Intellectual Property Outline

Chao, Introduction to Intellectual Property, Spring 2014

Trade Secret

· Trade Secret (UTSA §1)

o Information (formula, pattern, compilation, program, device, method, technique, or process) that

· Has economic value from not being generally known

§ Actual or potential

· Is not readily ascertainable by proper means

· Is subject to reasonable measures to maintain secrecy

o Elements

· Economic Value from not being generally known

§ Ex. Customer lists, Recipes, salaries, blind alleys/negative no-how (knowing what NOT to do already in research)

· Not generally known OR readily ascertainable

§ Absolute secrecy NOT required

§ Limited disclosure = okay (Metallurgical)

· Security

§ Ex. NDA’s, limit physical access, label as secret/confidential

o Factors on whether there is a trade secret (Metallurgical)

· Were protective measures taken?

· Is there substantial value?

· Was there substantial cost to develop secret?

o Defenses

· Information is known/readily ascertainable and NOT secret

· Information was not properly protected

· Can NOT do both trade secret and patent

o MUST choose one at some point in process as patents require publication

· Misappropriation

o Analysis

· Is there a trade secret? If yes, move to misappropriation analysis.

· Misappropriation IF defendant is using trade secret after (Rest 757):

§ 1.) Discovering trade secret by improper means

§ 2.) Breaching confidential relationship

§ Reverse Engineering = OKAY (Kadant)

· BUT means used to obtain the device in order to reverse engineer MAY NOT BE OK

· Ex. Shrink wrap = open question

§ Independent Derivation = OKAY

· Improper Means

§ Standard: Would competitor have reasonably anticipated tactics used? Commercial Morality

§ Improper means do NOT have be just illegal actions

§ Improper appropriation

· Unanticipated tactics = improper

· Ex. Aerial surveillance (duPont)

· 3rd parties

· Learning secret from 3rd party with notice that information was secret and that 3rd party discovered information via improper means or disclosure that was breach of confidential relationship/duty (Data General)

· Mistaken Disclosure

· Learned secret with notice of the facts that it was secret and disclosure was mistake (Rest 757)

· Breach of confidential relationship

§ Implied confidential relationship (Smith v. Dravo)

· Ex. Disclosures made for trade purposes

· Disclose information because

· Circumstances justify disclosure

· Parties knew disclosure was intended to be in confidence

· Reasonable to infer party consented to obligation of confidentiality

o Departing Employees

· Policy Concerns

§ Employee may improperly compete against former employer; take advantage of employer

§ Interest for both public and employee in allowing employee to move/pursue gainful employment as chooses

· Tactics to deal with departing employees

§ NDA’s

§ Obligations to assign invention

· Trailer clause (enforceable if reasonable usually)

§ Non-competes

· Majority View

· Non-compete is generally allowed so long as it’s reasonable

· 3 part test (CTI case)(used in Virginia)

· 1.) Restraint reasonably tailored to employer’s legitimate interest?

· 2.) Not unduly harsh on employee

· 3.) Is restraint reasonable from standpoint of sound public policy?

· Burden of proof on employer to show reasonableness

· Ex. Virginia

· Reasonableness areas of concern

· Geographic area/Distance

· Too large is too unreasonable

· Time period

· Too long is too unreasonable

· # of professionals in areas

· If there are only 2 in the state, then perhaps reasonable due to competition

· Profession

· Radiologist/Docort, likely reasonable

· Barista, not reasonable as they likely didn’t take a trade secret and are unlikely to hurt business by getting another job

· Paying during term of non-compete can make clause more reasonable

· Minority View

· General rule AGAINST non-competes with only few statutory exceptions

· Agreement to forfeit benefits OR pay liquidated damages for working for competitor = unenforceable (Muggill)

· Ex. California (Edwards)

· CA Bus & Prof Code §16600 — “every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.”

· Exception for:

· (1) not working for clients; and

· (2) not soliciting clients.

· **DISCUSS BOTH MAJORITY/MINORITY VIEW ON EXAM

§ Anti-solicitation clauses

· Can NOT ask other employees to leave a company with you

· Enforceable

· Subject to reasonableness judgment

· Seen as breach of fiduciary duty or employment agreement IF PRIOR to departure

· Less clear AFTER departure

· Non-enforceable

· If jurisdiction sees them as restraint on employment (Ex. California)

· Advice to client

· DO NOT solicit, but former employees may approach you

§ Remedial Measures

· File suit

· Breach of K, fiduciary duty

· Timing is critical

· Trade secret misappropriation via inevitable disclosure

· Inevitable Disclosure

§ Idea that former employee’s knowledge may be used to benefit of competitor in some way even if just that the information influences former employee’s decision making without actually revealing trade secrets (PepsiCo)

§ Example Solution

· Grant injunction prohibiting ever revealing trade s