Practical Trade Secret Asset Management and Other Alternatives for Protecting Technology-Alicia Griffin Mills & Brenda Furlow

IP Law Summit

September 23, 2016

Practical Trade Secret Asset Management

Alicia Griffin Mills

Vice President, Intellectual Property

LifeWatch Services, Inc.

Brenda Furlow

General Counsel

Bio-Techne

• What is a Trade Secret?

• To Trade Secret or Not to Trade Secret

• Intersection of Intellectual Property and Employment Law

• Trade Secret Laws

• Making it Real: Practical Tips for the Workplace

Overview

• The DTSA defines a trade secret as: • “all forms and types of financial, business, scientific, technical, economic, or

engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing if—(A) the owner thereof has taken reasonable measures to keep such information secret; and (B) the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, the another person who can obtain economic value from the disclosure or use of the information.”

• In short, almost every type of information can qualify as a trade secret under the EEA so long as: (1) the information is actually secret; (2) the owner took reasonable measures to maintain that secrecy; and (3) independent economic value is derived from that secrecy.

What is a Trade Secret?

• To Trade Secret or Not to Trade Secret • Trade secret protection is available to a wide range of information

beyond patentable inventions – e.g., computer programs, manufacturing methods, scientific processes and formulas, food recipes, codes for determining discounts, and customer lists

• Patentable subject matter

• Can you figure out if someone is infringing?

• Shelf-life of product • Can you get a patent in a useful time period?

• Can you keep the technology confidential for longer than the patent term?

• Likelihood of independent invention

To Trade Secret or Not to Trade Secret

• Why be concerned?

“Half of employees who left or lost their jobs in the last year kept confidential corporate data, and 40 percent plan to use it in their new jobs.”

What’s Yours is Mine: How Employees are Putting Your Intellectual Property at Risk, Symantec Survey (2013)

Intersection of Intellectual Property and Employment Law

• At-will employees change employers freely

• Good or bad economic times

• They can plan to compete while still working for you (as long as it’s not on your time)

• More competition for top talent

• Increased leverage for potential employees

• Less willing to sign non-compete agreements


• Preventative Measures • Trade Secret Law

• Duty of Loyalty

• Restrictive Covenants

• Conflict of Interest Policies in Code of Conduct

• Offer Letter

• Causes of Action • Tortious Interference

• Conversion

• Usurpation of Corporate Opportunity


• Trade secret issues may arise in:

• Employee hiring and firing

• Business contracts that contain non-disclosure or confidentiality clauses

• Employees that discuss company business with competitors, members of the public, or friends and family


• The Basics

• The Defend Trade Secrets Act of 2016

• Provisions

• Practice Tips

Trade Secret Laws

• To establish something as a trade secret, take reasonable measures to protect secrecy:

• Restrict access

• Employee handbook

• Take steps to demonstrate that you have taken reasonable measures

• Companies that are serious about protecting trade secrets should catalogue (*) their trade secrets and implement appropriate agreements and policies to limit disclosure

Trade Secret Laws – Basics

• Creates federal jurisdiction for trade secret misappropriation • Effective 5/11/2016 and applies to any misappropriation that occurred on

or after 5/11/2016 • Similar to Uniform Trade Secrets Act

• But the definition pulls in interstate commerce • The DTSA grants district courts “original jurisdiction” for an action “for misappropriation of a

trade secret that is related to a product or service used in, or intended for use in, interstate or foreign commerce.” This provision has raised the question over how courts will interpret the term “related” to a product or service used in or intended to be used in interstate or foreign commerce.

• Three year statute of limitations • Similar remedies • No requirement to state trade secrets with particularity • Prohibits injunctive relief based on inevitable disclosure doctrine

• But still can in some states; ability to injunctive relief against employee going to competitor based on knowledge in head

The Defend Trade Secrets Act of 2016

• Provides ex parte seizure procedure

• Extraordinary circumstances where the party against whom the seizure is ordered “would destroy, move, hide, or otherwise make such matter inaccessible to the court, if the applicant were to proceed on notice to such person…”

• May be carried out immediately

• Hearing not less than 7 days after issuance of order

• Protects whistleblowers who disclose trade secret information in confidence to government officials or private attorneys for purpose of reporting or investigating suspected violations of law


• Practice Pointers

• Update employment and confidentiality agreements to disclose whistleblower immunity (or cross reference a policy document)

• Failure to disclose defeats eligibility to recover double damages and attorneys’ fees in litigation (but can under Uniform Trade Secrets Acts)

• Reevaluate tolerance for bringing trade secret claims

• Federal courts have smaller case loads and less delay

• Review trade secret materials and evaluate protections to maintain their confidentiality

• Develop response plan for suspected misappropriation and seizure order

• Decide in advance how you will respond to minimize business disruption and facilitate an immediate response to misappropriation


• Most Theft is Internal

• Risky Situations

• Creating Awareness

• The Policy • Training

• Computer Banner at Log-In

• Exiting Employees

• Risky Business

• High Risk Factors

Making it Real: Practical Tips for the Workplace

• Threats come from both internal and external sources

• “In over 85% of trade secret cases, the alleged misappropriator was someone the trade secret owner knew—either an employee or a business partner.” • David S. Almeling et al., A Statistical Analysis of Trade Secret Litigation in Federal

Courts, 45 Gonz. L. Rev. 291, 294 (2009-2010).

• Employee awareness and vigilance is key

Most Theft is Internal

• Sharing trade secrets with the manufacturing operation in [China]

• Trade secrets maintained electronically

• Trade secrets in the freezer – under lock and key

• Customer requests for information and the cooperative employee

• The mobile workforce . . . . Working from home

Risky Situations

Have a Trade Secret Policy

Provide Training on the Policy

Use Computer Banners at Log-in

Creating Awareness

• Educates: • Describe trade secrets, confidential information, and the difference

• Practical guidance on how to handle --- electronic best practices; rules on sharing outside the company; tips when traveling

• Warns: • How to report suspected trade secret violations

• This is especially important in light of the Defend Trade Secrets Act of 2016

• Ideally this is set forth in the employment agreement or in a confidentiality agreement but can also be done by cross referencing to a policy document that is given to employees and sets forth reporting requirements for suspected violations of law

• Possible consequences of disclosing or stealing trade secrets

The Policy

• Train employees

• At least once for all employees; periodically for those with frequent access

• Give realistic examples

• Additional or separate training for managers

• Includes education on risky employee behaviors

• Emphasize the key role (and responsibility) they have to protect and report

The Policy - Training

• Reminds them of the ownership and appropriate use of the computer and electronic records

• Reminds them of acceptable use of the system and information (Acceptable Use and Trade Secret Policies)

• Warns them of the consequences for unauthorized or improper use

• Ideally, requires them to acknowledge agreement by clicking a Yes or No Button.

The Policy – Computer Banner at Log-In

• Next job ?

• Copies of relevant agreements and a “continuing obligations” letter

• Return of property and devices

• Home files and copies

• Log in and password info for company sites operated by employees

• Disable access – to the building, computers, etc.

• HR should use an Exit Interview Checklist to document; employee acknowledgment ideal

• Offer Letter

The Policy – Exiting Employees

• A mid-level employee was known to have expensive season tickets for basketball games and always had tickets to popular concerts. He traveled frequently and ate at expensive restaurants. The employee often submitted strange and questionable expense reports.

• A conscientious employee flagged one such report and the company began to investigate.

• The company placed the employee on administrative leave and investigated. That same day, the employee took thousands of trade secret documents from his work computer.

Economic Espionage, Federal Bureau of Investigation

Risky Business

• A software engineer and Chinese national worked for a US company for five years. In her fourth year of work, she began acting depressed and increasingly isolated at work, and complained to co-workers about being underappreciated and overworked.

• She made two personal trips to China that year to “visit an elderly parent,” although earlier in her career her manager thought she mentioned her parents were deceased.

• Before her third trip, she left her workspace unusually clean. Her manager was suspicious; the company investigated IT usage patterns.

• She was arrested at the airport with thousands of electronic records with valuable trade secrets.


Risky Business continued

Employee – without need or authorization – • Takes trade secrets home

• Asks about trade secrets without business need-to-know

• Accesses trade secrets remotely while “on vacation” or “out sick,” or at other unusual times.

• Works unusual hours during non-standard work times

• Has short trips to other countries for unexplained or peculiar reasons

• Engages in suspicious contact with competitors, customers, or other unauthorized individuals.


High Risk Factors – Employee Behaviors

• Greed or financial need • E.g., excessive debt or expenses, living beyond means

• Angry or disgruntled to the point of retaliation • Job dissatisfaction, disagreements with co-workers, potential layoff • Has loyalty to another person, company, or country • Seeks excitement; is intrigued by clandestine activity • Vulnerable to blackmail

• E.g. extra-marital affairs, gambling, addiction, fraud

• Excessive time pressure at work • While rushed may fail to secure trade secret information or not fully consider the

consequences of his or her actions.


High Risk Factors – Personal Factors