Trade Secret Law
Analysis:
Does plaintiff’s information qualify as a trade secret?
If so, was defendant’s acquisition, use, or disclosure of the information an actionable misappropriation?
Law:
Restatement of Torts: any formula, pattern, device or compilation of information which is used in one’s business and which gives him an opportunity to obtain an advantage over competitors who do not know/use it
Requires use to be continuous (not one-shot, such as terms of secret bid)
UTSA: information, including a formula, pattern, compilation, program, device, method, technique or process that:
Derives actual or potential economic value from the fact that it is not known or readily ascertainable by others
Is subject to reasonable efforts to maintain its secrecy
Restatement six factor test (focuses on whether info is secret and whether it has competitive value)
How widely is the idea or info known outside the claimant’s business
Others may know the secret as long as not too many
“Substantially secret”
Who within claimant’s company knows the idea or info
Disclosure is okay when reasonable precautions are taken
Measures to ensure secret remains secret (notify employees of secret status, confidentiality agreements, screen research papers for presentations at conferences)
Use cost and benefit analysis to determine what is a “reasonable precaution”
What measures has claimant taken to ensure that the idea or info remains secret
Anticipate and take reasonable measures to prevent access
Dupont: manufacturer not required to foresee air access by plane; cost of protective measures during construction, such as erecting huge tent, unreasonably expensive
How difficult would it be for others properly to acquire/duplicate the idea or information
Has info been published (published info probably does not qualify as trade secret
Reverse engineering: examination, analysis, or decompilation of the finished product placed on market
Easily ascertainable info probably not trade secret
Complex reverse engineering requiring significant effort and expertise will not destroy trade secret status or ability to enforce rights against those who obtained secret through other means
How valuable is idea or info to the claimant and competitors
Value to claimant must be commercial in nature
Religious/spiritual value insufficient
How much effort/money has claimant expended in developing/acquiring idea or info
Greater investment, more likely that knowledge has real value to claimant and public in general
Greater value, greater justification for providing protection as incentive for its development
Acquisition, use, disclosure = actionable misappropriation
Disclosure in breach of confidence
Special relationships (agent-principal, partner/joint venturers, fiduciary relationship, etc.)
Express contract to retain confidentiality
Shrink-wrap licenses: questionable enforceability under contract law (lack of consent, lack of consideration, adhesion contract, public polic
ty
“Free ride,” taking advantage of plaintiff’s vulnerability
Disclosure/use with notice that provider acquired it through improper means
Duty not to disclose/use secret
Use reasonable person analysis
Defendant’s modification of plaintiff’s trade secret does not relieve defendant from liability so long as plaintiff can show that information was substantially derived from plaintiff’s trade secret
Employees and former employees
Absence of express agreement
Preexisting trade secret disclosed to employee impose duty on employee
Trade secret created by employee cannot be disclosed without permission when it is employer’s property; no duty if secret is not employer’s property
Employer’s property when employee hired to create/develop secret and employer put substantial resources used for development at employee’s disposal
Shop right (irrevocable, non-exclusive, non-assignable right/license to use secret without paying royalty) allows employer to use secret developed by employee during working hours or with employer’s materials
Express agreement
Non-disclosure
Advance assignment: enforceable so long as not unconscionable and supported by consideration (hiring)
Non-competition
