Intellectual Property Survey – Prof. Lisa Ramsey – Fall 2016
Trade Secrets
Analysis of a Trade Secret Issue
Establishment of Rights: Does Plaintiff have a protectable trade secret?
Relevant law: federal Defend Trade Secrets Act (DTSA); state statutes that adopt Uniform Trade Secrets Act (UTSA) such as Cal. Civil Code; state common law such as New York that follows law set forth in Restatement of Torts (ROT)
Requirements for protection: what subject matter is claimed to be the trade secret?
Is this information secret, valuable, and subject to reasonable efforts to maintain secrecy at the time of misappropriation? For the exact language, see elements in DTSA, Cal. Civ. Code, or other state law incorporating the UTSA or ROT
Ownership of trade secret: Employer, employee, or another entity or person?
Duration of protection: Until not secret–publicly disclosed, reverse engineered, etc.
Enforcement of Rights: Is Defendant liable for trade secret misappropriation? See DTSA, Cal. Civ. Code, or other state law incorporating the UTSA or ROT
Elements: (1) Plaintiff owns a protectable trade secret at the time of misappropriation
(2) Misappropriation – unlawful acquisition, disclosure, use; (3) Harm/unjust enrichment
Acquisition by improper means
Breach of confidential relationship – improper disclosure or use after express or implied duty to maintain secrecy [breach of contract claim may also be possible]
Other types of misappropriation by disclosure or use
Defenses and Proper Means of Acquiring Trade Secrets
Reverse engineering, independent discovery, etc.; Cal. law: info readily ascertainable
Agreements: Any agreements relating to trade secrets or other intellectual property?
Remedies: Injunction, damages, unjust enrichment, attorneys’ fees, etc.
Sources of Law
Common law or judge-made law; courts apply law summarized in
Restatement of Torts §§ 757 & 758 (1939)
Massachusetts and New York apply the common law set forth in the Restatement of Torts
Restatement (Third) of Unfair Competition (1994)
State statutes
47 U.S. states and the District of Columbia have statutes modeled on the Uniform Trade Secrets Act (1979) – the “UTSA”
California adopted the UTSA but revised it in various ways we will discuss later. See Cal. Civil Code §§ 3426 et al.
Massachusetts and New York did not adopt the UTSA
North Carolina law is similar to the UTSA
Federal statutes
Defend Trade Secrets Act of 2016 and Economic Espionage Act of 1996, codified at 18 U.S.C. §§ 1831-1839
Computer Fraud and Abuse Act, 18 U.S.C. § 1030
Subject Matter
Defend Trade Secrets Act of 2016, 18 U.S.C. §1839 Definitions
“(3) the term “trade secret” means all forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing if
(A) the owner thereof has taken reasonable measures to keep such information secret; and
(B) the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, another person who can obtain economic value from the disclosure or use of the information”
Mettalurgical v. Fourtek
Improvements to furnace are trade secrets
Absolute secrecy is not required: Can disclose information to others to further economic interests (e.g., employees, those who pledge secrecy)
Evidence of confidential relationship is best, but not required
Restatement of Torts § 757, Comment b (1939)
What qualifies as at trade secret under the ROT:
any formula, pattern, device, or compilation of information which is used in one’s business
which provides an opportunity to obtain an advantage over competitors [i.e., it is valuable]
Competitors do not know or use the information [i.e., it is secret]
Factors Courts Consider in evaluating whether info is a TS
the extent to which the information is known outside of the business
the extent to which the information is known by employees or others involved in the business
the extent of measures taken to guard the secrecy of the information
the value of the information to the business and its competitors
the amount of effort or money expended by the business in developing the information
the ease or difficulty with which the information could be properly acquired or duplicated by others
Restatement (Third) of Unfair Competition §39
What qualifies as at trade secret under the RUC:
any information that can be used in the operation of a business or other enterprise and that is
sufficiently valuable and
secret to afford an actual or potential economic advantage over others
Uniform Trade Secrets Act §1
What qualifies as a trade secret under the UTSA:
information, including a formula, pattern, compilation, program, device, method, technique, or process, that
derives actual or potential independent economic value
from not being generally known [i.e., it is secret rather than known] and
not being readily ascertainable by proper means by other persons who can obtain economic value from its disclosure or use [i.e., it is not knowable] and
is subject to reasonable efforts to maintain its secrecy
What qualifies as a trade secret under the DTSA:
all forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing
reasonable measures to keep such information secret
information derives actual or potential independent economic value
from not being generally known [i.e., it is secret rather than known], and
not being readily ascertainable through proper means [i.e., it is not knowable] by another person who can obtain economic value from the disclosure or use of the information
California Civil Code § 3426.1
What qualifies as a trade secret under C
or
(d) he learned the secret with notice of the facts that it was a secret and that disclosure was made to him by mistake.”
Defend Trade Secrets Act of 2016, 18 U.S.C. §1839
“(5) the term ‘misappropriation’ means–
(A) acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or
(B) disclosure or use of a trade secret of another without express or implied consent by a person who–
(i) used improper means to acquire knowledge of the trade secret;
(ii) at the time of disclosure or use, knew or had reason to know that the knowledge of the trade secret was–
(I) derived from or through a person who had used improper means to acquire the trade secret;
(II) acquired under circumstances giving rise to a duty to maintain the secrecy of the trade secret or limit the use of the trade secret; or
(III) derived from or through a person who owed a duty to the person seeking relief to maintain the secrecy of the trade secret or limit the use of the trade secret; or
(iii) before a material change of the position of the person, knew or had reason to know that–
(I) the trade secret was a trade secret; and
(II) knowledge of the trade secret had been acquired by accident or mistake”
UTSA §1 / Cal. Civ. Code § 3426.1:
“(b) ‘Misappropriation’ means
(1) Acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or
(2) Disclosure or use of a trade secret of another without 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 the disclosure or use, knew or had reason to know that his or her 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 its use; or
(C) Before a material change of his or her position, knew or had reason to know that it was a trade secret and that knowledge of it had been acquired by accident or mistake”
E.I. DuPont v. Christopher: Improper Means
– aerial photos taken of Du Pont facility by agent of another company
– Improper means is not only limited to trespass or illegal conduct
– includes violations of generally acceptable conduct
– enforce corporate morality
