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Intellectual Property
University of Mississippi School of Law
Lantagne, Stacey M.

INTELLECTUAL PROPERTY – FALL 2015 – LANTAGNE

Introduction – Constitution: Art I, §8, Cl. 8 – “To promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their Writings and Discoveries”

Trademarks

Trademarks cannot be functional features, descriptive terms, geographic names, misleading aspects, or generic names
Trademarks have to be distinctive
You can have a trademark in a descriptive or geographic term if it’s developed secondary meaning
To have trademark protection, you must be using your trademark in commerce—comes from the commerce clause
We will let other people use your trademark if it’s a truthful reflection of the source of the product
We will also let other people use your trademark for “fair and collateral use”
Likelihood of confusion

Trade Secrets

Formula, pattern, compilation, program, device, method, technique, process
Cannot be generally known or available
You must make reasonable efforts to maintain its secrecy
It must have commercial value
It’s okay to discover independently or to reverse engineer

Patents

Process, machine, manufacture, composition of matter, plant, or design, except laws of nature, natural substances, forms, and mental steps
Your invention must be novel, nonobvious, and have some utility
The only way anyone can use your invention is to license it –they cannot reverse engineer or independently discover it
Patents grant a property right to an inventor by USPTO; include excluding others from using/selling the invention – government sanctioned monopoly

Copyrights

Literary musical, choreographic, dramatic, and artistic works, computer software, aesthetic elements of useful articles
You cannot copyright an idea / system / method / procedure, only the expression
Your expression must be original, must be the author of that expression, in a tangible medium
Others can use your expression in certain circumstances known as “fair use”
Independent creation is permitted

Copyright

Patent

Trade Secret

Trademark

Copyright and Patent Clause, as embodied in the Copyright Act

Copyright and Patent Clause, as embodied in the Patent Act

State law

Commerce Clause, as embodied in the Lanham Act

Life of author +70 years; or 95 years after publication / 120 years after creation if no “living” author

20 years with some extensions of up to 5 years available; 14 years for design patents

Perpetual, unless it becomes public knowledge

Perpetual, unless it is abandoned

Trade Secrets: Overview/Subject Matter/Misappropriation

Elements of a Trade Secret Claim—State Law

The subject matter must be secret – not generally known to all
The holder of the trade secret took reasonable precautions under the circumstances to prevent its disclosure

Evidence of the trade secret’s value
Evidence that the defendant probably got it wrongfully

The defendant acquired the trade secret wrongfully

Compl. & Jury Demand ¶¶ 51-55, Optos, Inc. v. Topcon Med. Sys., Inc., No. 110CV12016 (D. Mass. Nov. 22, 2010) sample complaint

COUNT III: THEFT OR MISAPPROPRIATION OF TRADE SECRETS

51. Optos’s confidential and proprietary information, including its customer lists and information about its customer contracts, constitutes trade secret information.
52. Optos took reasonable steps to preserve the secrecy of these trade secrets, including by limiting access to this information and requiring every employee to sign a nondisclosure and confidentiality agreement.
53. Schafer employed improper means, in breach of his contractual obligations to Optos, to acquire and/or use Optos’s trade secrets without Optos’s express authorization.
54. Topcon knowingly benefited from the use of Optos’s trade secrets, which were wrongfully acquired and/or used by Schafer in breach of his contractual obligations to Optos.
55. As a result of Schafer’s and Topcon’s wrongful actions, Optos has suffered and continues to suffer damages and irreparable harm.

Theories of Trade Secret Law

Utilitarian—Protecting against IP theft encourages investment in IP
Tort—Punishment and prevention of illicit behavior encourages reasonable standards of commercial behavior

Defining Trade Secret

Metallurgical Indus. Inc. v. Fourtek, Inc., 790 F.2d 1195 (5th Cir. 1986)

Metallurgical Industries, Inc. (Metallurgical) (Plaintiff) spent time, money, and effort to modify zinc furnaces it had purchased from a bankrupt company.A former employee (Defendant) of the bankrupt company, who had been told the process was a secret, formed Fourtek, Inc. (Defendant) and contracted with a third party to build a furnace incorporating the modifications.Plaintiff then sued, alleging a trade secret had been misappropriated.The district court ruled there was no trade secret involved in the basic zinc recovery process because the process had been publicized in the trade previously, therefore, misappropriation did not occur.Plaintiff appealed.It countered that its modifications gave it a clear advantage over its competitors.Plaintiff also claimed that its modifications were trade secrets because the holder of a secret may communicate to employees and others pledged to secrecy without losing his protection.
Metallurgical had refined specifically a generally known scientific process to make it better.

Although it was a general practice, their specifications were trade secrets.

“The definition of ‘trade secret’ will . . . be determined by weighing all equitable considerations.” (must look at all the circumstances)

The cost of devising the secret and the value the secret provides are the legal equitability of trade secrets.

Because Metallurgical had taken sufficient means to maintaining secrecy, it was a trade secret.

One who holds a trade secret may reveal a limited amount of information without destroying the trade secret status.
When disclosure to others is made to advance the holder’s economic interest, it should be considered a limited disclosure that does not destroy the required secrecy.
Here, the disclosures were not public announcements, Metallurgical (Plaintiff) only revealed its information to two businesses it was dealing with, and the disclosures were made to advance Plaintiff’s economic interests.Plus, the modifications that led to the commercial operation of the zinc recovery furnace provided a clear advantage over the competition.
That the scientific principles involved are generally known does not necessarily refute Plaintiff’s claim of trade secrets.

Rockwell Graphic Sys., Inc. v. DEV Indus., Inc., 925 F.3d 174 (7th Cir. 1991)

Rockwell Graphic Systems, Inc. (Rockwell) (Plaintiff) manufactured printing presses and replacement parts based on secret piece part drawings.Two prior employees of Plaintiff joined DEV Industries, Inc. (Defendant), a competitor, and Rockwell (Plaintiff) sued, claiming that they were using stolen secret piece part drawings.
Despite DEV getting summary judgment at the lower court level, the appellate court thought that it should have gone to a jury trial because there was enough of a question as to whether Rockwell sufficiently protected their trade secret.
Are holders of trade secrets required to take reasonable precautions to keep the secrets confidential?

Holders of trade secrets are required to take reasonable precautions to keep the secrets confidential.
Only in an extreme case can what is a “reasonable” precaution be determined on a motion for summary judgment, because the answer depends on a balancing of costs and benefits that will vary from case to case and therefore each requires estimation and mea

reasonable in inferring that the person consented to an obligation of confidentiality.

Smith v. DravoCorp., 203 F.2d 369 (7th Cir. 1953)

P created a shipping container trade secret that was going to be sold to D, but D never signed an agreement to keep this trade secret confidential. P had to argue that the confidential relationship was implied.
The Court applies the commercial morality standard, because the negotiation implied a confidential relationship.

This case gives no discussion on whether there was actually a trade secret to begin with.

A confidential relationship may be implied without an express promise of trust.

Proper Means

Discovery by independent invention
Discovery by reverse engineering
Observation of the item in public use or on public display
Obtaining the trade secret from published literature

Reverse Engineering

Kadant, Inc. v. Seeley Machine, Inc., 244 F. Supp. 2d 19 (N.D.N.Y. 2003)

Kadant, Inc. (Plaintiff) claimed that its former employee, Corlew, stole design specifications for its products, which, it claimed, were trade secrets, and that Corlew gave the trade secrets to his new employer, Seeley Machine, Inc. (Defendant), which then used them to develop a new line of products.
Is trade secret protection appropriate where a plaintiff does not provide evidence showing that the defendant improperly obtained and reverse engineered its products?
No.Trade secret protection is not appropriate where a plaintiff does not provide evidence showing that the defendant improperly obtained and reverse engineered its products.If secrecy is lost when a product is placed on the market, there is no trade secret protection.

Therefore, trade secret law does not offer protection against reverse engineering where the means used were “honest” (in the public domain) and not obtained by virtue of a confidential relationship with an employer.

In this case, Kadant (Plaintiff) has failed to present evidence that the means used by Seeley (Defendant) to obtain the alleged trade secret were improper or dishonest.Basically, it has no evidence Corlew actually stole the design specifications.Instead, it relies upon an inference, that the only way Defendant could develop, market, and sell its products in such a short time is if Corlew stole the design specification information.However, as far as the evidence to this point shows, such an inference is unjustified.
Plaintiff does not seem to argue that reverse engineering is impossible, just that it would take a great deal of time, skill, and expense, and that the lack thereof demonstrates that the design specification must have been stolen.
Defendant has argued that Plaintiff’s products were simple and made of nontechnical and few parts, requiring little time for reverse engineering, for the few products that were.Plaintiff failed to sufficiently rebut these contentions.
Therefore, since Plaintiff has failed to clearly show that Defendant improperly obtained and reverse engineered its products, trade secret protection is improper at this stage of the litigation.