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Intellectual Property
Villanova University School of Law
Risch, Michael V.

IP Outline
Professor Risch
Fall 2010
 
I.     Trade Secrets
A.    General
1.     Sources of Trade Secret Law
i.      State CL
a.     Restatement of Torts §757 (1939)
b.     Restatement of Unfair Competition (1995)
(1)   Professor thinks the new Restatement is pretty much useless
ii.     State Statute
a.     Uniform Trade Secrets Act (UTSA)
b.     Always know what was enacted in each jurisdiction
(1)   CA à pure trade secret
(2)   PA à a little of both
iii.    Federal Economic Espionage Act
2.     Competing theories/rationales
i.      Utilitarian à protection encourages investment
a.     Property-based
ii.     Deterrence of wrongful acts à breach of confidence, good faith in business
a.     Tort-based
3.     Recurrent themes
i.      Prevention ßà labor mobility
ii.     Existence of trade secret ßà punishing bad acts
iii.    Professor’s theory à form of investment, but not a big one
a.     Law is one investment
b.     Law is ordered way if doing it
iv.    If secrecy was that important, then loyalty, not performance, would be the key factor in hiring
a.     Nepotism would run wild
b.     Most costs in maintaining secret than in creating innovation
c.     More wars between companies to get information
B.    Elements – UTSA §1(4)
1.     Subject matter qualifies as trade secret
i.      Information NOT generally known
ii.     Information NOT readily ascertainable by proper means
a.     EXCEPTION: not required in CA
iii.    Reasonable efforts under circumstances to maintain secrecy
iv.    Independent economic or commercial value from not being generally known
2.     Misappropriation
i.      By improper means
ii.     Breach of confidence
3.     Restatement focuses on competitive advantage
i.      Not value from what is not generally known
ii.     UTSA is broader à not relative to competitor
4.     Framework
i.      Is the information a trade secret?
ii.     Was it misappropriated?
C.    Subject Matter
1.     What is a Trade Secret?
i.      Trade secret includes:
a.     Invention
b.     Technical information
c.     Business information
d.     Formula
e.     Pattern
f.      Compilation
g.     Program
h.     Device
i.      Method
j.      Technique
k.     Process
ii.     NOT trade secret:
a.     Personal skill
b.     General knowledge
c.     Reverse engineering
d.     Information readily ascertainable
(1)   EXCEPTION: CA à affirmative defense
iii.    Metallurgical Industries Inc. v. Fourtek, Inc. (5th Cir. 1986) – process as a whole was trade secret and protection not destroyed when no public announcement and confidentiality is only a factor, not requirement
a.     Facts: Metallurgical sued Fourtek for misappropriation of trade secret after it manufactured zinc recovery furnace for competitor
(1)   Metallurgical began considering zinc recovery process to reclaim carbide and contracted with Therm-O-Vac to design and construct two zinc recovery furnaces
(2)   Metallurgical made extensive modifications
(i)    Frequent notices to Therm-O-Vac indicated that process was secret and disclosures to them were made in confidence
(3)   Four of Therm-O-Vac’s representatives formed Fourtek
(4)   Metallurgical acknowledged at trial that the changes by themselves were not secret, but argued that the process as a whole is a trade secret in the carbide business
b.     Holding: process as a whole could have been trade secret and protection not destroyed when no public announcement and confidentiality is only a factor, not requirement à remanded for new trial
c.     Analysis:
(1)   General knowledge in the industry cannot be appropriated as a secret
(2)   Metallurgical presented evidence showing:
(i)    Metallurgical’s changes were unknown in carbide industry
(ii)   Security measures taken to conceal furnaces from all but authorized personnel
(a)   Would only undertake security if believed competitors did not know the information involved
(3)   Holder of secret need not be completely silent to remain trade secret
(i)    Rejects argument that disclosure to other parties vitiated secrecy
(4)   Also Metallurgical’s disclosure was limited and retains protection
(i)    Not public announcements
(ii)   Disclosures made to further Metallurgical’s economic interests
(5)   Confidentiality would not have made case stronger, but only a factor, not a requirement
iv.    Dead ends as trade secret
a.     Labor put in
b.     Utilitarian à how do you prove damages
c.     Ex ante à cannot look at end result
(1)   Value is in getting it wrong
(i)    Coke vs. new Coke
(2)   Others should not be able to benefit
d.     Because can derive independent economic value from actual or potential value from not being g

(no longer secret)
ii.     Types of disclosure:
a.     Advertent à trade secret protection lost
(1)   But some cases say if on Internet and sufficiently obscure then may not actually be published
b.     Disclosure of product
(1)   Trade secret apparent/on its face à trade secret protection lost
(2)   Trade secret hidden à trade secret proteection depends
(i)    Ex.: object code
(ii)   Reverse engineering à trade secret lost
c.     Accidental à others cannot knowingly disclose
(1)   Cannot disclose even with accidental disclosure
iii.    Data General Corp. v. Digital Computer Controls, Inc. (Del. Ct. Ch. 1971) – furnishing of information that constitutes trade secret does not destroy trade secret protection when adequate measures are taken in protecting it
a.     Facts: Data General seeks to preliminarily enjoin Digital Computer from using trade secrets contained in design drawings that accompany certain sales of Data General’s Nova 1200 computer
(1)   Digital Computer’s president acquired from a customer, including drawings and the used them to construct a competing machine
(2)   Drawings made available to buyers of computer so customers can do their maintenance
(i)    Contained proprietary information not to be used by purchaser
(3)   Drawings furnished to customers subject to non-disclosure clause
b.     Holding: furnishing of drawings to allow customers to maintain does not constitute disclosure of trade secret as matter of law and granting of preliminary injunctive relief was premature when only entitled for period it takes to reproduce of absence of such drawings
c.     Analysis:
(1)   Defendants argue that plaintiffs did not take adequate precautions to maintain secrecy of trade secret
(2)   Recognized in other cases that actual copy needed
(i)    Insufficient that unpatented article merely sold to public and subject to examination and copying by another