi v. Redmond

  21. Pespsi v. Redmond • Who’s the plaintiff? • Who’re the defendants? • Why does the plaintiff sue defendants? • Under what legal theory? • What happens in the trial court? • What happens on appeal?

  22. Inevitable Disclosure Doctrine • Even in the absence of actual or threatened misappropriation of a trade secret, where a person who has acquired trade secrets from one employer, will inevitably disclose those secrets to a competing employer, the court may issue an injunction.

  23. Learning Curve v. Playwood

  24. Learning Curve v. Playwood • Plaintiff/Counterdefendant = Learning Curve • Defendant/Counterplaintiff = Playwood • Learning Curve = Licensee of Thomas products • Playwood = Canadian toy maker • Learning Curve and Playwood meet • Playwood discloses idea for track • Parties do not form relationship • Learning Curve exploits “Clickety-Clack Track”

  25. Learning Curve v. Playwood • Learning Curve sues • Playwood countersues – alleges misappropriation of trade secrets • Playwood obtains jury verdict • Trial judge reverses • Playwood appeals to Seventh Circuit

  26. Learning Curve v. Playwood • Seventh Circuit reverses • Playwood had legitimate trade secret • Learning Curve learned of secret in confidence • Ease of reverse engineering does not matter

  27. Gonzales v. Google • Who is Gonzales and what does he want? • Who is Google and what does it want to keep from Gonzales?

  28. Gonzales v. Google • Gov’t wants to evaluate the effectiveness of on-line filters for purpose of COPA. • ACLU v. Gonzales – Challenge to COPA • Google wants to protect its “crawling, collecting, and sorting techniques” as trade secrets.

  29. Gonzales v. Google • Trial Court Splits the Baby: • Google must turn over 50,000 URL’s from its search index • Google need not turn over sample queries from its search logs • Court makes the data subject to a protective order

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