LAW SEMINARS INTERNATIONAL
Trade Secrets for Corporate Counsel
Brad LyerlaMarch 13, 2006
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
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:[email protected](312) 474-9556