F2009 TRADE SECRET SEGMENT PROF. JANICKE JUNE 2008

F2009

TRADE SECRET SEGMENT

PROF. JANICKEJUNE 2008

F2009 Trade Secret Segment 2

SOURCES OF LAW

• 45 STATES: UNIFORM TRADE SECRETS ACT

• TEXAS: COURT-BUILT DOCTRINES AROUND REST. OF TORTS (1ST – 1939)

• FEDERAL: GOVERNMENT CIVIL ACTIONS AND CRIM. PROCEEDINGS – ECONOMIC ESPIONAGE ACT (1997)


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


EXAMPLES

• MFG. METHODS

• MFG. MATERIALS

• BUSINESS PLANS


• USE, OR EVEN PLANNED USE, IN POSSESSOR’S BUSINESS IS NOT NEEDED

• SECRECY OF INDIVIDUAL COMPONENTS OR STEPS IS NOT NEEDED


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 DATA, PLANS, ETC.


HARD-TO-GET REQUIREMENT

• LIBERALLY CONSTRUED TO HELP TRADE SECRET OWNER

• EXAMPLE: OBSCURE PUBLICATION OR SUPPLIER


REASONABLE-MEASURES-FOR-SECRECY

REQUIREMENTTYPICAL:

• EMPLOYEE AGREEMENTS

• MARKING DOCUMENTS AND DRAWINGS “CONFIDENTIAL”

• CIRCULATING WRITTEN POLICY

• POSTING WRITTEN POLICY


TYPICAL (CONT’D):

• LIMIT TYPES OF EMPLOYEES WHO HAVE ACCESS

• LIMIT ACCESS TO PROJECT MEMBERS

• EXIT INTERVIEWS


• PROTECTIVE MEASURES CAN BE BY IMPLICATION RATHER THAN EXPRESS, BUT RISKY TO LITIGATE


OWNERSHIP OF ON-THE-JOB DEVELOPMENTS

• CONTRACT PROVISION 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


WHAT IS “MISAPPROPRIATION”

• USING UNDER WRONGFUL CONDITIONS:– OBTAIN BY FRAUD OR BREACH OF

CONFIDENCE– OBTAIN RIGHTFULLY, BUT USE IN

BREACH OF CONFIDENCE


WHAT IS NOT

• COPYING AN OPENLY AVAILABLE PRODUCT

• REVERSE ENGINEERING OF AN OPENLY AVAILABLE PRODUCT

• INDEPENDENT DESIGN

• ADOPTING THE DESIGN, AFTER DISCLOSURE UNDER CONTRACT OF NON-CONFIDENCE


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 THRO


TYPICAL PATTERNS (CONT’D):

• HARDER: EXECUTIVE DRIVES THE DEVELOPMENT, THEN JUMPS

• VENDOR, AGENT, ADVISOR LEARNS – THEN USES FOR OTHER CLIENTS


HARD CASES:

• FLY-OVERS

• TRAILING

• TRASH COLLECTING


REMEDIES

• INJUNCTION

• BETTER VIEW IS IT SHOULD BE LIMITED TO LEAD-TIME

• TIME IT TOOK P minus TIME IT TOOK D IS A ROUGH RULE OF THUMB


DAMAGES

• ARE AVAILABLE– COMPENS. AND PUNITIVE [UTSA: TREBLING]

• CAN BE UNJUST ENRICHMENT OR P’S LOSS OF BUSINESS

• HIGH SETTLEMENT RATE• TR. SEC. CASES SOMETIMES INVOLVE

PRELIM. INJUNC. HEARING – SELDOM GO TO TRIAL


INJUNCTION AGAINST WORKING FOR A PARTICULAR COMPETITOR

• CAN BE HANDLED PER CONTRACT

• WHERE NO CONTRACT, THIS TYPE OF INJUNCTION IS COMMONLY SOUGHT TO PROTECT THE SECRET

– ARGUMENT: WORKING FOR “THEM” WILL INHERENTLY DIVULGE

• PROBLEM: EARNING A LIVING


NON-COMPETE INJUNCTION

• POSSIBLE SOLUTIONS:– INJUNCTION REQUIRES KEEPING

PERSON ON PAYROLL AND WORK– INJUNCTION REQUIRES PROVIDING

MINIMUM CONSULTING FEES AND WORK– INJUNCTION IS TAILORED TO DIVISION

MOST LIKELY TO CAUSE BREACH


SPECIAL PROBLEM: CONTINUING TO ENJOIN WRONGDOER WHEN

OWNER HAS PUBLISHED• COMMONLY UNDERSTOOD NON-

WRONGDOERS ARE RELIEVED OF COVENANTS WHEN OWNER PUBLISHES

• MOVES TO DISSOLVE: SHOULD PREVIOUS WRONGDOER NOW BE THE ONLY ONE PRECLUDED FROM USE?


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


SPECIAL PROBLEM: STATUTE OF LIMITATIONS

• ANOTHER VIEW: ORIGINAL MISAPPROPRIATION STARTS THE ONLY CLOCK; WHEN IT RUNS, ALL ACTION IS BARRED

• TEXAS SOLUTION: SINGLE WRONG, SINGLE RUNNING – BUT FROM DISCOVERY DATE

Documents

F2009 TRADE SECRET SEGMENT PROF. JANICKE JUNE 2008