Trade Secrets Outline

Trade Secrets – Prof. Rowe – Spring 2007

Table of Contents:
1. Introduction; Background of Trade Secret Law
2. Common Law; UTSA
3. Relationship to Other IP Laws; Property or Quasi-Property?
4. Elements of a Trade Secret; Secrecy; Value
5. Rights and Ownership in Trade Secrets; Reverse Engineering
6. Misappropriation; Improper Means
7. Contractual Agreements; Nondisclosure Agreements; Noncompete Agreements
8. Managing Trade Secrets; Protection Programs; Employee Hiring and Termination
9. Injunctions; Inevitable Disclosure
10. Trade Secrets and the Internet/Computers; Free Speech
11. Pre-litigation Strategies
12. Pretrial and Trial Issues; Discovery; Protective Orders; Experts; Trial Strategy
13. Criminal Issues
14. Government and International Issues

1. Introduction; Background of Trade Secret Law
Kewanee Oil Co. v. Bicron Corp. (p35) (U.S. 1974):
without trade secret law, organizes scientific and technological research could become fragmented, and society
as a whole would suffer
state interest in denying corporate espionage because it is an invasion of privacy
state trade secret laws do not threaten patent system, thus federal patent laws do not preempt those statutes
trade secret does not need to be in use to be protected
negative information comprised of failed research or an ineffective process is also protected
theft by employees is far more prevalent than theft by outsiders
once a trade secret is posted on the Internet, it is effectively part of the public domain, impossible to retrieve
trade secret program:
1. identify the specific information that qualifies as a trade secret
2. efforts to maintain the secrecy of the information
competing policies behind trade secret law:
1. morality
2. encouragement of innovation
3. encouragement of sharing of knowledge
4. protection of commercial privacy
5. mobility of labor
6. protection of free competition
three bodies of law:
1. Restatement of Torts
-requires continuous, not single, use of trade secret
2. Restatement of Unfair Competition
3. UTSA
-states not adopting: Massachusetts, Texas, New Jersey, North Carolina, Wyoming, New York
trade secret is one step above confidential information

2. Common Law; UTSA
Van Products Co. v. General Welding & Fabricating Co. (p.77) (Pa. 1965):
if the validity of a patent is the principal issue involved, then the jurisdiction of the federal courts is exclusive
E.I. DuPont de Nemours Powder Co. v. Masland (p.75) (U.S. 1917):
Justice Holmes, instead of starting with property notion of trade secrets, began with confidential relationship
Alphamed Pharmaceuticals Corp. v. Arriva Pharmaceuticals, Inc. (presentation case) (S.D. Fla. 2006):
π did not show any proof of damages and thus could not maintain a claim
professor: this is faulty logic since the court should have determined whether there was a trade secret first,
then looked at damages
Harvey Barnett, Inc. v. Shidler (presentation case) (10th Cir. 2006):
facts that ∆ had no prior experience in training infants to swim prior to joining π and then did not depart from
those teachings in her new business was enough for the jury to find breach of confidentiality and no
misappropriation of trade secrets
professor: court meant to say that swimming stuff could not be trade secrets, but swimming program as a
whole could be

3. Relationship to Other IP Laws; Property or Quasi-Property?
Bonito Boats, Inc. v. Thunder Craft Boats, Inc. (p.89) (U.S. 1989):
state regulation of intellectual property must yield to the extent that it clashes with federal patent laws
Florida statue in this case so substantially impeded the public use of the otherwise unprotected design and
utilitarian ideas embodied in unpatented boat hulls as to run afoul of federal patent law
Computer Associates International, Inc. v. Altai, Inc. (2nd Cir. 1992):
a state law claim is not preempted if the “extra element” (e.g., breach of confidentiality) changes the nature of
the action so that it is qualitatively different from a copyright infringement claim
π may not receive double recovery, though, where the damages for copyright infringement and trade secret
misappropriation are coextensive
Ruckelshaus v. Monsanto Co. (p.295) (U.S. 1984):
trade secrets are property rights subject to the takings clause of the Fifth Amendment
factors determining whether a governmental action has gone beyond regulation and effects a taking:
1. the character of the governmental action
2. its economic impact
3. its interference with reasonable investment-backed expectations
a voluntary submission of data by an applicant in exchange for the economic advantages of a registration can
hardly be called a taking
the EPA’s disclosure of π’s trade secrets that occurred before π’s consent to disclosure, how