LAW SEMINARS INTERNATIONAL

Trade Secrets for Corporate Counsel

Brad LyerlaMarch 13, 2006

Keeping Company Secrets

Employees Customers Vendors Joint Development Agreements

Uniform Trade Secrets Act

45 States have adopted Exceptions Massachusetts, New Jersey, New

York, Texas and Wyoming* Restatement (Third) of Unfair Competition

* North Carolina adopted with “major departures” from the UTSA. Bills to adopt versions of the UTSA are pending currently in Massachusetts and New York.

Trade Secret

Information: Sufficiently secret to derive economic value Not generally known Not readily ascertainable Subject of reasonable efforts to maintain its

secrecy

Employer’s Arsenal

Non-disclosure agreements* Non-solicit agreements* Non-compete agreements* Inevitable disclosure doctrine

* A sample employment agreement including a non-disclosure agreement, a non-solicit agreement and a non-compete agreement is included in your materials at Tab A.

What Law Applies

State Law Controls Agreement Can Choose Law if There is a

“Rational Relationship” Personal Jurisdiction – Fiduciary Shield

Doctrine Law of State Where Employee is Located

Often Controls

Non-Disclosure Agreement

Prohibits disclosure of information Readily enforced in court Difficult to prove a breach

Non-Solicit Agreement

Prohibits solicitation of employees Easy to prove a breach Uncertain enforceability

Non-Compete Agreement

Prohibits accepting employment with a competitor

Easy to prove a breach Difficult to enforce in court

Inevitable Disclosure*

Prohibits accepting employment with a competitor

Easy to prove a breach Easy to enforce in court Remedy uncertain

* An article entitled “Thirteen Rules for Litigating an Inevitable Disclosure Case,” written by Mr. Lyerla is included in your materials at Tab B.

Inevitable Disclosure Doctrine Adopted Rejected Arkansas Connecticut Delaware Illinois Indiana Iowa New Jersey New York North Carolina North Dakota Ohio Pennsylvania Texas Utah Washington Wisconsin

California Florida Louisiana Massachusetts Missouri Virginia

Compare Non-Compete Agreements with Inevitable Disclosure

Non-Compete Agreements

Contract Formation Consideration Economic or Other

Coercion

Enforcement Geographic Scope Duration Activity Scope Legitimate Business

Purpose

Inevitable DisclosureStrong/Weak Version Elements of Proof

Plaintiffs own trade secrets Plaintiff disclosed trade secrets to

employee in confidence Employee is defecting to a rival Employee will be doing same job

for rival as he performed for plaintiff

Overt act imperiling trade secrets or some other explanation for why misappropriation is not speculative

Strong Weak

Yes Yes

Yes Yes

Yes Yes

Yes Yes

No Yes

Development of Inevitable Disclosure

Pepsico v. Redmond Motorola v. U.S. Robotics Strata Marketing v. Murphy

Evolution of Inevitable Disclosure

C&F Packaging v. IBP Connector Service v. Briggs Chris-Craft v. Kuraray Covad v. Hightman

Customers

Limit use of confidential information Mechanism for identifying confidential

information No license Indemnification

* A sample agreement suitable for use with a customer is attached to your materials as Tab C.

Vendors

Define what is confidential Limits of use Time limit No license Ownership of developments

* A sample agreement suitable for use with a vendor is attached as Tab D.

Joint Development

Define confidential information Define limits of use Define who will own new intellectual property Define limits of relationship: license, agency,

partnership, joint venture, time limits, etc.

* Confidentiality language suitable for use in a joint development agreement is attached as Tab E.

Thought for the Day

Always do right. This will gratify some people and astonish the rest.

-- Mark Twain

Thank You

Brad Lyerla is a trial lawyer and a partner at Marshall, Gerstein & Borun LLP. He graduated from the University of Illinois in 1976 where he was elected to Phi Beta Kappa. He obtained his law degree from the University of Illinois College of Law in 1980. He was a member and editor of the Law Review.

He is listed in Who’s Who in America, Who’s Who in American Law, America’s Leading Lawyers and Illinois Super Lawyers, among others. He is a Life Fellow of the American Bar Foundation and is a recipient of the John Powers Crowley Justice Award for Pro Bono trial work.

He has tried cases for such well-known companies as AM International, Quaker Oats, General Dynamics, MCI, Solo Cup Company, Chris-Craft Industries and US Robotics, among many others. Most of his trial work is in trade secret and patent infringement lawsuits.

For further information contact Mr. Lyerla at:blyerla@marshallip.com(312) 474-9556