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Intellectual Property Survey
University of Tennessee School of Law
Pulsinelli, Gary A.

Intellectual Property

Pulsinelli

Fall 2015

I. Introduction

A. Philosophical Perspectives

1. Natural Rights Perspective

» John Locke, Two Treatises on Government

2. The Personhood Perspective

» Margaret Jane Radin, Property and Personhood

3. The Utilitarian/Economic Incentive Perspective

a. Promoting Innovation and Creativity

b. Ensuring Integrity of the Marketplace

B. Overview of Intellectual Property

1. Trade Secret

2. Patent

3. Copyright

4. Trademark/Trade Dress

II. Trade Secret Protection

A. Intro

1. History

2. Overview of Trade Secret Protection

a. Initially Common Law

b. Based in Property and Torts

i. R1st Torts §757:

» Protected Trade Secret: Any information

» Used in one’s business

» That gives its owner an opportunity to obtain an advantage over competitors who do not know or use it, –AS LONG AS–

» The information was in fact a secret

3. Three Essential Elements of Trade Secret Claim:

a. Subject matter involved must qualify for trade secret protection:

b. Information must be secret

c. Info must derive value from that secrecy

i. P (holder of secret) took reasonable precautions under the circumstances to prevent its disclosure

ii. To show that litigation is worthwhile

iii. If precautions are taken and info is discovered, discovery was likely unlawful

iv. If none, D can claim there was no notice that it was a secret

» P must prove that D acquired information wrongfully

» Misappropriation = Duty

» Employee/K

4. Theory of Trade Secrets

a. Property Rights

b. Tort Law

B. Subject Matter

1. Defining Trade Secrets

a. What is a Trade Secret?

» Metallurgical Industries Inc. v. Fourtek, Inc.

United States Court of Appeals for the Fifth Circuit

2d 1195 (5th Cir. 1986)

Rule of Law: Whether a trade secret exists is determined by weighing:

· Is the subject matter actually secret,

· Is the subject matter discovered at some cost to the plaintiff, –AND–

· Is the subject matter of some value to the plaintiff.

· Doesn’t have to be absolute secret

· Disclosure limitation: Fact intensive situations, one factor among many

· Further seller’s economic interests

» PROBLEMS

· P2-1 (p. 47):

° B has no duty to keep secret, no misappropriation

° If disclosure to B does not destroy secrecy, depends on what B does with information

° No trade secret; no cause of action

· P2-2 (p. 48)

° Customer list: generally protected (when developed, not just J’s from the phonebook)

° Ct generally prevents use of memorized lists

° Personal contact info: hard to control personal knowledge

° Knowledge of market: once it’s in the market, it’s not a secret

· P2-3

° Traditionally negative information is not “used for one’s business”

° Blind Alley

° Fact determination: Must he sit idly by and watch new company make mistakes he was already aware of?

· P2-4

° Religious Tech. Center v. Wollersheim

· P2-5

° Password is not trade secret

2. Reasonable Efforts to Maintain Secrecy

a. What Constitutes a Reasonable Effort?

» Rockwell Graphic Systems, Inc. v. DEV Industries, Inc.

» United States Court of Appeals for the Seventh Circuit

» 2d 174 (7th Cir. 1991)

» Rule of Law: A trade secret owner must make reasonable efforts to maintain the secrecy of the subject matter.

· Two different emphases of Trade Secret Protection:

° 1st emphasizes the desirability of deterring efforts that have as their sole purpose and effect the redistribution of wealth from one firm to another

Ø (Narrow interpretation) P must prove that D obtained TS by wrongful act

Ø The greater the precautions, the greater chance that they were obtained unlawfully

° 2nd emphasizes the desirability of encouraging inventive activity by protecting its fruits from efforts at appropriation that are, indeed, sterile wealth-redistributive – not productive – activities

Ø Owner’s precautions still have evidentiary significance, but now primarily as evidence that the secret has real value

Ø The precise means by which D acquired it is less important under the second theory, though not completely unimportant (2nd theory still allows for unmasking of a trade secret by some means, such as reverse engineering)

° Difference (if at all), 2nd is not closed class of wrongful acts – 1st is not necessarily closed

· D is perfectly entitled to obtain the property if:

° He can, and he can if the property is in the hands of persons who themselves committed no wrong to get it

° P has abandoned it by giving it away without restrictions

· Only in very extreme cases will determining what constitutes reasonableness be appropriate for summary judgment

· Answer will vary case-to-case and probably require experts in particular field

· Rule 56 of civil rules

° The efforts of the purported trade secret owner must be weighed in terms of the costs incurred in maintaining security, while at the same time weighing indirect costs, such as ease of conducting business under extremely secure conditions.

· “Secrecy Continuum”

° Tell No One (Perfect Secrecy) – Publication (No Secrecy)

· Tend to favor TS holder when market knows but is under license to keep secret, yet party outside class gains/discloses TS

· Secrecy is different from # of people who know it

· Notice

° To Employees

° To Competition

» PROBLEMS

· P2-6 (p. 57)

° Simple formula; easy to reverse engineer

° If it’s not a secret, method of disclosure doesn’t matter

· 2-7

° Informal protection methods

° Damage to TS holder is primary concern

3. Disclosure of Trade Secrets

» Data General Corp. v. Digital Computer

mpetition §41:

° Person knew or had reason to know that the disclosure was intended to be in confidence

° Other party to the disclosure was reasonable in inferring that the person consented to an obligation of confidentiality

· Knowing that a patent exists can be valuable in certain situations

· Signing non-disclosure up front

· Standards Market: Company that owns standard is in position to benefit

· Arrow’s Information Paradox:

° Info is valuable b/c it is secret, must reveal secret to make the sale, but then there’s nothing worth buying

» PROBLEMS

· 2-9

° Not unilateral

° Solicitation, in and of itself, probably not enough to imply

° Separate idea from request (idea in separate envelope, opening agrees to confidentiality)

° Companies tend to send back unsolicited ideas unread

· 2-10

° Implied confidential relationship is harmful to Venture Capitalists

° No non-disclosure rule is notice of no K

4. Reverse Engineering

» Kadant, Inc. v. Seeley Machine, Inc.

» United States District Court for the Northern District of New York

» Supp. 2d 19 (N. D. N. Y. 2003)

» Rule of Law: Reverse engineering a product to determine its design specifications is permissible so long as the means used to get the information necessary to reverse engineer the product is in the public domain, and not through the confidential relationship established with the maker or owner of the product

· In order for a plaintiff to successfully move for a preliminary injuction, he must demonstrate:

° Likelihood of irreparable harm if the injunction is not granted –AND–

° Likelihood of success on merits of his claims –OR–

° Existence of serious questions going to the merits of its claims plus a balance of the hardships tipping decidedly in its favor

· To establish misappropriation of a TS, a plaintiff must prove:

° That it possessed a trade secret –AND–

° That defendants are using that TS in breach of an agreement, confidence, or duty, or as a result of discovery by improper means

· TS law does not offer protection against discovery by so-called reverse engineering

· RE is permissible as long as means to obtain TS were proper & honest

° Reverse engineer can not hold duty to TS owner

° Enforcing morality – RE does, Stealing does not

· Must be in stream-of-commerce to be RE