protecting trade secrets in the current economy - trade secret misappropriation

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Protecting Trade Secrets in the Current Economy

By:Kirby Drake

Trade SecretsProtection extends to confidential information that gives a company a competitive edgeNo formal registration requirementBalancing test

Trade SecretsDisclosure may destroy protectionTrade secrets usually endure as long as the information is kept secret

Trade Secrets

Commercial Life of ProductReverse EngineeringIndependent DevelopmentTipping Off CompetitorsType of Subject Matter/IndustryEase of Keeping SecretTime Needed to Obtain PatentEconomic Effects

Trade Secrets ConsiderationsNon-exclusive rightsIndependent development not actionableMust breach non-disclosure obligation or obtain trade secret via improper means to be actionable

Trade Secrets ConsiderationsCommercial life of productEconomic considerationsPatents may give a signal that IP was created good for future investments, competitive positioningLess upfront investment to maintain as trade secret but loss may be financially devastating

The Overlap Patents and Trade SecretsInnovations protectable with patents or trade secretsCannot usually protect same innovation by both patents and trade secrets

Patent?Trade Secret?Both?Neither?

What Is Protectable as a Trade Secret?Manufacturing processesIdeasManufacturing drawingsSoftwareChemical formulae and processes

Examples of Possible Trade Secrets

Customer ListsKnow-HowPricing InformationNegative Know-HowProduct Technical SpecsComputer HardwareMarketing PlansComputer SoftwareBusiness MethodsChemical Formulae

Effects of Trade Secret DisclosureClaim for Trade Secret MisappropriationPreliminary InjunctionReassignment of PatentDestruction of Trade Secret Protection

RemediesInjunctive reliefMonetary damages (royalty)Attorneys feesPunitive damages

Damages Remedies for Misappropriation of Trade SecretsRemedies are state-specific (whether in federal or state court), though most have some version of the UTSA and include:Actual loss by plaintiffLost profitsOut-of-pocket expensesLoss-in-value of business or trade secretsOther losses (consequential)

Damages for Trade Secret MisappropriationAlternatively, or in addition, to actual loss Unjust enrichment by the defendantDefendants profitsMarket value of misappropriated trade secretsCost savings or value of head start benefit gained by defendantAlternativelyReasonable royalty for use of trade secretsUse of patent damages construct

Damages Matrix

Damages Matrix

Co-defendant employees with various NDA, non-compete, and non-solicit agreements went to work for a competitor B and used their former employer As proprietary customer database with Bs consent to sell business to As customers

DuPont, Competitor, and EmployeesDuPont lawsuit against former employeeDuPont lawsuit against InvistaInvista lawsuit against DuPont partnerDuPont lawsuit against Kolon Industries

Coca-Cola and PepsiCoca-Cola sued former employee for trade secret misappropriation (formula for Coke)Former employee had offered knowledge of formula to Pepsi but Pepsi did not use

The New Economy Trade SecretsOpting for trade secret protection in lieu of other forms of intellectual property protectionRise of trade secret auditsIncreased enforcement of non-competes and NDAsModifications to damages model in litigationOther considerations?

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