Trade Secrets

Trade Secrets IntroductionLet’s begin our discussion of trade secrets

with the following video and article(Video) “

Shh! Food trade secrets you'll never know”(Article) “Closely Guarded Secrets”

Legal Environment of Business - Jeffrey Pittman 2

http://video.search.yahoo.com/search/video;_ylt=A2KLqIV.RdJOYkQAyIP7w8QF;_ylu=X3oDMTBncGdyMzQ0BHNlYwNzZWFyY2gEdnRpZAM-?p=trade+secrets+-+coca-cola&fr=fptb-yff40&ei=utf-8&n=21&tnr=20

http://iamsamuel.org/2008/10/24/closely-guarded-secrets/

Famous Trade SecretsKentucky Fried Chicken (KFC) - “Famous trade

secret comes home to beefed-up security”Notice steps taken to protect security of secret

Lockheed – “The Cost of Misconduct”Notice lack of diligence regarding trade secret

Coca-Cola – “World’s most famous trade secret revealed?” and “Original Recipe”


Famous Trade SecretsListerine – “Trade Secret Licensing: The

"Listerine" Formula Case”


Trade Secret DefinitionA trade secret is secret information owned or

developed by a business that gives it a competitive advantage


Sources of Trade Secret LawsIn the United States, trade secret protections

come from a combination of state and federal laws


Trade Secret Subject MatterUnder United States law, trade secret law

protects information, including a formula, pattern, compilation, program, device, method, technique, or process, that:Derives independent economic value from not

being generally known or readily ascertainable by proper means by other persons, and

Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy


Maintaining Trade SecretsCompanies should consider the following methods to

protect trade secrets:Review all company operations and proprietary

information to determine where trade secrets exist Use nondisclosure (confidentiality) agreements

with all individuals having access to the trade secrets, including employees, officers, bankers, vendors, etc.


Maintaining Trade SecretsConsider use of noncompetition agreements

(covenants not to compete)A covenant not to compete is a contract clause

where a person agrees not to engage in a specified business or occupation

The covenant will identify the applicable time and geographic region, e.g., the employee will not leave the company's employ and work in the meat processing industry for the next two years, within the United States


Maintaining Trade SecretsExamine physical and network security

issues:Restrict access to company trade secretsUtilize computer passwords, "confidential"

stamps/legends, record-keeping procedures, entrance and exit interviews, etc.


Covenants not to CompeteCovenants not to compete in employment

contracts are disfavored by the law in many countries, such as the United States

In the United States, employment covenants not to compete usually will be upheld only where the employer has a legitimate business interest to protect, and the time and geographic employment restrictions are reasonable


Covenants not to CompeteRegarding employment contracts, legitimate

business interests have been found where employees were provided special training, or allowed access to trade secrets, confidential business information, or confidential customer lists


Proper MeansTrade secrets may be legally discovered by the

following proper means:Independent invention“Reverse engineering", that is, starting with the

known product and working backward to find the method by which it was developed (assuming the reverse engineering is not prohibited by contract)

Observing the item in public use or on public display

Obtaining the trade secret from published literature


Improper MeansA partial list of improper means includes

theft, bribery, misrepresentation, breach, or inducement of a breach of a duty to maintain secrecy or espionage through electronic or other means


Documents

Trade Secrets