PROVING AND DISPROVING TRADE SECRETS Dennis Murrell Robert

PROVING (AND DISPROVING) TRADE SECRETS Dennis Murrell Robert Theuerkauf

THE GREAT CASE • • HIRED BY COCA COLA MOST FAMOUS TRADE SECRET CEO LEFT FOR NEW COMPETITOR WHO NOW HAS A COMPETING PRODUCT

THE CLIENT INTERVIEW

UTSA "Trade Secret" means information, including a formula, pattern, compilation, program, device, method, technique, or process, that: (i) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and(ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. • UTSA adopted by all states exception New York, North Carolina and Massachusetts

PEMBERTON’S RECIPE • • CIVIL WAR VETERAN ADDICTED TO MORPHINE ORIGINAL: KOLA NUT AND COCA WINE CHANGED IN 1886

COCA-COLA COMPANY BUYS RECIPE • BOUGHT IN 1887 • ASA CANDLER INSISTED IT NOT BE WRITTEN DOWN • REMOVED ALL LABELS • SHREDDED INVOICES

MODERN EFFORTS AT SECURITY

HAS VALUE • • HUNDREDS OF COMPETING PRODUCTS 46 BILLION IN SALES IN 2013 SOLD IN OVER 200 COUNTRIES 40% OF MARKET SHARE

DAMAGES AVAILABLE • • LOST PROFITS UNJUST ENRICHMENT PUNITIVE DAMAGES ATTORNEYS FEES

WHAT VENUE? • UTSA – CREATURE OF STATE LAW • CAN BE OUTCOME DETERMINATIVE • CALIFORNIA: CIVIL PROCEDURE SECTION 2019. 210 REQUIRES PLAINTIFF TO “IDENTIFY THE TRADE SECRET WITH REASONABLE PARTICULARITY” PRIOR TO ANY DISCOVERY

STRATEGIC ISSUES FOR DEFENSE • NARROWING DEFINITION OF TRADE SECRET PRIOR TO DISCOVERY • REQUEST IMMEDIATE IDENTIFICATION • POSSIBLY SEEK PROTECTIVE ORDER • ESTABLISH PUBLIC DOMAIN • INDEPENDENT DEVELOPMENT • ELIMINATE OTHER CLAIMS

SEEK A PROTECTIVE ORDER • MANY COURTS BELIEVE “THAT IT IS APPROPRIATE TO REQUIRE A TRADE SECRET OWNER TO STATE ITS CLAIMED TRADE SECRETS BEFORE IT ENGAGES IN DISCOVERY FROM THE DEFENDANT ABOUT THE DEFENDANT’S USE OF THE TRADE SECRETS. ” Brent J. Gurney, Joshua T. Ferrentino, and Alexander B. White, Benefits of Early Discovery in Defending Trade Secret Misappropriation Claims, New York Law Journal, Vol. 249, No. 113 (2013)

FOUR PRINCIPAL REASONS • WEEDS OUT MERITLESS, SPECULATIVE CLAIMS. OTHERWISE PLAINTIFFS WILL MOLD CLAIMS AROUND DISCOVERY. COURT SHOULD “FREEZE” PLAINTIFF’S CLAIMS. • EARLY DISCLOSURE OF TRADE SECRETS PROVIDES BASIS FOR DETERMINING RELEVANCY OF PLAINTIFF’S DISCOVERY • DEFENDANTS CAN ARTICULATE DEFENSES WHEN CLAIMS ARE SPECIFIC, NOT GENERAL • PREVENTS ABUSE OF DISCOVERY PROCESS FOR COMPETITIVE ADVANTAGE

COURTS REQUIRING SPECIFIC DISCLOSURE • ADDITION TO CALIFORNIA CODE • XEROX CORP. V. IBM, 64 FRD 367 (SDNY) • LOCTITE CORP V. FEL-PRO, INC. , 28 FED. R. SERV 2 ND 99 (N. D. ILL) • POROUS MEDIA CORP. MIDLAND BRAKE, INC. , 187 FRD 598 (D. MINN) • DEL MONTE FRESH PRODUCE CO. V. DOLE FOOD CO. , 148 F. SUPP 2 D 1322 (S. D. FLA)

WHAT CONSTITUTES SPECIFIC DISCLOSURE? • MUST BE SPECIFICALLY IDENTIFIED • “IT IS NOT ENOUGH TO POINT TO BROAD AREAS OF TECHNOLOGY AND ASSERT THAT SOMETHING THERE MUST HAVE BEEN SECRETY AND MISAPPROPRIATED. THE PLAINTIFF MUST SHOW CONCRETE SECRETS. ” COMPOSITE MARINE PROPELLERS, INC. V. VAN DER WOUDE, 962 f. 2 D 1263 (7 TH CIR. 1992)

COMPOSITE MARINE PROPELLERS • DEFENDANT HAD SPECIFIC TRADE SECRETS IDENTIFIED • JURY FOUND FOR PLAINTIFF • TRIAL COURT OVERTURNED • 7 TH CIRCUIT AFFIRMED

THE SPECIFIC “SECRETS” • • (1) (2) (3) (4) (5) (6) (7) (8) propeller blade flex marketing plans and strategies gas counter backpressure in molding water line configuration in the molds hub cooling methods in molding secondary sprue trimming material characteristics test data.

ESTABLISH INDEPENDENT DEVELOPMENT • • AFFIRMATIVE DEFENSE? ELEMENT OF PLANTIFF’S PROOF? WHY THAT MATTERS EXAMPLE: THIRD CIRCUIT HELD THAT PLAINTIFF STILL HAS BURDEN OF PROOF IN INDEPENDENT DEVELOPMENT CASES MOORE V. KULICKE & SOFFA INDUSTRIES, INC. , 318 F. 3 D 561 (3 RD Cir. 2003)

ELIMINATE OTHER CLAIMS • TYPICAL COMMON LAW CLAIMS ARE ALSO ASSERTED • IF CLAIMS ARE BASED ON SAME PROPERTY OR SECRET, MAY BE PREEMPTED • REMOVE PLAINITFF’S SAFETY NET Christopher Ruhland, Strategies for Defending Against Trade Secret Suits, Law 360 (2011)

IN OUR CASE • WHAT WOULD BE ENOUGH? • WHAT COMBINATION OF INGREDIENTS MAKES IT A TRADE SECRET • WHAT WOULDN’T BE KNOWN BY CHEMICAL ANALYSIS • WHAT WOULDN’T BE COMMON • WHAT HASN’T BEEN DISCLOSED

IS THE FORMULA REALLY A SECRET? • • THIS AMERICAN LIFE FEBRUARY 11, 2011 PEMBERTON’S RECIPE EVERETT BEAL’S RECIPE BOOK

THE RECIPE

IS IT REALLY A SECRET?

PRACTICE POINTER • 02 MICRO INTERNATIONAL LTD. v. MONOLITHIC POWER SYSTEMS, INC. • JURY ISSUE ON 11 TRADE SECRETS • JURY ONLY FOUND 5 • DAMAGE EXPERTS DIDN’T APPLY TO VALUES TO EACH SECRET • JUDGMENT AS A MATTER OF LAW FOR DEFENDANT

CONCLUSION MAYBE NOT EVERY LAWSUIT SHOULD BE BROUGHT!