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Posts Tagged ‘trade secret’

What's in the pocket there, chief? Don't let this employee walk away with your trade secret!

The first post in this series discussed what defines a trade secret.  The second post considered what reasonable steps must be taken to guard the secrecy of your trade secret. 

But what happens if, despite your best efforts, your trade secret is discovered?  This post will focus on some specifics you should know if you are thinking of taking action against the “bad guys.”

What is misappropriation of a trade secret?

If someone learns, uses or discloses your trade secret as a result of improper means, that generally constitutes an unlawful taking or “misappropriation” of that trade secret.  So if you want to take action for misappropriation of a trade secret, you must show that it leaked out as a result of “improper means.”  That in turn raises the question of what constitutes “improper means,” in this context.

In the last post in this series which covered maintaining the confidentiality of your trade secret, we learned that if someone learns a trade secret through theft or “spying,” that can be improper means.  Generally, obtaining a trade secret through bribery or misrepresentation will be considered improper means.  The same can be true (though not always) if the secret leaks out the result of a breach of someone’s duty to maintain secrecy.

One common scenario for claims of trade secret misappropriation is when an employee with access to confidential trade secrets leaves to work for a competitor.  Consider, for instance, a salesman with access to a confidential customer list; a marketing person with knowledge about upcoming advertising and marketing plans; a tech employee with extensive knowledge about upstream research and development activities. When these kinds of employees are hired away by a competitor, it’s only natural to assume that they will use and/or disclose the trade secret in the course of their new employment. 

What is not misappropriation?

You should bear in mind, though, that there are ways a competitor can learn your trade secret that are not regarded as misappropriation.  If someone learns your trade secret as a result of your failure to take reasonable precautions to protect its secrecy, that is not improper means and thus not misappropriation.  Similarly, if someone learns your trade secret by purchasing your product and taking it apart to learn how it works (called “reverse engineering”), that is not improper means either, and thus not misappropriation.

Even if your trade secret has been misappropriated by one party, in some cases others who learn the secret from the original “thief” may not have any liability.  This is particularly true of the second parties engaged in no misconduct in learning the secret. 

The problem of Internet posting

This issue of the “innocent” second party is a real problem if, for example, the thief posts your trade secret on the Internet.  There are interesting cases on this subject from California, Virginia and Colorado courts, involving the Internet posting of alleged trade secret materials of the Church of Scientology. 

In the Church of Scientology cases, the courts found that the original posters may have liability, but those who merely downloaded the posted information committed no misconduct.  The courts went on to find that trade secret protection had been lost through the posting, because the information had become “generally known” and thus no longer secret. 

What remedies can I get through a misappropriation lawsuit?

If you are successful in your trade secret misappropriation lawsuit, you can get a permanent injunction that bars the misappropriating party from use or further disclosure of the trade secret.  You may also be able to obtain a temporary restraining order and preliminary injunction while the lawsuit is pending, to prevent a threatened misappropriation or to prevent use of the trade secret until a judgment is rendered.

You also can seek money damages for your actual injury and/or the defendant’s profits from the use of the trade secret.  In the case of willful misappropriation the court may even double the award and/or award you attorneys’ fees.

Get Legal Advice

My comments here are general in nature, of course.  As I noted earlier in this series, there is no preemptive federal statute on the subject and thus trade secret laws vary from state to state. 

If you suspect misappropriation has occurred, you should work with an attorney with experience in the field of trade secrets.  He or she can look closely at the circumstances with reference to your state’s trade secret statute, to determine whether you may have an action for misappropriation.

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Having not read this blog post, Smedley and Popoff thought they were about to get rich by stealing a competitor's trade secret.

The first post in this series discussed exactly what defines a trade secret.  In many states any piece of information you possess, which has value to your business because it is unknown to the general public and to your competitors, can potentially be a trade secret.

But in order to qualify for protection for your trade secret, you must also take reasonable steps to guard the secrecy of that information.  This post will examine how that is accomplished.  We also will explore the circumstances under which trade secret protection may be preferable to seeking a patent. 

If I Have A Trade Secret, How Do I Protect It?

By its very definition, a trade secret must remain a secret.  That means that, as noted above, you must take reasonable steps to maintain the actual secrecy of your trade secret. 

What kinds of steps are recommended?  To some extent, it depends on the nature of the secret.  In every case, you should limit access to and disclosures of the trade secret to those with a need to know, requiring your employees and contractors to sign non-disclosure agreements if they may be exposed to a trade secret. 

You also should keep all trade secret materials in a secure place.  In the case of secrets that encompass paperwork, the papers should be locked up and marked “CONFIDENTIAL.”  If your trade secret is a manufacturing technique or process, you should carefully restrict access to/visibility of the production areas where that method is used.

How Far Must I Go To Maintain Secrecy?

To what lengths must you go to protect the secrecy of your trade secret?  Generally speaking, the key word here is reasonableness.  You don’t need to take wildly expensive measures to defeat even the most imaginative forms of industrial espionage.  The courts usually find such spying constitutes trade secret misappropriation.

In duPont v. Christopher, a famous case arising in Texas, a competitor chartered a plane and flew over the plaintiff trade secret owner’s factory while it was under construction.  By taking aerial pictures of the plant in this way, the competitor was able to figure out duPont’s trade secret.  duPont sued, and the court held that the trade secret owner need not have taken the extraordinary precaution of preventing airborne espionage while its factory was built – the competitor’s actions were misappropriation of the trade secret. 

On the other hand, if your measures are effective in avoiding discovery of your trade secret, you won’t have to go to the expense of litigating to protect it.  How extensive your confidentiality measures should be boils down to a judgement call, based on the level of competition your industry. 

Why Not Just Get A Patent?

With all the precautions necessary to maintain a trade secret it is reasonable to ask, “Why not just get a patent instead of bothering with all of that?”  There are at least two good reasons to use trade secret protection instead of seeking a patent, under the right set of circumstances.

First, patents are expensive and difficult to register.  Not everything that might be useful in the competitive arena would qualify for patent protection – in fact, most things would not.

And second, put very simply, patents expire.  A patent provides a window of time during which the patent owner has a complete monopoly over the manufacture and use of the patented invention.  Once the patent expires, the invention falls into the public domain and anyone can make or use that invention.  So a patent is basically a trade-off – you’re trading long-term exclusivity for the absoluteness of the patent monopoly.

Trade secret protection, by contrast, is easier to arrange.  And, if you take the proper precautions, you may be able to exploit your trade secret forever – it has no automatic expiration date, in any event. 

Get Legal Advice

If you think you may have a trade secret and want to protect it, it is a very good idea to consult an attorney with experience in trade secret law.  That attorney can help you set up the appropriate safeguards and precautions in order to maintain the secrecy of your trade secret.

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Hello and welcome to the IP Registration and Enforcement Blog!  This blog is brought to you by Jeffrey Davidson, a partner in the suburban Chicago law firm of Davidson & Davidson LLC.

Here we will be discussing issues of trademark, copyright, unfair competition, dilution, false advertising and trade secret law, as well as related issues in entertainment law, all with a focus on the registration and enforcement of intellectual property.  We’ll examine recent developments in the law and offer tips to assist those charged with registering and enforcing intellectual property.

Please check back often to see what unusual topics we’ve covered since your last visit.  We look forward to a long and fruitful discussion within the IP and entertainment law community!

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