TRADE SECRETS
Presented
By
Joseph A. Calvaruso
Orrick, Herrington & Sutcliffe LLP
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© AIPLA 2012
Overview of Trade Secret Protection
Applicable Law
• Statutory Basis
—Uniform Trade Secrets Act (“UTSA”)
Enacted by most of the 50 states.
• Common Law (still the law in New York,
for example)
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Overview of Trade Secret Protection
What is a trade secret?
• Any information that:
— (1) is secret;
— (2) has commercial value derived from the
fact that it is secret; and
— (3) is the subject of reasonable efforts to be
kept secret. UTSA
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Overview of Trade Secret Protection
• Definition of Misappropriation (UTSA)
– Misappropriation means:
• Improper acquisition
-orImproper use
-or• Improper disclosure
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of a trade secret
Overview of Trade Secret Protection
Inevitable Disclosure Doctrine
•
Inevitable Disclosure Doctrine generally requires a showing
that:
— Departing employee knows former employer’s trade
secrets;
— Departing employee’s new job duties at competitor are so
similar to those in former job that it would be extremely
difficult for him to avoid relying on or using former
employer’s trade secrets; and
— Departing employee and new employer cannot be
depended upon to avoid using former employer’s trade
secrets.
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Overview of Trade Secret Protection
Why use trade secrets?
• Most non-technical information not patentable
• More than a year beyond patenting window
— Note the absolute bar outside U.S.
• Extended protection
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Overview of Trade Secret Protection
Jurisdictional Differences in Enforcement UTSA vs. non-UTSA
States
• Available remedies
— UTSA (CA): Injunction and damages (actual loss,
reasonable royalty, or punitive) provided by statute
— Non-UTSA (NY): Variety of remedies including constructive
trust
• Criminal law protection
— UTSA (CA): Available
— Non-UTSA (NY): Not trade secrets, but larceny law
protects “secret scientific material”
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Overview of Trade Secret Protection
When are your trade secrets at greatest risk?
• Departing employees
• Failed business dealings
• Corporate espionage
70-80% of breaches are caused by insiders, often lower
level employees, through carelessness, lack of training,
or greed.
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Internal Trade Secret Program
Internal Trade Secret Procedures
• Employment Practices
• Confidentiality Program and Records Management
• Monitoring and Auditing
• Response procedures
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Internal Trade Secret Program
Employment Practices
• Require all employees to sign confidentiality
agreements
— Acknowledging ownership of confidential
information
— Obligations during and after employment
— Address IP assignment issues
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Internal Trade Secret Program
Confidentiality Program and Records Management
• Identify and update secrets to be protected
• Train employees and consultants on record-keeping
• Limit Access
— Meaningful difference between confidential and nonconfidential information
• Physical Security
— Restrict access to information and certain physical areas
— Need to know basis
— Security measures including locks, keys, shredding,
dumpsters
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Internal Trade Secret Program
Monitoring and Auditing
• Monitoring compliance (privacy issues)
• Exit interview and related procedures
— Return/seizure of all company property at
termination, including electronic copies of
materials
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Internal Trade Secret Program
• Monitoring and Auditing
— Examples of questions to ask
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•
Is the information copied with a photocopier
that is openly accessible?
•
Are the employees instructed not to discuss
secret company projects in front of visitors,
especially suppliers and vendors?
•
When employees violate such instructions, are
they reprimanded?
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Internal Trade Secret Program
Response Procedures
• Response procedures when suspecting a departing
employee taking confidential with him?
– What to do immediately?
• e.g., secure computer and other storage devices,
access to email/network
• e.g., suspend record destruction
• Response procedures when a security breach caused by
potential espionage is discovered?
— Should one get law enforcement involved?
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External Business Relationships:
Collaboration Agreements
Key Considerations
• Any disclosure of proprietary information must be
protected by written agreements
• Must clearly define the scope of what is confidential
• Must clearly define the purpose of the disclosure to
the collaboration partner
• Must clearly define the use that can be made with that
information (including further disclosure)
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External Business Relationships:
Collaboration Agreements
Exploratory Discussions: NDAs and Feasibility Studies
• Narrow Disclosure – disclose only what is needed to
achieve purpose
— Disclosure may not lead to deal and potential
partner is likely also considering competitors
— NDA is critical not only for protecting trade
secrets, but preserving patent rights
— Keep most valuable (and enabling) information to
yourself
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— Example: results, but no methods, no formulas,
compositions, etc.
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External Business Relationships:
Collaboration Agreements
Exploratory Discussions: NDAs and Feasibility Studies
• Limit Right to Use and Disclose
— To evaluate technology for purpose of business of
business relationship
— Limit sharing of information within each company
• Limit Right for the NDA
— Require return of any documents/presentation
handouts
• Don’t progress to the next stage without a new
agreement
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External Business Relationships:
Collaboration Agreements
Joint Work
• Clearly define scope of disclosures
— Limit disclosures to “need to know”; use point persons for
party interface
— Train your project team in what you consider proprietary
and in what can and cannot be shared
— Require written consent before any third party disclosures
• Clearly define scope of use of confidential information
— Define purpose of agreement
— Define each party’s rights and responsibilities
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External Business Relationships:
Collaboration Agreements
Joint Work
•
Build a record
— Clearly identify and document all exchanges of Confidential
Information
— Keep written records of all internal work under the JDA.
— Keep written records of all oral exchanges of information
(including informal calls) and of all documents exchanged
•
Clearly define IP rights (including trade secrets and know-how)
— Background IP rights
— Joint discoveries and collaboration IP
— Separate discoveries during collaboration term
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— Require cooperation in patenting to avoid harm to respective
patent portfolios
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External Business Relationships:
Collaboration Agreements
Joint Work
• Be Vigilant
— Monitor publications and presentations made
by collaborator
— Monitor patent filings
— Periodically exercise audit or inspection rights
— Track inventory and use of confidential
information
• Be wary of waiver
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TRADE SECRETS
Thank You
Joseph A. Calvaruso
Orrick, Herrington & Sutcliffe LLP
51 West 52nd Street
New York, NY 10019
jcalvaruso@orrick.com
1-212-506-5140
www.orrick.com/ip
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