Vacca-Fundamentals of IP-Fall 2016
Trade Secret Law
Defining a Trade Secret
Trade secret means information, including a formula, pattern, compilation, program, device, method, technique, or process that: (UTSA Section 1(4))
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
Is the subject of efforts that are reasonable under the circumstance to maintain its secrecy (Rockwell Graphic Systems)
Policy: Efficiency, Encourage independent innovation, Commercial morality, Encourage competition, Allow people to move freely between employment
Misappropriation, Remedies, & Departing Employees
Policies affecting misappropriation:
Misappropriation means: (UTSA Section 1(2))
Acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or
Receive or come into possession of the subject matter (Silvaco Data Systems)
Disclosure or use of a trade secret of another without express or implied consent by a person who
Used improper means to acquire knowledge of the trade secret; or
At the time of disclosure or use, knew or had reason to know that the knowledge of the trade secret was;
Derived from or through a person who had utilized improper means to acquire it;
Acquired under circumstances giving rise to a duty to maintain its secret or limit its use; or
Derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use; or
Before a material change of his position, knew or had reason to know that it was a trade secret and that knowledge of it had been acquired by accident or mistake
Spoilers – releasing a trade secret for reasons other than their own benefit (DVD Copy Control case)
Proper means to obtain a trade secret
Discovery by independent invention;
Discovery by “reverse engineering”. The acquisition ofthe known product must, of course, also be by a fair and honest means, such as purchase of the item on the open market for reverse engineering to be lawful;
Discovery under a license from the owner of the trade secret;
Observation of the item in public use or on public display;
Obtaining the trade secret from published literature.
Remedies to Trade Secret Misappropriation
Equitable Relief
TRO – Temporary Restraining Order
Preliminary Injunction – bar to activities for the duration of the trial
Permanent Injunction – bar to activities for a period of time set by the court
Monetary Relief
Actual damages
Reasonable Royalty
Attorney Fees
Exemplary damages
Injunctive Relief
UTSA, Section 2 provides:
Actual or threatened misappropriation may be enjoined. Upon application to the court, an injunction shall be terminated when the trade secret has ceased to exist, but the injunction may be continued for an additional reasonable period of time in order to eliminate commercial advantage that otherwise would be derived from the misappropriation.
In exceptional circumstances, an injunction may condition future use upon payment of a reasonable loyalty for no longer than the period of time for which use could have been prohibited. Exceptional circumstances include, but are not limited to, a material and prejudicial change of position prior to acquiring knowledge or reason to know of misappropriation that renders a prohibitive injunction inequitable.
In appropriate circumstances, affirmative acts protect a trade secret may be compelled by court order.
To obtain permanent injunctive relief, a plaintiff must demonstrate:
That is has suffered an irreparable injury;
That remedies available at law, such as monetary damages, are inadequate to compensate for that injury;
That, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and
That the public interest would not be disserved by a permanent injunction
Head-start period: Many trade secret injunctions will only last so long as the trade secret still qualifies for protection or a court may enjoin for the period of time that it would have taken to reverse engineer/individually develop the product
To issue a preliminary injunction: (Amazon v. Powers)
A likelihood of success on the merits
It is likely to suffer irreparable harm in the absence of preliminary relief
The balance of hardships tips in its favor; and
The public interest favors an injunction
Damages can't be speculative or uncertain, you must be able to prove that you have been harmed in some particular way or amount
Except to the extent that a material and prejudicial change of position prior to acquiring knowledge or reason to know of misappropriation renders a monetary recovery inequitable, a complainant is entitled to recover damages for misappropriation. Damages can include both the caused by misappropriation and the caused by misappropriation that is not taken into account in computing actual loss. In lieu of damages measured by any other methods, the damages caused by misappropriation may be measured by imposition of liability for a for a misappropriator's unauthorized disclosure or use of a trade secret.
If willful and malicious misappropriation exists, the court may award in an amount not exceeding twice any award made under subsection (a).
Attorney's fees are also available to plaintiffs and defendants: (UTSA Section 4)
Bad Faith
Motion to terminate an injunction is made or resisted in bad faith
Willful and malicious misappropriation exists, the court may award reasonable attorney's fees to the prevailing party
Three basic categories for monetary awards:
The profits lost by the plaintiff as a result of the misappropriation
Disgorgement (repayment) of the ill-gotten gains obtained by the defendant
Reasonable royalty
Typically used only if the first two options aren't readily available, also if there is an established royalty agreement
Criminal Trade Secret Theft
About half of the states have criminalized trade secret theft and it is a federal crime (focusing on foreign)
Economic Espionage Act of 1996 (18 USC Sections 1831 & 1832)
Section 1832 is geared more towards interstate commerce. It has an economic focus, less focus on the knowledge requirement, focus on injury to the owner
This act has much more focus on punishing acquisition as opposed to use and disclosure
Departing Employees
Generally, trade secret information that employees create within the scope of their assigned duties is own
the applicant’s claims, the applicant can seek review of the PTO’s assessment in federal court. The more common route is to appeal the PTO’s rejection directly to the U.S. Court of Appeals for the Federal Circuit, located in Washington, DC.
After a patent issues, it is subject to reconsideration by the Patent Office under statutorily prescribed conditions
Reexamination – Anyone, including the patentee, a competitor, or an accused infringer, can ask the PTO to reexamine the issued claims on the basis of prior art patents or printed publications
The PTO Director then has the discretion to grant the requested reexamination, upon a finding that “a substantial new question of patentability affecting any claim of the patent concerned is raised by the request.”
The patentee has an opportunity to comment on the new materials, and the requester has a right to respond to the patentee’s comments.
Inter Partes Review (IPR) – Only someone other than the patentee can request this form of review, and only a limited number of prior art-based issues can be considered
Post-Grant Review – Because only patents filed after March 2013 are subject to this type of reconsideration, AIA § 6(f), there is not yet any substantial track record for this type of PTO proceeding.
A patent is good for 20 years from date of application, not issue. Inventors are also required to pay a maintenance fee at 3.5, 7.5, and 11.5 years after application.
Claim Construction & Definiteness
Claim Construction (Interpretation) – trying to determine what the claims boundaries are (claims are at the end of the document)
Assists in determining validity of the claim, as well as determining if infringement has occurred
Each claim in a patent contains its own right to exclude
One analyzes the infringement and validity of each claim individually
Enforce a patent by bringing suit for patent infringement, in federal court only
The judge is responsible for construing patent construction, not the jury (Markman)
District Judge typically holds a Markman hearing to pursue claim construction before the actual trial begins. Then a jury is able to determine the ruling at trial.
Policy: The trial court judge is in a better position to understand the technical nature behind the patent
Appellate court uses a standard of review of “clearly erroneous” if there is extrinsic evidence (Teva Pharma v. Sandoz)
Unless there are no factual disputes and the judge's finding was simply a determination of law (intrinsic evidence), then a de novo standard of review applies
When ensuring there are no factual disputes, you look at the claims, specifications, and the prosecution history
