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Intellectual Property
University of North Carolina School of Law
Chin, Andrew

UNC Law – IP Seminar 2012
Andrew Chin, IP in the New Technological Age 6th Edition
v  Introduction
o   Utilitarian justifications for IP Law
§  Goal of promoting innovation and creativity by allowing people the exclusive right to profit from their innovation for at least a certain amount of time
§  Counterbalanced with the idea that information should not be constrained, should be public to build on and improve upon
o   Types of IP Law
§  Trade Secret
§  Trademark
§  Patent
§  Copyright
·         See chart Appendix 1 for breakdown of associated rights
v  Trade Secret
§  Actual Secret
·         Not generally known to the public
·         Secret was valuable (a competitive advantage to the owner resulting from the secret not being generally known or knowable)
o   Factors of value:
§  1) improved quality of product relative to competition
·         Modifications on a known process can be a TS (Metalurgic)
§  2) cost of developing the secret – time, effort, money         
§  3) degree of measures taken to protect the secret
·         TS holder made good faith attempt to protect, restrict access to, the secret
o   Reasonableness of effort is generally a matter of fact, though court will look at the circumstances to decide, as a matter of law, if efforts were so insufficient that they couldn’t possibly be considered a secret.
o   Absolute secrecy not required
§  Reasonable good faith disclosure to others in business relationships (employees, licensees, etc. ) do not destroy secret status
·         Metalurgic- licensing to business partners with limitations OK
·         Rockwell- distribution of drawings to employees with check-out system from vault and non-disclosure agreement OK
·         Data General v. Digital- providing instructional drawings to customers for computer repairs with confidentiality agreement and clear privacy notice printed on documents OK
§  Misappropriation: Improper acquisition
·         RULE:  Plaintiff must prove that Defendant obtained by improper means- the more steps towards protecting the secret in place, the more likely it is that the acquisition was improper  (Rockwell graphics v. DEV)
·         Theft
·         Unauthorized disclosure:
o   Often occurs with former employees who go work for competitors
o   Non-competition/non-disclosure agreements are alight, but can’t be so restrictive as to prevent someone from practicing their given profession- Edwards v. Arthur Anderson
§  Factors to assessing fairness of non-competition agreement
·         Is the restraint no greater than necessary to protect the employer in some legitimate business interest
·         Is the restrain not unduly harsh and oppressive to the employee in curtailing his legitimate efforts to earn a living
·         Is the restraint reasonable from a policy standpoint? 
§  Constructive breach occurs if employee’s new position is:
·         In direct competition AND
·         Is of such a nature that disclosure or use of previously acquired secrets is inevitable 
(PepsiCo v. Quaker Oats)
·         Other improper means:
o   Fly overs: DuPont v. Chrisotpher
o   Breach of confidential relationship:
§  Smith v. . Dravo Corp. : if there was a secret and the secret was shared to one in a position of trust and confidence, disclosure or use of the secret is a misappropriation.
§  Restatement of torts-  confidential relationship established if:
·         Express promise of confidentiality
·         Secret disclosed under circumstances such that the disclosing party
o   Knew or had reason to know that the disclosure was intended in confidence
o   The other party was reasonable in inferring that the person consented to this obligation of confidentiality  
Probability that challenged act
 x Probability of Discovery of TS through the Challenged Act Occurred
 x Value of TS
Security Measures in place to prevent challenged act — and the cost that would have been required to add additional measures to prevent acquisition (reasonableness)
o   Defenses
§  Not an actual secret
§  No breach
·         Failure to make reasonable efforts to restrict access/protect the secret
§  Obtained by proper means
·         Discovery by independent invention
·         Discovery by reverse engineering after selling of product that embodies the secret

n, government, governmental subdivision or agency, business trust, estate, trust, partnership, association, joint venture, or any other  legal or commercial entity.
§  (3)        “Trade secret” means business or technical information, including but not limited to a formula, pattern, program, device, compilation of information, method, technique, or process that:
·         a.         Derives independent actual or potential commercial value from not being generally known or readily ascertainable through independent development or reverse engineering by persons who can obtain economic value from its disclosure or use; and
·         b.         Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
§  The existence of a trade secret shall not be negated merely because the information comprising the trade secret has also been developed, used, or owned independently by more than one person, or licensed to other persons. (1981, c. 890, s. 1.)
o   Common Law:  Restatement of Torts:
§  as any info used in one’s business that gives owner an opportunity to obtain advantage over competitors who don’t know or use it.
·         must be used in the owner’s business
·         does not have to actually gain advantage (potentially advantageous can be enough)
§  Six factors to determine if it is a TS
·         1) extent to which info is known outside of claimant’s business
·         2) extent to which info is known to employees and others in claimant’s business
·         3) extent of measures taken by claimant to guard secrecy
·         4) value of the info the claimant and its competitors
·         5) Amount of effort/money expended by claimant to  develop the secret
·         6) the ease of difficulty with which the information could be PROPERLY acquired or duplicated by others