TRADE SECRET PROTECTION IN THE UNITED STATES
Why are trade secrets important?
Trade secrets play an important role in the development of commercial competitiveness, economic gain, and strategic positioning, especially for startups and R&D-intensive industries.
What is a trade secret?
- Information that has either actual or potential independent economic value by virtue of not being generally known; and
- Has value to others who cannot legitimately obtain the information; and
- Is subject to reasonable efforts to maintain its secrecy.
Some types of trade secrets
- Product Designs
- Customer Lists
- Pricing Schedules
- Manufacturing techniques
- Technical Data
- Marketing Strategies
- Sales techniques
EXAMPLES OF FAMOUS TRADE SECRETS
Coca-Cola: The formula of CocaCola’s natural flavorings is a trade secret, although other ingredients are listed on the side of the bottle or can.
WD-40: A penetrating oil and water-displacing spray abbreviated from the term “Water Displacement, 40th formula”, has household and other uses.
Kentucky Fried Chicken: The KFC Original Recipe is a secret mix of ingredients (“11 herbs and spices”), created by Colonel Harlan Sanders.
US Trade secret laws- TWO TYPES:
- State trade secret law:
– The Uniform Trade Secrets Act forms the basis of state statutes
- Adopted by all states except New York
- Federal trade secret law:
– Economic Espionage Act
- Two criminal offenses
- One civil cause of action
WHAT IS A MISAPPROPIATION?
Acquisition, disclosure or use of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means. Most COMMON WORD RELATED TO TRADE SECRET.
“A complete catalog of improper means is not possible . . . . In general, they are means which fall below the generally accepted standards of commercial morality and reasonable conduct.”
Examples of improper means
- Breach or inducement of a breach of duty to maintain secrecy; or
- Espionage through electronic or other means.
Acquisition of a trade secret is not always a misappropriation. A competitor can arrive at the secret information by legitimate means.
EXAMPLES OF LEGAL (PROPER) ACQUISITION
– Discovery by independent invention
– Reverse engineering where the product was obtained honestly
- The trade secret owner is responsible for taking “reasonable efforts” to maintain secrecy.
- What constitutes reasonable efforts will depend on the circumstances.
- The greater the economic value of the trade secret, the greater the expectations for reasonable efforts.
- Common, but not only, steps:
– Maintain good records of trade secrets
– Limit access to employees who require the trade secrets to perform their jobs
– Require relevant employees to sign a confidentiality agreement and renew yearly
– Control physical and digital access
EXAMPLE OF A BIG TRADE SECRET
PROTECTION OF TRADE SECRETS DURING CASES
- The trade secret owner cannot protect its rights if it must disclose the secret in open court.
- Courts can use tools that maintain the ongoing secrecy of the trade secret and still permit trial preparation and conduct. EXAMPLES:
– Protective orders
– In camera reviews by the judge or magistrate
– Closed courtrooms
REMEDIES IN CIVIL CASES
- Money damages