Select Page

Intellectual Property
University of Illinois School of Law
Kesan, Jay P.

Trade Secrets
 
Three elements of a trade secret claim:
 
                   1.      Subject Matter
§ information capable of adding economic value to the plaintiff, and is not generally known
§ formula, pattern, compilation, program, device, method, technique, process
 
                   2.      Reasonable precautions were taken to protect
§ secret holder must be consistently diligent in protecting the information
 
                   3.      Misappropriation
§ information cannot be acquired through deception or theft
§ explicit and implied duties to protect secret can lead to wrongful disclosure
 
 
Underlying Theory
Freedom of contract; protection against unfair means of competition
Source of Law
State statute (e.g. UTSA); common law
Subject Matter
Formula, pattern, compilation, program, device, method, technique, process
Standard for Protection
Information not generally known or available; reasonable efforts to maintain secrecy; commercial value
Scope of Protection
Protection against misappropriation
Period of Protection
Until becomes public knowledge
Disclosure
Loss of protection
Rights of Others
Independent discovery; reverse engineering
Costs of Protection
Security expenses; personnel dissatisfaction; litigation costs
Licensing and Assignment
Discouraged by inherent nature of bargaining
Remedies
Civil suit for misappropriation; conversion; unjust enrichment, breach of K; damages (potentially treble) and injunctive relief, criminal prosecution for theft
 
 
Factors to consider in determining whether something is a trade secret:
1.       known to industry
a.       expert testimony. Expert says basics known in industry but I can tell you b/c I know industry standards, there are none that replicate these exact changes.
2.       efforts to protect (often used by Courts to show that it’s a secret)
3.       value to them (better product b/c of their modifications)
4.       disclosure & how they were disclosed
a.       did it promote the economic interests of the trade secret holder?
b.       was it a limited disclosure? We want to give people an incentive to divulge the secret if it’s economically efficient.
5.       cost involved in developing the secret.
a.       why would a company spend $ to develop something when you could just acquire it through public sources? Incentive based.
Subject Matter                                                                                                                               
 
Factors used to determine trade secret:
b.       Efforts to keep secret modifications are important b/c security measures cost money, and a manufacturer therefore wouldn’t incur these costs if it believed that its competitors already knew the information they were trying to protect
c.        the trade secret holder can divulge his information to a limited extent without destroying status as trade secret. Otherwise, the holder’s ability to profit from his secret would be greatly limited. Factors to determine if limited disclosure:
1.       disclosures were not public announcements;
2.       the disclosures were made to further holder’s economic interests
 
Misappropriation                                                                                                                          
See UTSA
 
E.I. DuPont v. Rolfe Christopher (Improper Means, 1971)
Issue: whether ariel photography of plant construction is an improper means of obtaining another’s trade secret
Holding: Yes, it is.
Rule: To obtain knowledge of a process without spending the time and the money to discover it independently is improper unless the holder voluntarily discloses it or fails to take reasonable precautions to ensure its secrecy.
Rationale: we should not require a person or corp. to take unreasonable precautions to prevent another from doing that which he ought not to do in the first place.
Notes: Ways to legally obtain a trade secret: (1) discover it on your own; (2) buy a product and inspect it; (3) reverse engineer it.
 
Smith v. Dravo Corp. (Confidential Relationship, 1953)
Facts: P and D were in contact regarding D’s possible purchase of P’s business. D didn’t buy, but allegedly used info he got while in contact to create similar product, sold to customers that he was told about by P.
Issue: Was there a confidential relationship between the parties, even though there was no express agreement?
Holding: Yes. P disclosed their design for one purpose – to enable D to appraise it with a view in mind of purchasing their business. There can be no question that D knew and understood this limited purpose.
 
Chicago Lock Co. v. Fanberg (Reverse Engineering, 1982)
Issue: whether D’s procurement of individual locksmith’s reverse engineering data is an “improper means” with respect to Chicago Lock Co.
Holding: No, it was not. D only liable if they intentionally procured the locksmiths to disclose the trade secrets in breach of the locksmith’s duty to the company of nondisclsoure.
Rationale: A lock-purchaser’s own reverse-engineering of his own lock is an example of the independent invention and reverse engineering expressly allowed by trade secret doctrine.
Notes: there was no direct relationship between Fanberg and CLC.
Reverse engineering part of trade secret law would create a sort of never ending patent without the process of the patent system. TS law does not protect against independent invention b/c of this.
 
 
 
 
Copyrights
 
A protectable copyright has the following elements:
 
Copyrightable Subject Matter: broad range of literary and artistic expression. Ideas themselves are not copyrightable, but the author’s particular expression of an idea is protectable.
 
Threshold for protection:work must exhibit a modicum of originality and be fixed in a “tangible medium of expression”
 
Formalities: registration not required for validity, but required prior to instituting an infringement suit. Deposit of copies of the work is required to obtain registration of copyright.
 
Authorship and Ownership: Work must have been created by party bringing suit, or rights transferred to them. For works made “for hire,” employer and not the employee is considered the author and the owner of the work.
 
Duration of Copyright: Lasts for life of author plus 90 years.
 
A valid copyright confers the following rights:
 
Copying: owner has exclusive right to make copies of her work. Copying is infringing if “material” and “substantial” even if copy in different form or only part of a whole.
 
Derivative Works: owner has exclusive rights to prepare derivative works.
 
Distribution: owner has right to control the sale and distribution of the original and all copies or derivative works.
 
Performance and Display: owner has right to control the public (but not private) performance and display of her works.
 
Underlying Theory
Limited (although relatively long-lived) monopoly to encourage the authorship of expressive works; developed initially as a means of promoting publishing. Also reflects a moral sense that authors deserve to own the works they have created.
Source of Law
© Act (federal); common law (limited)
Subject Matter
Literary, musical, choreographic, dramatic, and artistic works limited by idea/expression dichotomy (no protection for ideas, systems, methods, procedures); no protection for facts/research
Standard for Protection
Originality; authorship; fixation in a tangible medium
Scope of Protection
Rights of performance, display, reproduction, derivative works
Period of Protection
Life of author + 90 years; “works for hire”: minimu

e authors; and
g.       the authors must intend their contributions be merged into inseparable or interdependent parts of a unitary whole.
 
Maurizio v. Goldsmith and the Alexander Lindsay case
 
Duration and Renewal                                                                                                                
 
Duration and Renewal
duration of © protection has evolved significantly over the past century, generally moving in the direction of a longer term of protection
 
 
 
 
TABLE 4-1
Duration of Copyright Protection
Date work created
Protected from
Term of protection*
Created January 1, 1978, or thereafter
When the work is fixed in a tangible medium of expression
Life of the author +70 years or if work of corporate, anonymous, pseudonymous entity, or if work for hire, 95 years from publication, or 120 years from creation, whichever is less
Published between beginning of 1964 and end of 1977
When published with notice
28 years for first term; automatic extension of 67 years for second term
Published between 1923 and end of 1963
When published with notice
28 years for first term; could be renewed for 67 years; if not so renewed, now in public domain
Created before January 1, 1978 but not yet published
January 1, 1978, the effective date of the 1976 Act which eliminated common law copy right protection
Life of the author plus 70 years or at least until 2003 if the work remains unpublished. If the work is published by 2003, term expires in 2048.
Sound recordings created prior to February 15, 1972
Depends upon treatment under applicable state law. “Any rights or remedies [for such works] under the common law or statutes of any State shall not be annulled or limited by this title until February 15, 2047.” 17 U.S.C. § 301(c).
* Copyright terms run until the end of the calendar year in which they would otherwise expire.
 
CTEA of 1998 adds 20 years to those works created Jan. 1, 1978 or later
 
Exclusive Rights                                                                                                                            
 
Reproduction
right to copy granted by § 106(1) is not limited to exact reproduction
two distinct problems: (1) proving whether someone has actually copied the work of another; and (2) whether the second comer appropriated sufficient material to violate the copyright.
 
Copying – if evidence of access is absent, the similarities must be so striking as to preclude the possibility that P and D independently arrived at the same result
For unlawful appropriation, the test is the response of the ordinary lay hearer, not an expert.
h.       Sliding scale approach – the more access the less similarity is needed, the less access the more similarity needed.
 
the question is whether the part taken is so “substantial,” and therefore not a “fair use” of the © work.
 
Court defines substantial similarity as “whether an average lay observer would recognize the alleged copy as having been appropriated from the © work.”