Trade Secrets By Timothy B. McCormack

Trade Secrets By Timothy B. McCormack

http://www.mccormacklegal.com

Trade Secrets Law Basics

Overview Policy Basis for Trade Secrets Protection Legal Basis for Trade Secrets Protection Protectable Subject Matter Trade Secret Protection Programs Trade Secret Litigation Tips for Defense

and Prosecution

Overview Trade Secrets Law is concerned with

the protection of technological and commercial information not generally known in the trade against unauthorized commercial use by others

A trade secret may be inclusive of patentable subject matter

Policy Basis for Trade Secrets Protection

Encourage research and development by providing protection to the originator of business information

Maintain proper standards of business ethics

See Kewanee Oil Company v. Bicron Corp., 416 U.S. 470 (1970)

Policy Basis for Trade Secrets

Protection(Cont’d) The trade secret owner is not

granted exclusivity to the information, but rather is only protected against improper acquisition and/or use of the information

Others are free to discover a trade secret by any fair means

The most widely-used common law definition of a trade secret was first set forth in the Restatement of Torts, § 757 comment b (1939):

[A trade secret is] [a]ny formula, pattern, device or compilation of information which is used in one’s business, and which gives him an opportunity to obtain an advantage over competitors who do not know or use it.

Legal Basis for Trade Secrets Protection

In recent years, trade secret law has become largely statutory.

The Uniform Trade Secret Act (UTSA) has now been adopted in 46 states and the District of Columbia.

Washington adopted the UTSA as of January 1, 1982. RCW 19.108 et seq.


(Cont’d)

Trade Secret =

1. Information used in business2. Information is secret3. Reasonable efforts to maintain

secrecy4. Provides competitive advantage

The Restatement also lists six factors to be considered in determining the existence of a trade secret: the extent to which the information is known

outside the business; the extent to which it is known by employees

and others involved in the business; the extent of measures taken to guard

the secrecy of the information; the value of the information; the amount of efforts or money expended in

developing the information; and the ease or difficulty with which the information

could be properly acquired or duplicated by others.


Protectable Subject Matter Almost any knowledge or information used

in conjunction with one’s business may be held as a trade secret. Specific examples include: Formulas for chemicals, drugs, cosmetics,

foods, etc. Industrial Processes Technical “know-how” Blueprints and drawings Computer software Sources of supply, pricing information, identity

of vendors or suppliers, and customer lists

Trade Secret Protection Programs

A formalized Trade Secret Protection Program generally consists of three components: employee / contractor relationsdocumentationphysical security

Easy Safeguards Contracts; Contracts; Contracts! Marking Trade Secret Documents as

Confidential Use of Confidential Information

Cover Page Change of Passwords Regularly Education and Awareness Meeting Reminders and Awareness Follow Existing Protocol for Document

Destruction and Retention Maintain Awareness of Physical Security

Precautions E-mail Encryption Colored Badges

Easy Safeguards Controlling plant access to company

files and facility locations; Central control of blueprints and

engineering drawings (software too); Use of security systems and guards; Providing locked storage for sensitive

information such as laboratory notebooks;

Implementation of document protection and retention policies; and

Use of computer passwords and firewalls throughout the organization

Easy Safeguards Establishing/enforcing clear policies about

confidential business information; Identifying technological and technical

information deemed to be secret; Advising/training employees and others of

the existence of trade secrets; Use of nondisclosure and confidentiality

agreements with employees and others; Limiting access to trade secrets on a

“need-to-know-basis”; Trade Secret Audits and Follow-Up Audits

Trade Secret LitigationTips For Defense &

Prosecution Identify the Trade Secrets – Rule

30(b)(6) Motions In Limine (prima face) Protective Orders Motion to Dismiss - Rule 12(b)(6) Summary Judgment – Rule 56

Special Topics: Inevitable Trade Secret

Misappropriation Under the common law, liability for trade secret misappropriation

required acquisition by another by improper conduct or unfair means together with the use or disclosure by such person to the trade secret owner’s detriment.

Under the UTSA, the definition of misappropriation is much broader; it can include simple acquisition of a trade secret by a person who knows or has reason to know that the trade secret was acquired by improper means – no subsequent or impending use of the trade secret is required.

Special Topics: State Criminal Laws Ala. Code Section 13A-8-10.4 (Supp. 1986)

Ark. Stat. Ann. §§ 41-2201; 41-2207 (1977) Cal. Pen. Code Ann. § 499c Colo. Rev. Stat. § 18-4-

408 (Fla. Stat. Ann. § 812.081 (West 1976 and Supp.

1986) Ga. Code Ann. § 16-8-13 (1984) Ill. Rev. Stat. ch. 38, § 15-1 (Smith-Hurd Supp. 1986) La. Rev. Stat. Ann. §§ 14:73.1, 14:73.2 (West 1986) Me. Rev. Stat. Ann. Title 17-A § 352 (1964) Mass. Ann. Laws ch. 266 § 30(4) (1986) Mich. Comp. Laws §§ 752.771 to 752.773 (1991) Minn. Stat. Ann. § 609.52 (Supp. 1986) Mo. Stat. Ann. §§ 569.093, 579.095 N.H. Rev. Stat. Ann. § 637:2 (1974) N.J. Stat. Ann. § 2c:20-1 (Supp. 1986) N.M. Stat. Chap. 30 § 30-16-24 N.Y. Consol. Laws Ann., Penal § 155 (McKinney 1975) Ohio Rev. Code Ann. § 1333.51 Okla. Stat. Ann. Title 21 § 1732 (1983) Pa. Consol. Stat. Ann. Title 18 § 3930 (Purdon 1983)

Tenn. Code Ann. § 39-3-1126 (1982) Tex. Pen Code Ann. § 31.05 (Vernon 1974) V.I. Code Ann. tit. 14, § 1665 (1992) RCW § 9A.56.010 Wis. Stat. Ann. § 943.205 Wyo. Stat. § 6-3-502 (1992)

Contact Information

Timothy B. McCormackAttorney at Law

COURIER/MAILING ADDRESS

617 Lee StreetSeattle, WA 98109 USA

DIAL ADDRESSTelephone 206.381.8888Facsimile 206.381.1988

INTERNET ADDRESSwww.McCormackLegal.com

E: [email protected]