Trade secrets

Question 1

Definition

Answer 1

• information that is held in secrecy and is not known to others
• provides value to the trade secret holder given its status as a secret
• subject to reasonable measures to preserve its status as a secret.

Protected under state and federal law against theft, but cannot prevent independent development.

Term can be indefinite.

No registrar listing all trade secrets.

Question 2

Qualifications

Answer 2

Technical: process OR descriptive: suppliers, customers (non-compete)

• Formula: recipe, seasoning,unique cocktails
• Pattern, plan or design: circuitry, schematics, plans for a specific process, MFG molds
  
  • Spectroscopy
• Physical device used in MFG: machine & equipment to make polyethylene
• Process, method, technique used to make final end product
  
  • Using prepare coloring formula in your own special process, gives you an advantage
  • Can be patented too
• Know-how: info & expertise related to using formula / process
  
  • know-how pertaining to the construction of plant chemicals
• Unique combinations of public information
  
  • Specific combinations of otherwise public information

Can’t take it apart and revese engineer easily.

Question 3

Must be secret

Answer 3

Generally, public knowledge and not a trade secret if people who do not have a need to know the information have access to it.

Question 4

Preserving secrecy

Answer 4

Intentional, ongoing program to prevent disclosure.

• Contractualconfidentiality obligations, for
  employees and other recipients
• Security measures (receptionists; security badges)
• Policies (clean desk policies; limiting information
  access to employees with need to know)

Question 5

Value from secrecy

Answer 5

Competitive advantage becasue of secret.

• Others trying to solve same problem.
• Development investmanets by holder.

Question 6

US Trade Secret Act

Answer 6

Stated:

• Improper means: theft, bribery, misrepresentation or espionage through electronic or other means.
• Misappropriation
  
  • Acquiring secret by someone who knows they shouldn’t have it or was received by improper means ^
  • disclosure or use of secret without consent of holders

Injunctive relief:

• Actual or threateaned misappropriation may be enjoined

Damages

• Actual loss
• Unjust enrichment
• Liability for reasonable royalty
• Willful and malicious: 2x penalties

Question 7

Non-competes

Answer 7

Protect legitimate business interests, not prevent lawful competition.

• Employee consideration in the non-compete when signing.
  
  • Employee receives something of value in exchange
  • This can be employment if signed before.
  • If signed after, promotion or benefit needed.
• Protects a legitimate business interest.
  
  • Customer relationship
    
    • soliciting prior clients
  • Confidential information
    
    • info same qualifications as trade secret
    • plans, clients, sales data
• Reasonable in protecting employer and not unduly burdensome on employee’s right to earn a living.
  
  • Duration
    
    • As long as info is valid, usually 1-3 years
  • Scope
    
    • Where they can and cannot work
    • What projects they work on
    • Will mostly depend on customers they had
    • If found too broad, can be narrowed

Outcomes

• Injunction to stop breach of contract
• Money damages from employee or new employer
  *

Question 8

CVD vs Markham

Answer 8

• Two engineers left old employer to start directly competing company making chemical optics process with lasers (CVD)
• Used their knowledge of Chemical vapor disposition (CVD) manufacturing process to become the supplier of infrared materials.
• CVD suing Markham on the basis of antitrust issues, went to higher level court to bring up issue.
  
  • Do they even have trade secrets and patents that prevent engineers from using?
  • Court sided with CVD
• Markham acting in bad faith, reducing its prices to cut out CVD royalties.
  
  • Done purely to restrict competition not protect legitimate business interests.
• Did not have trade secrets as CVD process was considered public information
• They asserted a claim of trade secret, asked for contract, knowing they didn’t have trade secrets.
• They had the market power to raise the price and they did.
• The agreement was an attempt to monopolize and restrict competition.