Trade Secret:• A type of intellectual property in the form of a formula, practice, process, design, instrument, pattern, commercial method, or compilation of information not generally known • Any confidential information which provides an enterprise with a competitive edge can qualify as a trade secret entitled to legal protection Trade Secret:• A Trade Secret is a piece of information, not generally known or reasonably ascertainable, that gives a business an economic advantage over its competitors. • Trade Secret protection requires reasonable efforts to maintain secrecy. • Some of the most famous Trade Secrets include: • • • • • Recipes (Coca-Cola) Formulas (WD-40) Algorithms (Google Search) For most businesses – may include customer lists, internal specs and best practices guide Trade Secret:- • A trade secret can relate to different types of information • Technical and scientific Information • Commercial Information • Financial Information • Negative Information in some law A formula for a Recipes (food), Marketing strategies, Manufacturing techniques, Computer algorithms Benefits of Trade secret : • Perpetual Protection: Not limited by time than patents (20 years) and copyrights • Involve no registration costs: • The owner avoids the expensive patent application process • A trade secret is not publicly disclosed like a patent, therefore the inventor may make improvements to their invention without competition from other businesses. • Take immediate effect • Do not require complex formalities such as disclosure to a Government Authority Famous Examples Trade Secret:- How Long Do Trade Secrets Last? Potentially forever - if the information continues to meet the • qualifications (remember: a piece of information, not generally • known or reasonably ascertainable, that gives a business an • economic advantage over its competitors), and it’s not • revealed, it remains a trade secret. • This indefinite life span means that trade secrets can be very • valuable assets for your company. • However: rights in a Trade Secret only exist as long as the • secret is maintained. • • If you broadcast it to the world, you’re out of luck. WAY TO PROTECT TRADE SECRET • Restrict access to the information (lock it away in a secure place, such as a bank vault) • Limit the number of people who know the information • Have the people who know the trade secret agree in writing not to disclose the information (sign non-disclosure agreements) • Have anyone that comes in contact with the trade secret, directly or indirectly, sign non-disclosure agreements • Mark any written material pertaining to the trade secret as proprietary Essential legal requirements: 1. The information must be secret • “not generally known among or readily accessible to persons within the circles that normally deal with this kind of information” • price list on your website is no trade secret • wheel technique for pottery is no trade secret • For Example:- Based on supplier relationship, joint development agreement, due diligence investigation, etc. Essential legal requirements: 2. It must have commercial value because it’s secret • Confers some economic benefit to the holder • this benefit must derive specifically from the fact that it is not generally known, not just from the value of the information itself actual or potential • Not easy to know exact value of trade secret because it is a secret Essential legal requirements: 3.Owner must have taken reasonable steps to keep it secret • Under most trade secret governments, a TS is not considered to exist unless its holder takes reasonable steps to maintain its secrecy • importance of proper Trade Secret management program • Let less people know about it Misappropriation Trade acquires, secret uses and/or discloses one trade secrets without • someone permission and in an improper manner • Companies often try to discover one another's trade secrets through lawful methods of reverse engineering or employee poaching on one hand, and potentially unlawful methods including industrial intelligence on the other. • Acts of industrial intelligence are generally illegal in their own right under the relevant governing laws, and penalties can be harsh. • The importance of that illegality to trade secret law is: if a trade secret is acquired by improper means then the secret is generally deemed to have been misappropriated. Claim for Trade secret Misappropriation • 1 – Existence:- The trade secret must be proven to exist.The courts will make this determination with a consideration of a trade secret as set Section. • 2 – Ownership:- It must be proven that the applicant had ownership rights to the trade secret information. • 3 - Access. It must be proven that the defendant had access to the trade secret information. • 4 - Notice. It must be proven that the defendant knew or should have known that the information was a trade secret of the plaintiff. • 5 - Use. It must be proven that the trade secret information was actually used by the defendant. • 6 - Damages. It must be proved that a remedy exists within the power of the court to apply. Example of Trade Secret :• One of the most famous examples of a trade secret is the formula for Coca-Cola. The formula, also referred to by the code name "Merchandise 77X" is known to only by two employees at any particular instance and kept in the vault of a bank in Atlanta, Georgia. The individuals who know the secret formula have signed non-disclosure agreements, and it is rumored that they are not allowed to travel together. f it had patented its formula, the whole world would be making Coca-Cola. In the past, you could not buy Coca-Cola in India because Indian law required that trade-secret information be disclosed. In 1991, India changed its laws regarding trademarks, and Coca-Cola can now be sold in that country. Trade secret protected by law 1. Contract law • When there is an agreement to protect the anti-reverse engineering clause • Where a confidential relationship exists attorney, employee, independent contractors 2. Principle of unfair competition • Misappropriation by competitors who have no contractual relationship • theft, espionage, subversion of employees 3.Criminal laws:- e.g. for an employee to steal trade secrets from a company • e.g. unauthorized access to computers theft, electronic espionage, invasion of privacy, etc. • circumvention of technical protection systems Trade Secret litigation • Trade secret litigation comprises of two aspects. • 1. violation of trade secret law takes place, when the confidential information is obtained through misappropriation. • 2. violation of nondisclosure agreement takes place when a party in the contract breached the agreement. Ts not protected • Reverse Engineering: Any information which • is obtained through reverse engineering of a • product, will also be unprotectable under TS. • Ex:- A Gel Pen company has a secret formula • for making Gel used in pens. If a person • purchases the pen and analyze the Gel • chemically and come to knew about the secret • formula, then it is called “Reverse • Engineering” Trade secrets may be legally discovered by the • Independent invention • Reverse engineering:• that is, starting with the known product and working • backward to find the method by which it was developed • (assuming the reverse engineering is not prohibited by • contract) • Observing the item in public use or on public display • Obtaining the trade secret from published • literature • 29 Ts not protected • The Clean Room:- The clean room refers to a • room in which a team of engineers, designers, • researchers or scientists work together for a • specific purpose. Each and every activity is • documented . • The clean room act as an evidence to prove that • the information which is identical to some other’s • trade secret has derived through team efforts. • It also ensures that the information was not • copied , theft or gained through any other • improper means What is lawful • Discovery of the secret by fair and • honest means • 1. Independent creation • – without • or law • patent using illegal means or violating agreements Reverse engineering • – Common practice among software • companies: studying competitors' • products • •to make software that can interoperate with • the software being studied • •to make a product that will compete with it • – E.g. decompile object code to reveal its structure • and figure out the interface specifications for • interoperability purposes • – E.g. look at a program's input and outputs Difference between trade secret and patent Trade Secret • no registration less costs ( b u t: c o s ts to k e e p s e c r e t) immediately available can last longer but: limited to economic life • - uncertain life span : leak out is irremediable • no pu blic disclosure • But practical need to disclose • -if leak out trade secret lost Patent • Registration • Fee( registartion+maintainance) • - takes time to get patent • Limited in time • - generally: max 20 y • - but can be invalided • Public disclosure • Publication; 18 m after filling Remedies of trade secret • Court Order to stop the misuse • 2. Monetary damages • •Actual damages caused as a result of the misuse (lost • profits) • •Amount by which defendant unjustly benefited from • the misappropriation (unjust enrichment) • 3. Seizure order • •Can be obtained in civil actions to search the • defendant's premises in order to obtain the evidence • to establish the theft of TS at trial • 4. Precautionary impoundment • •Of the articles that include misused TS, or the products • that resulted of misusing Trade Secret Licensing:• The owner may grant a license to another party to use the secret info • Licenses may be exclusive or non-exclusive • Make sure that the contract terms are strongly worded and clear • Contract must restrict disclosure of trade secret and indicate what happens in the case of a breach • Think through the various possibilities before drafting or signing a trade Secret Licensing Agreement Legal Protection for Trade Secrets • In Pakistan, there is no legislation that protects trade secrets. • Trade Secrets are governed in the U.S. by State and Federal Laws including the Uniform Trade Secrets Act (adopted by most states in various forms.) • Misappropriation by Improper Means is punishable: May include theft, bribery, misrepresentation, breach of duty to maintain secrecy. • In 2016, Legislature passed the Defend Trade Secrets Act, creating a Federal right of action for Trade Secret Misappropriation. • However: you can’t prevent others from independently discovering or reverse engineering your trade secrets Common Trade Secret Security Procedures:• Restricting access to “need to know” individuals • Marking docs or security areas “Proprietary and Confidential” • Keeping info under lock and key or imposing password protection • Monitoring access to info through log-in procedures & signin sheets • Shredding or destroying copies • Exit interviews and agreements for departing employees
