Intellectual Property Lantagne Fall 2016
4 Areas: Trade Secrets, Trademark, Patents, Copyright
U.S. Const. art. I, § 8: “The Congress shall have Power…to promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries….”
(1) 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
• Okay to discover independently or to reverse engineer.
Elements: Subject matter must be secret; not gen. known to all. Holder of the trade secret took reasonable precautions under the circumstances to prevent its disclosure: evidence of the trade secret’s value & evidence that D prob. got it wrongfully.
1. Utilitarian – Protecting against IP encourages investment IP
2. Tort- the equity clause; commercial morality; Punishment and prevention of illicit behavior encourages reasonable standards of commercial behavior.
Uniform Trade Secrets Act
Trade secret means info., including a formula, pattern, compilation, program, device, method, technique, or process that: (1) Derives independent economic value, from not being gen. known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and (2) Is the subject of efforts that are reasonable…to maintain its secrecy.
Metallurgical Indus. Inc. v. Fourtek, Inc. (1986) – Rule: one who holds a trade secret may reveal a limited amount of information without destroying the trade secret status.
Rockwell Graphic Sys., Inc. v. DEV Indus., Inc. (1991) – Rule: Holders of trade secrets are required to take reasonable precautions to keep the secrets confidential. “If trade secrets are only protected when their owners take extravagant, productivity-impairing measures to maintain their secrecy, the incentives to invest in more efficient ways of production will be reduced.
Losing Your Trade Secret
Voluntary Disclosure: (journal article) gen. gives up trade secret protection
Gov.-Required Disclosure: gives u something in exchange for giving up protection.
Disclosure by somebody else: gen. destroys the secrecy
Accidental disclosure: depends on equities and the practicalities
Product distribution embedding trade secret: depends how apparent trade secret is from the product
Data Gen. Corp. v. Digital Computer Controls, Inc. (1972), pg. 33: Rule: to prove a violation of trade secret, P must demonstrate the existence of a trade secret, D didn’t properly receive the info. which it confid. nature should have been known, and that D proposes to misuse such info.
Uniform Trade Secrets Act
Misappropriation means: (i) Acquisition of a trade secret of another by a person who know that a trade secret was acquired by improper means; or (ii) disclosure or use of a trade secret of another w/o express or implied consent by a person who:
• (a) used improper means to acquire knowledge of the trade secret; or
• (b) at the time of disclosure or use, knew or had reason to know that his knowledge of the trade secret was:
• (i) derived from or through a person who had utilized improper means to acquire it;
• (ii) acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; or
• (iii) derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit use; or
• (c) Before a material change of his position, knew that it was a trade secret and knowledge had been acquired by accident or mistake.
Improper Means include theft, bribery, misrepresentation, breach or inducement of a breach to maintain secrecy. Doesn’t include reverse engineering, independent derivation, or other lawful means.
E.I. duPont deNemours & Co. v. Christopher (1970) pg. 39, Rule: The holder of a trade secret can sue another for obtaining knowledge of the trade secret without having spent the time or money to discover it on their own, unless the holder discloses the trade secret voluntarily, or if the holder does not take reasonable precautions to protect its secrecy.
Creating a Confidential Relationship
Express Agreements – making people sign contracts agreeing to keep certain info. confidential
Implied Agreements – disclosed under circumstances where the person knew or should have known the disclosure was confidential and it’s reasonable to infer that the person consent to keeping it confidential.
Smith v. Dravo Corp. (1953) pg. 45, Rule: A confidential relationship may be implied without an express promise of trust. Dravo Corp. expressed interest in buying Smith’s shipping container comp. but instead used the blue prints to create their own shipping container
• Redmond was enjoined from being employed by Quaker for 6 months and enjoined from using trade secrets forever; undercuts the “inevitable disclosure” doctrine.
• Employers cannot prohibit employees from using the general skills and knowledge that they obtained but can keep an employee from using trade secrets.
Upheld only in 2 circumstances:
(1) If there is active inducement to breach an employment contract.
(2) If departing employees have taken a trade secret customer list with them.
• even when upheld, a customer is allowed to approach the former employee.
Employee Issues Recap
• Prohibit employees from using trade secrets (NDAs); some states allow u to make “inevitable disclosure” argument.
• Can’t prohibit employees from using gen. skills & knowledge
• “reasonable” non-competition agreements are permitted, even w/o trade secrets but not in Cal.
• Can gen. make employees agree that employers own inventions created on work time that r related to employer’s business.
• Nonsolicitation agreements gen. upheld if there’s a breach of contract or trade secret involved.
• Injunctions – not forever; sometimes have to take affirmative steps to keep secret, secret.
• Reasonable royalty – when secret is out of the bag; then court say that we would had enjoined it for this long, and make party pay a licensing fee
• Damages for actual loss and unjust enrichment
• Exemplary damages – if willful and malicious
• Attorney fees – willful malicious too
Winston Research Corp. v. 3M Corp. (1965), pg. 100, Rule: (1) A particular embodiment of a general approach to solving a problem can be a trade secret. (2) A court has discretion to enjoin disclosure of a trade secret for the period of time during which it would take a competitor to develop a competing product after the holder of the trade secret has disclosed it publicly.