1 SSHHHH! It’s a Trade Secret Baron & Lamoureux. 2 A Trade Secret is Information: that has economic value that is not generally known over which

11

SSHHHH! ItSSHHHH! It’’s a Trade Secrets a Trade Secret

Baron & LamoureuxBaron & Lamoureux

22

A Trade Secret is A Trade Secret is Information: Information:

that has economic valuethat has economic value that is not generally knownthat is not generally known over which reasonable efforts over which reasonable efforts to maintain secrecy have taken to maintain secrecy have taken place.place.

33

Types of Trade Secret Types of Trade Secret InformationInformation

Technical or non-Technical or non-technical datatechnical data

FormulaFormula PatternPattern CompilationCompilation ProgramProgram DeviceDevice

MethodMethod TechniqueTechnique DrawingDrawing ProcessProcess Financial dataFinancial data List of actual or List of actual or

potential customerspotential customers

44

Economic ValueEconomic Value

Actual (could be Actual (could be development/implementation costs; lost development/implementation costs; lost profits, etc.)profits, etc.)

Potential (value that would have been Potential (value that would have been gained had the secret not been gained had the secret not been misappropriated). misappropriated).

55

Availability of InformationAvailability of Information

Not generally known by competitorsNot generally known by competitors

66

““ReasonableReasonable”” Efforts to Maintain Efforts to Maintain SecrecySecrecy

Absolute secrecy Absolute secrecy notnot required required Reasonable under the circumstancesReasonable under the circumstances Comprehensive programComprehensive program

77

Examples of Methods to Examples of Methods to Maintain SecrecyMaintain Secrecy

Lock & KeyLock & Key PasswordsPasswords Restricted accessRestricted access Sign-in sheetsSign-in sheets Confidential stampsConfidential stamps Non-Disclosure AgreementsNon-Disclosure Agreements

““BewareBeware”” of of

Agreements you are bound by under Agreements you are bound by under terms of employment.terms of employment.

Employer expectations and behavior that Employer expectations and behavior that may be inappropriate (turning you into a may be inappropriate (turning you into a spy)spy)

Questions you ask your new employees Questions you ask your new employees about their former employment.about their former employment.

88

99

The sum may be a trade secret, even if each part is not.

1010

Advantages/Disadvantages of Advantages/Disadvantages of Trade SecretsTrade Secrets

No time limitNo time limit No public disclosureNo public disclosure No governmental filing processNo governmental filing process

Depends on employee-employer Depends on employee-employer relationships, and those can change.relationships, and those can change.

PandoraPandora’’s box s box May distract from your knittingMay distract from your knitting

1111

What Law GovernsWhat Law Governs

Historically – Common LawHistorically – Common Law Uniform Trade Secrets ActUniform Trade Secrets Act Illinois Trade Secrets ActIllinois Trade Secrets Act Economic Espionage ActEconomic Espionage Act [the American Law Institutue[the American Law Institutue’’s s

Restatement of Torts, 1939 – and Restatement of Torts, 1939 – and subsequent updates—have/has played subsequent updates—have/has played an important interpretative role.an important interpretative role.

1212

Historically – Common Law – Historically – Common Law – Six Factor TestSix Factor Test

1.1. Extent known outside companyExtent known outside company

2.2. Extent known by employeesExtent known by employees

3.3. Measures taken to guard secrecyMeasures taken to guard secrecy

4.4. Value to company and competitorsValue to company and competitors

5.5. Time, effort and money to developTime, effort and money to develop

6.6. Difficulty of proper acquisitionDifficulty of proper acquisition

1313

Uniform Trade Secrets ActUniform Trade Secrets Act

1.1. Adopted by nearly 40 statesAdopted by nearly 40 states

1414

Illinois Trade Secrets ActIllinois Trade Secrets Act

1.1. Effective since 1988Effective since 1988

2.2. Adjunct to common lawAdjunct to common law

3.3. Gives Gives ““teethteeth”” to infringement claims to infringement claims

1515

Illinois Trade Secrets ActIllinois Trade Secrets Act

RemediesRemedies InjunctionInjunction Compensatory damagesCompensatory damages Punitive damagesPunitive damages AttorneyAttorney’’s feess fees

1616

Economic Espionage ActEconomic Espionage Act

Gives U.S. Attorney sweeping powers to Gives U.S. Attorney sweeping powers to prosecute any person or company prosecute any person or company involved in trade secret misappropriationinvolved in trade secret misappropriation

Punishes intentional stealing, copying or Punishes intentional stealing, copying or receiving of trade secretsreceiving of trade secrets

For product produced or placed in For product produced or placed in interstate commerceinterstate commerce

1717

Economic Espionage ActEconomic Espionage Act

PenalitiesPenalities Individual fines up to $500,000Individual fines up to $500,000 Company fines up to $5 millionCompany fines up to $5 million Prison – up to 10 years for individuals and 15 Prison – up to 10 years for individuals and 15

years if theft performed for foreign years if theft performed for foreign governmentgovernment

1818

Proper Methods to Obtain Trade Proper Methods to Obtain Trade SecretsSecrets

Legitimate ObservationLegitimate Observation Reverse EngineeringReverse Engineering Independent InventionIndependent Invention

DVD Copy Control Assn., Inc. v. Bunner, 31 Cal. DVD Copy Control Assn., Inc. v. Bunner, 31 Cal. 4th 864, 889 (2003)4th 864, 889 (2003)

DVD-CCA v. Bunner, Court of Appeals of the State DVD-CCA v. Bunner, Court of Appeals of the State of California, 6th Appellateof California, 6th AppellateDistrict, HO21153 Santa Clara County Super. CT. District, HO21153 Santa Clara County Super. CT. No. CV786804, (Feb.No. CV786804, (Feb.27, 2004)27, 2004)

Trial court issued injunction, CA court reversed, Trial court issued injunction, CA court reversed, CA SC remanded [perhaps compromising the free CA SC remanded [perhaps compromising the free speech claim], DVD-CCA withdrew.speech claim], DVD-CCA withdrew.

Lessons? Free speech may not protect hacking; Lessons? Free speech may not protect hacking; the internet is the ultimate Pandorathe internet is the ultimate Pandora’’s boxs box

1919

McRoberts Software Inc. v. Media 100 Inc., 329 F.3d McRoberts Software Inc. v. Media 100 Inc., 329 F.3d 557 (7th Cir. 2003)557 (7th Cir. 2003)

The 7th Circuit noted that it is The 7th Circuit noted that it is possible to recover possible to recover damages based on more than one legal theory in damages based on more than one legal theory in the same suit,the same suit, provided the plaintiff provides provided the plaintiff provides sufficient evidence of his injuries. [Copyright sufficient evidence of his injuries. [Copyright infringement and trade secret misappropriation].infringement and trade secret misappropriation].

7th Circuit held that it was an error for the District 7th Circuit held that it was an error for the District Court to vacate the juryCourt to vacate the jury’’s award of $300,000 to MSI s award of $300,000 to MSI for trade secret damages as duplicative of the for trade secret damages as duplicative of the copyright infringement damagescopyright infringement damages

2020

IDX Systems Corp. v. Epic Systems, Corp., IDX Systems Corp. v. Epic Systems, Corp., 285 F.3d 581 (7th Cir. 2002)285 F.3d 581 (7th Cir. 2002)

ItIt’’s not good enough to just show that s not good enough to just show that valuable information has been transferred. valuable information has been transferred.

One has to be able to specify which part(s) One has to be able to specify which part(s) were protected, how they were protected, were protected, how they were protected, and specifically that the alleged violation and specifically that the alleged violation involved those parts.involved those parts.

2121

EF Cultural Travel BV v. Explorica, Inc., 274 EF Cultural Travel BV v. Explorica, Inc., 274 F.3d 577 (1st Cir. 2001)F.3d 577 (1st Cir. 2001)

In many instances, you canIn many instances, you can’’t take what t take what you know with you and apply it in direct you know with you and apply it in direct competition against your former employer. competition against your former employer.

Note here, though, that without the Note here, though, that without the contractual agreement, itcontractual agreement, it’’s possible this s possible this case could have gone the other way. case could have gone the other way.

2222

ClearOne v. Chiang (2007)ClearOne v. Chiang (2007)

Court = USDC UtahCourt = USDC Utah Plaintiff = ClearOne = Maker of wideband Plaintiff = ClearOne = Maker of wideband

codecode Defendants = Biamp licenses object code Defendants = Biamp licenses object code

from Widebandfrom Wideband The fightThe fight’’s about whether the code is a s about whether the code is a

trade secrettrade secret The posture: Biamp files a motion to The posture: Biamp files a motion to

dismissdismiss


Biamp says: it canBiamp says: it can’’t read the object code; only t read the object code; only machines can read object code.machines can read object code.

Court says: who cares. It doesnCourt says: who cares. It doesn’’t matter.t matter. Biam says: object code was publicly available.Biam says: object code was publicly available. Court says: who cares. Even if object code Court says: who cares. Even if object code

available, the source code (human readable) available, the source code (human readable) may still be protectable trade secret.may still be protectable trade secret.

Result: Motion to dismiss complaint denied.Result: Motion to dismiss complaint denied.

Cenveo Corp. v. Southern Cenveo Corp. v. Southern Graphic, et al (1-22-09)Graphic, et al (1-22-09)

Court = US DC MinnesotaCourt = US DC Minnesota Plaintiff = CenveoPlaintiff = Cenveo Defendants = Southern Graphic and indiv.Defendants = Southern Graphic and indiv. Fight = Cenveo wants to stop SG from Fight = Cenveo wants to stop SG from

working with past and current Cenveo working with past and current Cenveo clients and using proprietary info.clients and using proprietary info.

Court to decide whether to enter Court to decide whether to enter preliminary injunction.preliminary injunction.

Cenveo Corp. v. Southern Cenveo Corp. v. Southern Graphic (1-22-09)Graphic (1-22-09)

Court decides:Court decides: Grants preliminary injunction in part and Grants preliminary injunction in part and

denies in part.denies in part. What are alleged trade secrets:What are alleged trade secrets:

Job history information Job history information USB flash driveUSB flash drive


Court = USDC UtahCourt = USDC Utah Plaintiff = ClearOne = Maker of wideband Plaintiff = ClearOne = Maker of wideband

codecode Defendants = Biamp licenses object code Defendants = Biamp licenses object code

from Widebandfrom Wideband The fightThe fight’’s about whether the code is a s about whether the code is a

trade secrettrade secret The posture: Biamp files a motion to The posture: Biamp files a motion to

dismissdismiss


Biamp says: it canBiamp says: it can’’t read the object code; only t read the object code; only machines can read object code.machines can read object code.

Court says: who cares. It doesnCourt says: who cares. It doesn’’t matter.t matter. Biam says: object code was publicly available.Biam says: object code was publicly available. Court says: who cares. Even if object code Court says: who cares. Even if object code

available, the source code (human readable) available, the source code (human readable) may still be protectable trade secret.may still be protectable trade secret.

Result: Motion to dismiss complaint denied.Result: Motion to dismiss complaint denied.

Taco Bell v. TBWA (2009)Taco Bell v. TBWA (2009)

http://www.youtube.com/watch?v=M8sZ1DWsAHE/


Court = Ninth Circuit Court of AppealsCourt = Ninth Circuit Court of Appeals Plaintiff/Appellant = Taco BellPlaintiff/Appellant = Taco Bell Defendant/Appellee = TBWADefendant/Appellee = TBWA TheyThey’’re fightinre fightin’’ about who should pay for about who should pay for

the use of the psycho chihuahua the use of the psycho chihuahua character.character.

The confidential TS is the concept of using The confidential TS is the concept of using a psycho chihuahua as a Taco Bell a psycho chihuahua as a Taco Bell mascotmascot


Underlying case: Wrench v. Taco BellUnderlying case: Wrench v. Taco Bell Jury finds that Taco Bell breached and Jury finds that Taco Bell breached and

implied confidentiality agreement.implied confidentiality agreement. Awards Wrench $30 million, which mounts to Awards Wrench $30 million, which mounts to

$42 million with interest.$42 million with interest.


This case:This case: Question presented: Is Taco BellQuestion presented: Is Taco Bell’’s ad s ad

agency, TBWA, liable for agency, TBWA, liable for ““indemnityindemnity”” to Taco to Taco Bell?Bell?

Trial court granted summary judgment for Trial court granted summary judgment for TBWA.TBWA.

Ninth Circuit agrees: TBWA not aware of Ninth Circuit agrees: TBWA not aware of implied contract b/t Taco Bell and Wrench.implied contract b/t Taco Bell and Wrench.

Spring Design, Inc. v. Barnesandnoble.com (N.D. Cal. Dec. 27, 2010)

• Spring Design and B&N discuss doing a reader together; talks break off

• Both come out with a reader; Spring Design sues for trade secret misappropriation and Unfair competition.

• B&N files for summary judgment (dismissal). Gets dismissal on 1 of 4 patents (due to a public patent filing), but loses on the other claims that might set the case aside. NDA’s were signed that cause the court to be willing to examine the claims of fact.

• Pretty typical here: the side that loses at summary judgment will sometimes settle rather than go to trial:

• B&N settles with a licensing agreement.

Trade Secrets Take AwayTrade Secrets Take Away Any information can fall within the ambit of trade secrets if its secret, Any information can fall within the ambit of trade secrets if its secret,

you take reasonable steps to maintain secrecy and the info has you take reasonable steps to maintain secrecy and the info has economic valueeconomic value

(e.g. source code, customer data, pre-public ad campaign) (e.g. source code, customer data, pre-public ad campaign) Non-competes should be reasonable in scope and geography.Non-competes should be reasonable in scope and geography. Even if you donEven if you don’’t sign a contract, you owe a t sign a contract, you owe a ““duty of loyaltyduty of loyalty”” to your to your

employer and a duty to maintain confidentiality.employer and a duty to maintain confidentiality. When you leave a company, donWhen you leave a company, don’’t download company data onto t download company data onto

your own computer or a flash drive.your own computer or a flash drive. ThereThere’’s no worse way to start a new employment relationship s no worse way to start a new employment relationship

than to invite a lawsuit against you and your new employer.than to invite a lawsuit against you and your new employer.

Trade Secrets Take AwayTrade Secrets Take Away

Be careful what information you get and from whom.Be careful what information you get and from whom. In the world of advertising, it ainIn the world of advertising, it ain’’t over til wet over til we’’ve sorted out who ve sorted out who

has to pay $40 million.has to pay $40 million. E.g Taco Bell or its Ad Agency?E.g Taco Bell or its Ad Agency? Where a company (Taco Bell) supplies content to its agency but Where a company (Taco Bell) supplies content to its agency but

fails to disclose that it had a contract with the creator of the fails to disclose that it had a contract with the creator of the content not to disclose, no indemnity.content not to disclose, no indemnity.

Understand what it means to indemnify another partyUnderstand what it means to indemnify another party i.e. Assume the legal responsibility to pay if they get hit by a i.e. Assume the legal responsibility to pay if they get hit by a

money judgmentmoney judgment

Trade Secrets Take AwayTrade Secrets Take Away

Once the catOnce the cat’’s out of the bag, its out of the bag, it’’s tough to get it back in.s tough to get it back in. CourtCourt’’s favor injunctive relief in trade secret cases.s favor injunctive relief in trade secret cases. You canYou can’’t cover your tracks on a computer so dont cover your tracks on a computer so don’’t try.t try.

Computer forensic experts will get youComputer forensic experts will get you You may subject yourself to claims under the Computer Fraud and You may subject yourself to claims under the Computer Fraud and

Abuse ActAbuse Act

Confidentiality AgreementsConfidentiality Agreements

Protects against disclosure of confidential Protects against disclosure of confidential information and trade secrets of employer.information and trade secrets of employer.

Term: during employment and potentially Term: during employment and potentially forever.forever.

May not cover stuff you already know. But, how May not cover stuff you already know. But, how do you prove you already knew it.do you prove you already knew it.

Check terms of employee handbook.Check terms of employee handbook.

Confidentiality AgreementsConfidentiality Agreements Confidentiality. Employee will not disclose any Confidential Information to any person or entity for Confidentiality. Employee will not disclose any Confidential Information to any person or entity for

any reason, except as required to perform its obligations under this Agreement. For purposes of any reason, except as required to perform its obligations under this Agreement. For purposes of this Agreement, Confidential Information shall include the financial terms of this Agreement and this Agreement, Confidential Information shall include the financial terms of this Agreement and all records, reports, documents, designs, plans, contracts, literature, data, concepts, ideas, all records, reports, documents, designs, plans, contracts, literature, data, concepts, ideas, software, computer programs, source code, object code, information, memoranda, software, computer programs, source code, object code, information, memoranda, correspondence, and other material created, developed or used by Employer or Employee correspondence, and other material created, developed or used by Employer or Employee pursuant to this Agreement, or delivered or transmitted to Employer by Employee pursuant to this pursuant to this Agreement, or delivered or transmitted to Employer by Employee pursuant to this Agreement or otherwise. Confidential Information shall also include information in EmployeeAgreement or otherwise. Confidential Information shall also include information in Employee ’’s s knowledge or possession concerning Employerknowledge or possession concerning Employer’’s business, marketing, administrative, s business, marketing, administrative, advertising, budgeting or organizational plans, practices, policies and procedures, as well as advertising, budgeting or organizational plans, practices, policies and procedures, as well as EmployerEmployer’’s customer lists and scientific or technical information, Employers customer lists and scientific or technical information, Employer ’’s advertising rates, s advertising rates, information about users of any Employer Web site, and any traffic patterns or usage information information about users of any Employer Web site, and any traffic patterns or usage information about Employer Web sites, regardless of whether such knowledge or information was obtained about Employer Web sites, regardless of whether such knowledge or information was obtained pursuant to this Agreement or otherwise. Employer shall own all rights, title and interest in all pursuant to this Agreement or otherwise. Employer shall own all rights, title and interest in all Confidential Information. Employee acknowledges that much of this information constitutes trade Confidential Information. Employee acknowledges that much of this information constitutes trade secrets or proprietary information unique to Employer, and that disclosure in breach of this secrets or proprietary information unique to Employer, and that disclosure in breach of this Paragraph will result in irreparable injury to Employer for which Employer shall be entitled to Paragraph will result in irreparable injury to Employer for which Employer shall be entitled to injunctive relief in addition to all other remedies available at law or in equity.injunctive relief in addition to all other remedies available at law or in equity.

Non-Competition Agreements/Restrictive CovenantsNon-Competition Agreements/Restrictive Covenants

Prevent employee/independent contractor from engaging in work or projects that may Prevent employee/independent contractor from engaging in work or projects that may compete with business of employer.compete with business of employer.

Disfavored (but enforceable) under the law.Disfavored (but enforceable) under the law. Must be limited in scope, geography and time.Must be limited in scope, geography and time. No bright line test on whatNo bright line test on what’’s acceptable.s acceptable.

Non-Competition Agreements/Restrictive CovenantsNon-Competition Agreements/Restrictive Covenants

Upon termination of this Agreement and/or the date Optometrist ceases to perform services for Upon termination of this Agreement and/or the date Optometrist ceases to perform services for Corporation for any reason, with the sole exceptions of termination by the Optometrist for Corporation for any reason, with the sole exceptions of termination by the Optometrist for ““CauseCause”” as defined in Section 14(b), or termination by Corporation without cause pursuant to Section as defined in Section 14(b), or termination by Corporation without cause pursuant to Section 13(b), and for a period of 13(b), and for a period of five (5) yearsfive (5) years following termination, Optometrist will not, without written following termination, Optometrist will not, without written consent of Corporation, engage in consent of Corporation, engage in the Practice of Optometrythe Practice of Optometry (i) at either of the ___________, or (i) at either of the ___________, or (ii) at any other facility within the Service Area.(ii) at any other facility within the Service Area. The parties agree that these covenants are The parties agree that these covenants are necessary to protect the activities of Corporation and the professional practices of employees of necessary to protect the activities of Corporation and the professional practices of employees of Corporation. Optometrist agrees that any breach of these restrictive covenants will result in Corporation. Optometrist agrees that any breach of these restrictive covenants will result in irreparable damage to Corporation for which it will have no adequate remedy at law, and hereby irreparable damage to Corporation for which it will have no adequate remedy at law, and hereby consents to an injunction by any court of competent jurisdiction in favor of Corporation enjoining consents to an injunction by any court of competent jurisdiction in favor of Corporation enjoining any breach of such covenants, without prejudice to any other right or remedy to which any breach of such covenants, without prejudice to any other right or remedy to which Corporation may be entitled. If Corporation institutes a suit or takes action against Optometrist Corporation may be entitled. If Corporation institutes a suit or takes action against Optometrist for violation of or to enforce this Section 16, Corporation shall be entitled to all of its costs and for violation of or to enforce this Section 16, Corporation shall be entitled to all of its costs and expenses, including, without limitation, reasonable attorneyexpenses, including, without limitation, reasonable attorney’’s fees. In the event that these s fees. In the event that these covenants shall be determined by any court of competent jurisdiction to be unenforceable by covenants shall be determined by any court of competent jurisdiction to be unenforceable by reason of their being extended to too great a period of time or too large a geographic area or over reason of their being extended to too great a period of time or too large a geographic area or over too great a range of activities, they should be interpreted to extend only over the maximum period too great a range of activities, they should be interpreted to extend only over the maximum period of time, geographic area, or range of activities as to which they may be enforceable.of time, geographic area, or range of activities as to which they may be enforceable.

Non-Disclosure Agreements (Non-Disclosure Agreements (““NDAsNDAs””))

Like confidentiality agreement but may be used outside of employment context.Like confidentiality agreement but may be used outside of employment context. Presenting ideas to:Presenting ideas to:

• Venture capital firmVenture capital firm• Other funding sourceOther funding source• Potential joint venturerPotential joint venturer• Potential business partner.Potential business partner.

Coady v. Harpo, Inc., 308 Ill.App.3d Coady v. Harpo, Inc., 308 Ill.App.3d 153 (1153 (1stst Dist. 1999) Dist. 1999)


Post-employment restrictive covenant.Post-employment restrictive covenant. Senior Associate Producer seeks DJ of non-Senior Associate Producer seeks DJ of non-

enforceablility.enforceablility. Prohibitions in contract:Prohibitions in contract:

During contract and thereafter (i.e. forever)During contract and thereafter (i.e. forever) CanCan’’t reveal info about:t reveal info about:

• Oprah, her business or private life;Oprah, her business or private life;• Business and dealings of Harpo;Business and dealings of Harpo;• HarpoHarpo’’s employment practices and policiess employment practices and policies

CanCan’’t give or participate in interviews about Opraht give or participate in interviews about Oprah


CourtCourt’’s rationale:s rationale: No restraint on plaintiffNo restraint on plaintiff’’s future career.s future career. No restraint on commerce.No restraint on commerce. Forever is ok.Forever is ok.

• ““Whether for better or for worse, interest in a Whether for better or for worse, interest in a celebrity figure and his or her attendant business celebrity figure and his or her attendant business and personal venture somehow seems to continue and personal venture somehow seems to continue endlessly, even long after death, and often, as in endlessly, even long after death, and often, as in the present case, extends over an international the present case, extends over an international domain.domain.””

RKI, Inc. v. Grimes, 177 F. Supp. RKI, Inc. v. Grimes, 177 F. Supp. 2d 859 (N.D. Ill. 2001)2d 859 (N.D. Ill. 2001)

““This is a case about how an employee This is a case about how an employee who signed a non-disclosure and non-who signed a non-disclosure and non-compete agreement chose to join a compete agreement chose to join a competitor. This is a textbook case of how competitor. This is a textbook case of how not to do it.not to do it.”” Magistrate Judge Morton DenlowMagistrate Judge Morton Denlow


Employee signs 2-year deal and agrees during Employee signs 2-year deal and agrees during the term and thereafter.the term and thereafter. WonWon’’t reveal t reveal ““Proprietary Information.Proprietary Information.”” PI = PI = ““any and all information including but not limited any and all information including but not limited

to information concerning the design and to information concerning the design and development of tooling used in the Companydevelopment of tooling used in the Company’’s s business, not generally known or recognized as business, not generally known or recognized as standard practices, and information which is disclosed standard practices, and information which is disclosed to … [employee] concerning any and all of the to … [employee] concerning any and all of the technology, research, . . . produced by the Company.technology, research, . . . produced by the Company.


Employee has access to:Employee has access to: Customer contact management system.Customer contact management system. Account contact management software.Account contact management software. Reports with quote, order, cost and profit Reports with quote, order, cost and profit

data.data. Info provided with appropriate safeguards Info provided with appropriate safeguards

(e.g. password protection)(e.g. password protection)


Employee recruited by direct competitor.Employee recruited by direct competitor. Before leaving, employee downloads Before leaving, employee downloads

customer information from databases.customer information from databases. Employee immediately begins to solicit Employee immediately begins to solicit

former employerformer employer’’s customers.s customers. Held: Confidentiality provision of contract Held: Confidentiality provision of contract

was enforceable, and employee breached.was enforceable, and employee breached.

Nilssen v. Motorola, Inc., 963 F. Nilssen v. Motorola, Inc., 963 F. Supp. 664 (N.D. Ill. 1997)Supp. 664 (N.D. Ill. 1997)

Nilsson approaches Motorola about electronic Nilsson approaches Motorola about electronic ballasts.ballasts.

Discussions ensue over several yearsDiscussions ensue over several years In midst of discussions, parties enter a In midst of discussions, parties enter a

confidentiality agreement.confidentiality agreement. Motorola afforded Nilsson opportunity to Motorola afforded Nilsson opportunity to

retroactively label material retroactively label material ““confidential.confidential.”” Trade secret litigation erupts.Trade secret litigation erupts. Court finds no implied duty of non-disclosure in Court finds no implied duty of non-disclosure in

the face of express contract.the face of express contract.

Pope v. Alberto-Culver Company, Pope v. Alberto-Culver Company, 296 Ill.App.3d 512 (1296 Ill.App.3d 512 (1stst Dist. 1998) Dist. 1998)

P approaches AC with proposal to use a plastic P approaches AC with proposal to use a plastic tube to contain and apply lye-based hair relaxer.tube to contain and apply lye-based hair relaxer.

P and AC execute a non-disclosure agreement: P and AC execute a non-disclosure agreement: AC agrees not to disclose or misappropriate any AC agrees not to disclose or misappropriate any trade secrets or confidential information.trade secrets or confidential information.

P and AC do not consummate deal.P and AC do not consummate deal. AC introduces lye-based hair relaxer in a tube.AC introduces lye-based hair relaxer in a tube. P sues. Who wins?P sues. Who wins?



Placement of a lye relaxer in an already existing Placement of a lye relaxer in an already existing tube and using tube to apply relaxer were easily tube and using tube to apply relaxer were easily within realm of general skills and knowledge.within realm of general skills and knowledge.

A design process that can be readily ascertained A design process that can be readily ascertained from an examination of the product itself cannot from an examination of the product itself cannot be a trade secret.be a trade secret.

NDA of no help: excluded information that is NDA of no help: excluded information that is generally available to the public or becomes generally available to the public or becomes available through no fault of AC.available through no fault of AC.

Learning Curve Toys v. Playwood Learning Curve Toys v. Playwood Toys, 342 F.3d 714 (7Toys, 342 F.3d 714 (7thth Cir. 2003) Cir. 2003)

LC and PT meet to discuss potential business LC and PT meet to discuss potential business venture regarding toy train business.venture regarding toy train business.

LC and PT enter into an oral confidentiality LC and PT enter into an oral confidentiality agreement.agreement.

PT discloses to LC a method of making realistic PT discloses to LC a method of making realistic ““Clickety-ClackClickety-Clack”” wooden train tracks. wooden train tracks.

LC and PT do not enter into business LC and PT do not enter into business agreement.agreement.

LC went on to sell the Clickety-Clack track.LC went on to sell the Clickety-Clack track. PT sued for misappropriation of trade secrets.PT sued for misappropriation of trade secrets. Who wins?Who wins?

Learning Curve Toys v. Playwood Learning Curve Toys v. Playwood Toys, 342 F.3d 714 (7Toys, 342 F.3d 714 (7thth Cir. 2003) Cir. 2003)

Not ThomasNot Thomas

So, what have we learned?So, what have we learned? An NDA can last forever (if it does not restrain trade or employment).An NDA can last forever (if it does not restrain trade or employment). When drafting, be broad but be specific in defining information covered and When drafting, be broad but be specific in defining information covered and

permitted uses.permitted uses. An NDA will not protect information that is otherwise generally available.An NDA will not protect information that is otherwise generally available. NDAs enforceable only if reasonable efforts made to keep information NDAs enforceable only if reasonable efforts made to keep information

confidential. (i.e. same level of care given to trade secrets).confidential. (i.e. same level of care given to trade secrets). NDANDA’’s can cover confidential customer information.s can cover confidential customer information. Faced with an express NDA, courts will not find an implied duty of non-Faced with an express NDA, courts will not find an implied duty of non-

disclosure (but employee may owe duties of loyalty etc.).disclosure (but employee may owe duties of loyalty etc.). Follow NDAFollow NDA’’s provisions (e.g. proper marking on documents).s provisions (e.g. proper marking on documents). Parties may be bound by oral NDAParties may be bound by oral NDA’’s.s. In Illinois, courts seem to follow all-or-nothing approach (not In Illinois, courts seem to follow all-or-nothing approach (not ““blue pencilblue pencil””).).

Documents

1 SSHHHH! It’s a Trade Secret Baron & Lamoureux. 2 A Trade Secret is Information: that has economic value that is not generally known over which