I. Trade Secrets
A. Definition—what courts look to decide:
a. Information must be secret (not readily ascertainable) AND
b. Must have commercial value to the claimant that can be attributed to the fact that the claimant has it and others don’t
i. EXAMPLES: customers lists, recipes, employee lists, salaries
c. Did business make reasonable effort to keep it a secret?
i. Non-disclosure agreements with business partners etc
ii. Limit physical access (safe, higher security areas)
iii. Label secrets as secrets
d. If a business has a trade secret then can stop employees from divulging it to others but most show that it’s secret and took measures to keep it a secret.
B. Public policy:
a. Gives incentives to businesses to invest in the compilation of information by prohibiting certain unauthorized uses by others
II. Misappropriation of Trade Secret
a. Acquisition of a trade secret is illegal in when:
i. Where it is done through improper means
1. If got info UNFAIRLY or by SNEAKY means—look to this.
2. Improper means: RST: fall below the standards of commercial morality and reasonable conduct.
a. Taken without the discover’s permission when discoverer is taking reasonable precautions to keep it a secret.
i. EI DuPont v. Rolfe: discovered secrets by taking pictures from a chartered plane.
1. Example of falling below: commercial morality.
b. D.’s modification of trade secret: the user of another’s trade secret is liable even if he uses it with modifications, so long as the substance of the process used by the actor is derived from the other’s secret.
3. Proper means: Through inspection and analysis of the product in order to create a duplicate. – reverse engineering
a. You can use a secret if it’s discovered thru reverse engineering because it’s readily ascertainable and thus not a secret.
b. Secrecy lost when product put in marketplace
c. Kadant v. Seeley: man worked at company that cleaned paper machines. Left and went to competitor and used same technology. He didn’t violate because could have been thru reverse engineering.
ii. Where it involves a breach of confidence
1. If the def.’s disclosure is a breach of a confidential relationship that is owed to P. not allowed.
a. Confidential relationship: a person made an express promise of confidentiality prior to disclosure OR
b. The trade secret was disclosed under circumstances that infer that the def. should have known that the disclosure was intended to be confidential.
c. Smith v. Dravo: shipping company enters agreement with carton maker, get all blueprints, they back out but steal design.
i. No express confidential agreement but a relationship exists, so taking of idea not ok.
2. Learning the secret from a 3rd person with notice that it was a secret and that the 3rd person discovered it thru improper means or thru a mistake—breach of duty
b. To prove misappropriation, P must show:
i. That it possessed a trade secret
ii. The def.’s are using that trade secret in breach of an agreement, confidence or duty or as a result of discovery by improper means.
c. Use and Disclosure by Employees and Former Employees
i. Tactics to use with departing employees
1. Non-disclosure agreements
a. Indicates that employee knew that the item was a secret
2. Assignments of invention (keeps patentable invention with employer)
a. Trailer Clauses: what you invent 6 weeks after leaving is ours
i. Must be reasonable
3. Agreements not to compete
a. Limitations on time, geography, scope of employment and non-solicitation.
4. Anti-solicitation clauses
a. May be enforceable is reasonable
5. Confidentiality agreements
a. Does not protect all information
ii. Even without an express clause, an employee cannot disclose trade secrets that they learned while employed in company.
iii. Trade secret created by the employee while working, belongs to the employer if the employee was hired to do the type of research that lead to the creation of the trade secret.
iv. In CA there’s a general rule against non-compete agreements with statutory exceptions
1. In VA: there’s a three part test:
a. Is restraint reasonably tailored to employer’s interest?
b. Not unduly harsh on employee
c. Is restraint reasonable for sound public policy?
v. Inevitable disclosure doctrine:
1. Test: If a former employee knows the former employer’s trade secrets
a. the former employee’s new job duties are so similar to former position that it would be difficult not to rely on trade secrets AND
b. the former employee or new employer cannot be relied on to avoid using secrets, the former employee may be enjoined from taking the new job. (not sure about this one)***
2. Implications: high degree of probability of inevitable and immediate use of trade secrets.
a. Courts typically against limiting an employee’s future employment.
3. Pepsico: P left pepsi to go to competitor. Pepsi tried to sue on this doctrine because he knew the details of marketing etc.
a. Court said couldn’t work for 6 months and then can’t give trade secrets.
b. Uniform Trade Secret Act authorizes relief against “actual or threatened” misappropriation
i. Threatened because he knew pepsi’s marketing scheme and could devise marketing aimed at attacking pepsi.
vi. Solicitation of former employees/customers
1. Agreements not to solicit are not always enforceable, depends on the reasonableness of agreement.
2. Even without an agreement, solicitation can be basis for action:
a. If done prior to departure: breach of fiduciary duty
i. This is always illegal.
b. Taking documents is a violation of trade secrets.
III. Remedies for misappropriation
a. Uniform Trade Secrets Act
i. Section 2: injunction for actual or threatened misappropriation
1. Enjoined from using or disclosing the trade secret
ii. Section 3: allows for damages, including unjust enrichment
1. Depends on courts but maybe awarded a reasonable royalty, loss profits etc.
iii. Section 4: allows for attorney fees for prevailing party upon a showing of bad faith
IV. For test question:
a. Is it a trade secret?
i. Secret?
ii. Puts P at an advantage?
iii. Were there steps to keep it a secret?
b. If yes, then is there misappropriation?
i. Breach of confidence
ii. Improper means
iii. Inevitable disclosure?
1. Look to three requirements
c. What are the remedies?
i. Injunction
ii. Damages
V. General rules
a. Reverse engineering—ok
b. Modifications to secret is substance is the same—not ok
c. In markerplace—no longer a secret
d. Misappropriation: actual or threatened.
Patents
I. Basic overview: 35 USC 101
a. Patent is like an agreement between the inventor and the public that in return for making and fully disclosing the invention to the public, the inventor obtains the exclusive right to exploit the invention for a limited period of time—20 years from date application filed.
b. Subject matter: any new and useful process, machine, manufacture, or composition of matter.
i. Not available for naturally occurring matter
c. Gives the inventor the right to su
on must be more than a mere curiosity, a scientific process without result or a frivolous article that adds nothing to the human race.
v. An article can be altered to appear like another in order to satisfy the utility requirement.
b. Specifications
i. Section 112: The specification shall contain a written description of the invention, and of the manner and process of making and using it, in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains, or with which it is most nearly connected, to make and use the same, and shall set forth the best mode contemplated by the inventor of carrying out his invention.
1. Enablement– (requires inventor to instruct other to make and use invention)
2. Written description– ensure patent applicant actually invented claimed subject matter
3. Best mode—ensures you don’t sandbag.
ii. All of these specifications are designed to tell the public what the invention is and how to make it useful.
1. Claims describe what the inventor claims as the subject matter of his invention.
a. You can change claims in cases of rejection or pre-empt a competitor
iii. A patent applicant must show that he/she was in possession of the invention as later claimed
iv. Claims in a patent application change because:
1. Changing technology, narrow claim, nefarious motives, need patent now but want to fight on.
v. Submarine patents:
1. File on a technology that has not been successfully implemented
a. Chips in thumb.
2. When a practical implementation of the device appears, your patent surfaces and then you demand royalties
3. Enablement and written description meant to limit submarine
vi. Patent terms
1. Filed after July 1995- 20 years from filing date.
vii. TEST FOR ENABLEMENT: A patent claim is invalid if the patent does not contain a description of the claimed invention that is sufficiently full and clear to enable a person of ordinary skill in the field to make and use the invention without undue experimentation.
1. Must include one or more claims that clearly and distinctly describe the invention, setting forth its constituent elements.
a. Claims are the official definition of the invention while specifications describe it.
b. Must lay out everything in the claims—must be narrow, give the specifics of invention. Try and make them as broad as the PTO will allow.
2. Need to show that you have the invention now
3. Can’t have overly broad claims. (Incandescent lamp)
4. Often determined by jury instructions on blackboard or Wand’s factors
a. The person of ordinary skill in the field looks to the Wand elements to see if enablement is met
viii. Wands Factors
1. The quality of experimentation necessary (supports narrow claim)
2. Amount of direction of guidance presented (supports narrow claim)
3. The presence or absence of working examples (more working examples—broad claim)
4. The nature of the invention – the more complex the invention the more narrow
5. The state of the prior art – if it’s a developed area then it’s easier for people to understand a broader claim.
6. The relative skill of those in the art
7. The predictability of unpredictability of the art, AND
a. Electrical- unpredictable because of newness.
8. The breadth of the claims.
