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TRADE SECRETTRADE SECRET

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What is Trade Secret?What is Trade Secret?A trade secret is a confidential

practice, method, process, design, or other information used by a company/individual to compete with other businesses. It is also referred to in some jurisdictions as confidential information.

Nondisclosure agreement (NDA) is a mean to achieve the same

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Non Disclosure AgreementsNon Disclosure AgreementsFive important elements in a

nondisclosure agreementdefinition of confidential information exclusions from confidential information obligations of receiving party time periods miscellaneous provisions

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Purpose of NDAPurpose of NDA To protect your ideas. Create a confidential relationship between

parties. Enter into contract intended to protect

information considered to be proprietary or confidential.

Nondisclosure agreements protects any type of trade secret not generally known, providing a competitive advantage.

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Examples of Non disclosuresExamples of Non disclosuresProhibiting others from disclosing

a new design, an idea for a new Web site, or confidential material contained in a

copyrighted software program.

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NDA (Exclusions)NDA (Exclusions)NDA excludes the following

information created or discovered by the receiving party prior to (or independent of) any involvement with the other party

Unless agreed upon otherwise, the receiving party has no obligation to protect this excluded information.

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How to Use NDAHow to Use NDA NDA is used when you have an

unpatented idea that you need to show to a third party and you want that party to not reveal any information about your idea.

The inventor is the one who usually provides the non-disclosure agreement (NDA) at the meeting.

In summary, the other party signs in a non-disclosure agreement that he/she will not disclose any of the information

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When to use NDAWhen to use NDA KEEP THE DETAILS OF YOUR NEW IDEA

SECRET AT FIRST USE THE NDA SELECTIVELY WITH

ESSENTIAL SERVICE PROVIDERS THAT YOU HAVE DECIDED TO WORK WITH

WHAT IF THE COMPANY REFUSES TO SIGN A NDA?

APPROACHING WELL-KNOWN LARGE COMPANIES WITH YOUR IDEA

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Dilemmas of Trade SecretDilemmas of Trade Secret Do I keep something secret or patent it? What if I just don't tell anyone. Is that

enough to preserve secrecy? How do you maintain something as a trade

secret? How do I choose whether to patent

something or keep it as a trade secret? How long does trade secret protection last

compared to patent?

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Trade Secret – Commonality - Trade Secret – Commonality - TRIPSTRIPS is not generally known to the relevant

portion of the public; confers some sort of economic benefit on

its holder (where this benefit must derive specifically from its not being generally known, not just from the value of the information itself);

is the subject of reasonable efforts to maintain its secrecy.

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Issues with NDAIssues with NDAthe exclusions from what must be

kept confidential. the recipient gained subsequent

knowledge of the materials from another source;

the materials are generally available to the public;

the materials were obtained illegally;

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Trade Secret violatorsTrade Secret violators

Two categories of persons who can be sued for trade secret violations. – Employees who either negligently or

intentionally violate employment agreements and allow a trade secret to become known by a person who is not otherwise allowed access to the trade secret. 

– Person who uses the trade secret information to manufacture a product that competes with the original owner of the trade secret.  

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What constitutes Trade SecretsWhat constitutes Trade Secrets Customer lists Business information Employee details Financial records Data compilations Business plans and strategies Formulae, designs Drawings, algorithms et al

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Tools to Protect Trade Secrets

  Employment agreement: suitable confidentiality, non-

disclosure and non-compete clauses in agreements with employees.

Trade Secret Policy: Such a policy is a must for businesses that heavily rely on their trade secrets. A basic step to develop such a policy is to identify and prioritize the business secrets based on their value and sensitivity.

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Legal Framework in India

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There is no specific law in India that protects trade secrets and confidential information.

Indian courts have upheld trade secret protection on basis of principles of equity, and at times, upon a common law action of breach of confidence, which in effect amounts to a breach of contractual obligation.

In India it is possible to contractually bind a person not to disclose any information that is revealed to him/her in confidence.

In one case, the Delhi High Court has also upheld that a claim that disclosure of information would amount to breach of confidence is not defeated by the fact that other people in the world already knew the information.

The Supreme Court of India (i.e. the apex court) has also upheld a restrictive clause in an employment contract, which imposed constraints on the employee to not reveal or misuse any trade secrets that he or she has learnt whilst in employment.  

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Prevention is better than cure

.As businesses are growing out of their parochial moulds and going global, effective trade secret protection is becoming a necessity. Though there is no enactment in India that affords protection to trade secrets, businesses can use the tools mentioned above to safeguard these trade secrets. Businesses must remember that adequate and effective creation, protection, use and management of trade secrets are crucial factors in determining their success.

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Trade Secret Lawsuits Fail.1. Existence. The trade secret must be proved to exist

2 Ownership. It must be proved that the plaintiff had ownership rights to the trade secret information.

3 Access. It must be proved that the defendant had access to the trade secret information.

4 Notice. It must be proved that the defendant knew or should have known that the information was a trade secret of the plaintiff.

5 Use. It must be proved that the trade secret information was actually used by the defendant.

6 Damages. It must be proved that a remedy exists within the power of the court to apply.

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Case Continued…

•As the team left, they took with them financial forecasts, business strategy documents and even Yahoo source code for technologies designed to send content efficiently to cell phones, the suit alleges.

• Evidence Much of the evidence is drawn from back-and-forth instant messaging conversations conducted on company laptops. At several points, the employees switched to using similar chat software from AOL, apparently in an attempt to avoid detection, the suit claims.

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MForma’s View•In a statement, MForma Chief Executive Officer Jonathan Sacks said that the Web company Yahoo had itself been recently sued on trade secrets grounds by Nuance Communications, after hiring a team of that company's employees.

•"(Yahoo) is now so desperate over the fact that they are losing several experienced software engineers with years of experience in the mobile industry, that they are now taking the exact opposite legal position," Sacks said in the statement. "These cutting-edge, mobile-content engineers are leaving because MForma is a company of the future."

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Case - Yahoo accused of poaching speech engineers

•A California court has been asked to temporarily bar about a dozen engineers hired by Yahoo from working on interactive speech technology at the search engine after the company they recently left Nuance Communications filed a lawsuit accusing Yahoo of trying to steal trade secrets. •A complaint by Nuance Communications argues that the speech technology company is likely to prevail on the merits of the case regarding misappropriation of trade secrets and unfair competition, among other claims. •The complaint also argues that Nuance would suffer "great and irreparable injury" if the employees were not blocked from doing work on speech technology at Yahoo.

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Case Cont…Case Cont…•The complaint also asks that Yahoo be barred temporarily from employing any former or current Nuance employees to work on such technology. •Nuance alleges that Yahoo "gutted" its research and development unit and hired away 13 of its engineers. Nuance also alleges that its former vice president of research and development, Larry Heck, helped Yahoo hire a dozen of his engineering staff. •"Nuance alleges that the engineers were at least 75 percent done with a big project when Heck left to work for Yahoo. Nuance planned to sell the technology to Yahoo and other Internet companies who want to offer voice-activated search and directory services to telephone users.

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TitBit.Google, has also been accused of hiring away a key executive--in this case from Microsoft. Microsoft sued Google and the executive, Kai-Fu Lee, arguing that his setting up Google's China development center would violate a noncompete agreement he signed with Microsoft. Microsoft offered to settle the case with Google after a judge restricted the work activities Lee could do until the case is resolved