TRADE SECRET SEGMENT PROF JANICKE 2015 IP Survey

TRADE SECRET SEGMENT PROF. JANICKE 2015 IP Survey – Trade Secrets 1

SOURCES OF LAW • 45 STATES: UNIFORM TRADE SECRETS ACT – CIVIL • TEXAS: – 2013 adopted Uniform Trade Secrets Act – Earlier: Caselaw Doctrines Based On 1 st Rest. Of Torts (1939) – ALSO A CRIMINAL STATUTE TEX. PENAL CODE § 32. 05 2015 IP Survey – Trade Secrets 2

• FEDERAL: – GOVERNMENT CIVIL ACTIONS AND CRIM. PROCEEDINGS – ECONOMIC ESPIONAGE ACT (1997) – NO PRIVATE CIVIL ACTION 2015 IP Survey – Trade Secrets 3

WHAT IS A “TRADE SECRET” • (1) ANY COMPETITIVELY VALUABLE INFORMATION • (2) THAT’S NOT WIDELY KNOWN OR EASILY FOUND OUT • (3) THAT THE POSSESSOR HAS TAKEN REASONABLE STEPS TO KEEP FROM DISCLOSURE 2015 IP Survey – Trade Secrets 4

EXAMPLES • MFG. METHODS • MFG. MATERIALS • BUSINESS PLANS 2015 IP Survey – Trade Secrets 5

• USE, OR EVEN PLANNED USE, IN POSSESSOR’S BUSINESS IS NOT NEEDED • SECRECY OF INDIVIDUAL COMPONENTS OR STEPS IS NOT NEEDED 2015 IP Survey – Trade Secrets 6

THE PROBLEM OF CUSTOMER LISTS • HAS CAUSED A CASE LAW QUAGMIRE • OFTEN ARE EASILY LEARNED BY RIGHTFUL MEANS; HENCE NOT A “TRADE SECRET” • CAN BECOME A SECRET BY ADDING PURCHASE HISTORY, PLANS, CONTACTS, ETC. 2015 IP Survey – Trade Secrets 7

HARD-TO-GET REQUIREMENT • LIBERALLY CONSTRUED TO HELP TRADE SECRET OWNER • EXAMPLE: OBSCURE PUBLICATION OR SUPPLIER NAME 2015 IP Survey – Trade Secrets 8

REASONABLE-MEASURES-FORSECRECY REQUIREMENT TYPICAL: • EMPLOYEE AGREEMENTS • MARKING DOCUMENTS AND DRAWINGS “CONFIDENTIAL” • CIRCULATING WRITTEN POLICY • POSTING WRITTEN POLICY 2015 IP Survey – Trade Secrets 9

TYPICAL MEASURES (CONT’D): • LIMIT TYPES OF EMPLOYEES WHO HAVE ACCESS • LIMIT ACCESS TO PROJECT MEMBERS • EXIT INTERVIEWS 2015 IP Survey – Trade Secrets 10

• PROTECTIVE MEASURES CAN BE BY IMPLICATION RATHER THAN EXPRESS, BUT RISKY TO LITIGATE 2015 IP Survey – Trade Secrets 11

SECRETS GIVEN TO EMPLOYEE • IF OWNED BY THE EMPLOYER, THESE REMAIN OWNED BY EMPLOYER, UNTIL PUBLISHED BY EMPLOYER 2015 IP Survey – Trade Secrets 12

CASES • LAMB-WESTON • LEARNING CURVE 2015 IP Survey – Trade Secrets 13

NEW SECRETS DEVELOPED ONTHE-JOB • CONTRACT PROVISION FOR OWNERSHIP CONTROLS, IF THERE IS ONE • IF THERE IS NO CONTRACT PROVISION, RESULT GOES BY THE EQUITIES • “GENERAL SKILLS OF A CALLING” ARE ALWAYS OK FOR EMPLOYEE TO TAKE WITH HIM AND USE – DEFINING THESE IS DIFFICULT 2015 IP Survey – Trade Secrets 14

WHAT IS “MISAPPROPRIATION” • USING UNDER WRONGFUL CONDITIONS: – OBTAIN RIGHTFULLY, BUT USE IN BREACH OF AGREEMENT [MANY CASES] – OBTAIN BY FRAUD OR INDUCING A BREACH OF CONFIDENCE [A FEW CASES] 2015 IP Survey – Trade Secrets 15

THE KNOWLEDGE REQUIREMENT • WHERE SECRET IS IMPARTED TO AN EMPLOYEE OR OTHER PERSON IN CONFIDENCE: – MISAPPROPRIATION UNDER UTSA (INCLUDING TEXAS) REQUIRES RECIPIENT “knew or had reason to know” THE INFO WAS “acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use” >>> 2015 IP Survey – Trade Secrets 16

• MOST DEFENDANTS SAY THEY DIDN’T KNOW OF ANY “DUTY” • BUT, “HAD REASON TO KNOW” IS GIVEN BROAD INTERPRETATION BY COURTS AND JURIES 2015 IP Survey – Trade Secrets 17

WHAT IS NOT A MISAPPROPRIATION • COPYING AN OPENLY AVAILABLE PRODUCT • REVERSE ENGINEERING OF AN OPENLY AVAILABLE PRODUCT • WHOLLY INDEPENDENT DESIGN • ADOPTING THE DESIGN, AFTER DISCLOSURE UNDER CONTRACT OF NONCONFIDENCE 2015 IP Survey – Trade Secrets 18

• THE INFORMATION PER SE IS NOT PROTECTED • ONLY THE IMPROPER OBTAINING OR USING IS BARRED 2015 IP Survey – Trade Secrets 19

CASES • MANGREN • CROUCH 2015 IP Survey – Trade Secrets 20

MOST CASES INVOLVE RIGHTFUL LEARNING, AND THEN MISAPPROPRIATING TYPICAL PATTERNS: • EMPLOYEES LEARN, THEN JUMP • JOINT VENTURE PARTNER LEARNS, THEN VENTURE TERMINATES • POTENTIAL BUYER OF BUSINESS LEARNS, AND SALE FALLS THROUGH 2015 IP Survey – Trade Secrets 21

TYPICAL PATTERNS (CONT’D): • HARDER TO DECIDE: EXECUTIVE DRIVES THE DEVELOPMENT, THEN JUMPS • HARDER TO DECIDE: VENDOR, AGENT, ADVISOR CONTRIBUTES THE SECRET – THEN USES FOR OTHER CLIENTS 2015 IP Survey – Trade Secrets 22

HARDEST CASES: • FLY-OVERS ONE DECIDED CASE • TRAILING SHOULD BE OK • TRASH COLLECTING MAY BE OK ON THE TRADE SECRET FRONT; PERILOUS ON CRIMINAL FRONT; AND BAD PRESS 2015 IP Survey – Trade Secrets 23

CASES • CHICAGO LOCK • SMITH v. DRAVO • DUPONT v. CHRISTOPHER 2015 IP Survey – Trade Secrets 24

REMEDIES • INJUNCTION IS THE KEY REMEDY • PREVAILING U. S. VIEW (AND NEW TEXAS STATUTE VIEW): IF INFO HAS BEEN MADE PUBLIC BY OWNER, INJUNCTION SHOULD: – BE LIMITED TO LEAD-TIME, NOT PERPETUAL – TIME IT TOOK P IS A ROUGH RULE OF THUMB; SHOULD TAKE D AS LONG 2015 IP Survey – Trade Secrets 25 25

EXAMPLE OF LEAD-TIME INJUNCTION: • P SPENT 3 YEARS IN DEVELOPING THE INFO • D NEEDED ONLY 1 YEAR, DUE TO MISAPPROP. • D SHOULD BE ENJOINED FROM USE FOR 2 YEARS 2015 IP Survey – Trade Secrets 26

DAMAGES • ARE AVAILABLE – COMPENS. AND PUNITIVE [UTSA: UP TO TREBLING] • CAN BE UNJUST ENRICHMENT PLUS P’S LOSS OF BUSINESS • CAN BE TREBLED IF WILLFUL OR MALICIOUS [TWICE THE ACTUAL DAMAGES, AS PUNITIVE COMPONENT] 2015 IP Survey – Trade Secrets 27

• TR. SEC. CASES SOMETIMES INVOLVE PRELIM. INJUNC. HEARING – SELDOM GO TO TRIAL – VERY HIGH SETTLEMENT RATE 2015 IP Survey – Trade Secrets 28

INJUNCTION AGAINST WORKING FOR A PARTICULAR COMPETITOR • CAN BE HANDLED PER NO-COMPETE CONTRACT IN MOST STATES, INCLUDING TEXAS • WHERE NO CONTRACT, THIS TYPE OF INJUNCTION IS COMMONLY SOUGHT TO PROTECT THE SECRET – ARGUMENT: WORKING FOR “THEM” IN “THIS MANNER” WILL INHERENTLY DIVULGE – COUNTER-ARGUMENT: NEED TO EARN A LIVING 2015 IP Survey – Trade Secrets 29

COMMON JUDICIAL RELUCTANCE RE. NO-COMPETE INJUNCTION WHERE NO CONTRACT PROVISION • JUDGES DO NOT WANT TO KILL JOBS • JUDGES DO NOT WANT TO DEPRIVE FAMILIES OF LIVELIHOODS >>> 2015 IP Survey – Trade Secrets 30

• POSSIBLE SOLUTIONS: – INJUNCTION REQUIRES KEEPING PERSON ON PAYROLL AND WORKING – INJUNCTION REQUIRES PROVIDING MINIMUM CONSULTING FEES AND POSSIBLE WORK – INJUNCTION LIMITED TO WORKING IN COMPETITOR DIVISION MOST LIKELY TO CAUSE BREACH 2015 IP Survey – Trade Secrets 31

CASE • WEED-EATER 2015 IP Survey – Trade Secrets 32

SPECIAL PROBLEM: STATUTE OF LIMITATIONS • ONE VIEW: MISAPPROPRIATION IS AN ONGOING TORT, NEW VIOLATION EVERY DAY • HENCE, ONLY OLD MISUSES ARE CUT OFF; DAMAGES AND INJUNCTION ARE AVAILABLE FOR RECENT/FUTURE VIOLATIONS 2015 IP Survey – Trade Secrets 33

SPECIAL PROBLEM: STATUTE OF LIMITATIONS • ANOTHER VIEW: ORIGINAL MISAPPROPRIATION STARTS A SINGLE CLOCK; WHEN IT RUNS, ALL ACTION IS BARRED • TEXAS SOLUTION: SINGLE WRONG, SINGLE RUNNING -- BUT FROM DISCOVERY DATE (KNEW OR SHOULD HAVE KNOWN) 2015 IP Survey – Trade Secrets 34

CASE • SCHALK 2015 IP Survey – Trade Secrets 35