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Intellectual Property
St. Johns University School of Law
Subotnik, Eva E.

Introduction to Intellectual Property
Professor Subotnik
Fall 2015
Trade Secrets
v  Uniform Trade Secrets Act §1(4):
“Trade secret” means information, including a formula, pattern, compilation, program, device, method, technique, or process, that… (i) derives independent 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… to maintain its secrecy.”
I.                   Requirements for the IP right (is there a duty?)
1)      Information
2)      Economic value (actual or potential)
3)      Because its “secret” – i.e., not generally known or readily ascertainable
4)      Subject of reasonable secrecy efforts
A.    Subject Matter of Trade Secrets
·         Information (including a formula, pattern, compilation, program, device, method, technique, or process).
·         Economic value (actual or potential)
·         Because it’s a “secret” – not generally known/ascertainable
B.     What constitutes “reasonable” efforts to maintain secrecy?
1)      Physical
·         Locked vaults/rooms
·         ID badges/keys
·         Password-protected computers
·         Restricted physical access
2)      Contractual
·         Confidentiality agreements/NDAs
3)      Other forms of notice to employees/contractors that information is secret (marking documents “proprietary,” “confidential,” etc.)
Ø  Acts that destroy the secret:
·         Publication in academic/trade journal; Internet
·         Publication in patent
·         Selling commercial product that embodies the secret where secret is apparent from product itself (e.g. “self-disclosing” invention like a safety pin).
Metallurgical Industries v. Fourtek
·         Facts: Metallurgical Industries, Inc. (Plaintiff) claimed that its zinc recovery furnace modifications were trade secrets misappropriated by Fourtek, Inc. (Defendant).  A former employee (Defendant) of the bankrupt company, who had been told the process was a secret, formed Fourtek, Inc. (Defendant) and contracted with a third party to build a furnace incorporating the modification. 
·         Rule: “Absolute secrecy” not required – “relative secrecy” ok. Here, the disclosures were not public announcements, Metallurgical (Plaintiff) only revealed its information to two businesses it was dealing with, and the disclosures were made to advance Plaintiff’s economic interests.  Plus, the modifications that led to the commercial operation of the zinc recovery furnace provided a clear advantage over the competition.
Rockwell Graphic Systems v. DEV
Facts: Rockwell was a manufacturer of printing presses used by newspapers.  The company would subcontract with independent shops (vendors) to create and deliver piece parts.  The vendors need drawings in order to create the piece parts.  The President of DEV left Rockwell.  A former employee of Rockwell who was then working for DEV was caught stealing piece part drawings.  Rockwell alleges that 100 of DEV’s 600 drawings are stolen.
Rule: Why is reasonable secrecy required?
à To show economic value of the information
à To show that the more precautions taken to keep it a secret, the more likely that it was misappropriated by the defendant.
à Gives notice to the outside world that this information is not for the taking.
·         Note 1: Contrast with Electro-Craft v. Controlled Motion – the plaintiff had not measured up to the use of reasonable secrecy precautions.  The case reads as a laundry list of what not to do.
Ø  Public Disclosure of the Trade Secret
·         Unlike patent and copyright, no set “term” of protection for trade secrets.
·         When does use of secret in one’s business turn into “public disclosure”?
Data General v. Digital Computer Controls, Inc.
·         Facts: Data General produces a computer, the Nova 1200.  When a sale of a Nova 1200 is made, the company makes available, at no extra cost, to its customer a design drawing to those who wish to do their own maintenance of the product.  The trade secret was not patented.  The president of Ackley, a company that is about to hit the market with its competing product, had bought a Nova 1200 from a customer of Data General, Mini-Computer Systems, Inc.  The computer came with the design drawings that the defendant then used it to produce a computer that would then rival the Nova 1200.  There were no competitors until the defendant’s product entered.
·         Rule: To prove violation of a trade secret, a plaintiff must demonstrate the existence of a trade secret, that the defendant did not properly receive the information in question in such a manner that its confidential nature should have been known, and that defendant proposes to misuse such information.
C.     Misappropriation
1)      Acquisition, use or disclosure where improper means were used; or
2)      Use or disclosure in breach of confidential relations; or
3)      Before a material change in position, use or disclosure of secrets that you know were acquired by accident or mistake (“knows or has reason to know”).
Ø  What constitutes improper means?
a)      Means which fall below the generally accepted standards of commercial morality;
b)      Commercial privacy must be protected from espionage, which could not have been reasonably anticipated or prevented.
E.I. du Pont de Nemours & Co. v. Christopher
·         Facts: E.I. duPont deNemours & Co. (Plaintiff) had developed a highly secret but unpatented process for producing methanol, which gave Plaintiff a competitive advantage over other producers.  (Aerial photographs case).
·         Rule: To become knowledgeable of a process without spending the time and money to discover it independently is improper unless the holder voluntarily reveals

easonable period of time in order to eliminate commercial advantage that otherwise would be derived from the misappropriation” [aka “head start injunction”] c.        Imposition of a “reasonable royalty” in lieu of an injunction
d.       Damages (in addition or in lieu of injunction):
                                                              i.       in the amount of plaintiff’s actual loss
                                                            ii.       for defendant’s unjust enrichment (i.e., defendant’s gain)
                                                          iii.       exemplary damages and attorney’s fees in cases of willful misappropriation
•         A patent grants the right to exclude
v  35 U.S.C. § 154(a): (1) Contents.  Every patent shall . . . grant to the patentee, his heirs or assigns, of the right to exclude others from making, using, offering for sale, or selling the invention throughout the United States or importing the invention into the United States, and, if the invention is a process, of the right to exclude others from using, offering for sale or selling throughout the United States, or importing into the United States, products made by that process, referring to the specification for particulars thereof.
•         A patent is not a positive right to make, use or sell.
I.                   Requirements for the IP right (is there a duty?)
1)      Subject Matter
2)      Utility
3)      Describing and Enabling the invention
4)      Novelty
5)      Nonobviousness
A. Patentable Subject Matter
v  35 U.S.C.§ 101 Inventions patentable: Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.
v  35 U.S.C.§ 100(b): The term “process” means process, art or method and includes a new use of a known process, machine, manufacture, or composition of matter, or material.
·         3 types of patents:
1.      Utility – Granted for any process, machine, manufacture or composition of matter;
2.      Design – Protects only the ornamental features of an article, not its functional features;
3.      Plant – Protects those who invent or discover and asexually reproduce a new variety of plant.