Protecting the Crown Jewels: Trade Secrets and Non-Disclosure Agreements

Part III: Trade Secret Litigation

By: John L. Watkins and Thomas L. McLain

Contact: jwatkins@ctflegal.com or tmclain@ctflegal.com

Disclaimer This presentation is for informational purposes only. The

presentation is based on general principles of Georgia law as of the date the of preparation (May 4, 2009). Georgia law is subject to change, and the law may differ in other jurisdictions. Reviewing or downloading this presentation does not create an attorney/client relationship with the authors or their law firm, Chorey, Taylor & Feil, A Professional Corporation. The authors and their firm provide legal services only pursuant to written engagements. Legal advice must be tailored to the particular circumstances and the applicable law. Those seeking legal advice should consult an experienced attorney in their jurisdiction.

Trade Secret Litigation

• Sometimes, despite all reasonable efforts, trade secrets will be misappropriated or confidentiality breached

• Litigation may be the only option

Pre-Suit Investigation• Pre-suit investigation

is critical• Often moves very

quickly• Involve counsel

– More thorough investigation

– Implementation of safeguards

– Protection of privileges

Pre-Suit Investigation• Unusual downloads

– Review IT Logs

• Communications– Emails– Instant messages– Voice mails

• Destruction/deletion• Security cameras• Consider expert

Pre-Suit Investigation

• Interviews– Involve counsel– Employees– Possibly customers– Possibly suppliers

• Search Internet

Preservation

• Preservation demand

• Preservation directive or “hold”– IT should be involved– Consider involving outside computer expert

Litigation• Started by filing a Complaint• Complaint will include background facts• Legal theories

– Misappropriation of trade secrets– Federal Computer Fraud and Abuse Act– State computer abuse statute– Breach of Non-Disclosure Agreement– Breach of fiduciary duty– Possibly others

Potential Remedies• Injunctive relief

– Court order to do something or to stop doing something

• Damages– Actual damages

• Consider proof at outset

– Statutory damages– Punitive damages

• Attorneys fees and costs

Defenses

• Trade secret cases often vigorously defended

• Courts seem to vary in how they resolve the issues– Some focus on requiring strict proof of the

elements– Other courts focus on nature of defendant’s

conduct

Defenses• Information not a trade secret

– Publicly available– Reasonably ascertainable by proper means– Discovered by proper means

• Reverse engineering

Defenses• Not subject to reasonable efforts to maintain

secrecy– Often focus of defense

• Issues– Not subject to NDAs

• NDAs not enforceable

– Information widely available within company– Information not password protected– Provided to others under no condition of secrecy

• Customers

Defenses• Contest damages

– No damages to plaintiff– No benefit to defendant

• No “jump start”

– Contest punitive damages– Contest attorney’s fees

Preliminary Motions

• TRO/Preliminary Injunction– Happens very fast – Sometimes hours or days– Subject to strict legal standards

• But often granted upon sufficient proof

– Often sets tone for resolution– Court may require plaintiff to post bond

Preliminary Motions

• Expedited discovery

• Preservation order

• Request for immediate inspection

• Request for expedited depositions

Discovery

• Document requests

• Interrogatories (written questions)

• Depositions

• Requests for Admissions

• Often involves e-discovery

• Usually lasts four to eight months, depending on the court

Mediation

• Formal settlement negotiation with a trained third-party

• Sometimes required by courts, but often agreed to by parties

• Confidential

• Allows for creative solutions not available in court

• Relatively low cost and low risk

Trial

• Case normally tried to a jury (typically, six or twelve persons)– Jurors hear evidence and make determination

• Plaintiff will ask court to make the preliminary injunction (if there is one) permanent

• Judgment will be entered for the winning party

Appeal

• Losing party may choose to appeal

• Appeals are typically based on errors of law– Improper evidentiary rulings– Improper legal instructions to the jurors– Improper application of legal standards

Conclusion

• This concludes our podcast series on Trade Secrets and Non-Disclosure Agreements

• We will have new podcasts on different subjects

• For more information, visit our website, www.ctflegal.com