Trade Secrets
By Timothy B. McCormack
http://www.mccormacklegal.com
Trade Secrets Law Basics
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Overview
Policy Basis for Trade Secrets Protection
Legal Basis for Trade Secrets Protection
Protectable Subject Matter
Trade Secret Protection Programs
Trade Secret Litigation Tips for Defense
and Prosecution
Overview
 Trade Secrets Law is concerned with the
protection of technological and
commercial information not generally
known in the trade against unauthorized
commercial use by others
 A trade secret may be inclusive of
patentable subject matter
Policy Basis for
Trade Secrets Protection
 Encourage research and development
by providing protection to the originator
of business information
 Maintain proper standards of
business ethics
See Kewanee Oil Company v. Bicron Corp., 416 U.S. 470 (1970)
Policy Basis for
Trade Secrets Protection(Cont’d)
 The trade secret owner is not
granted exclusivity to the information,
but rather is only protected against
improper acquisition and/or use of the
information
 Others are free to discover a trade
secret by any fair means
Legal Basis for
Trade Secrets Protection
 The most widely-used common law definition of
a trade secret was first set forth in the
Restatement of Torts,
§ 757 comment b (1939):
[A trade secret is] [a]ny formula, pattern, device or
compilation of information which is used in one’s
business, and which gives him an opportunity to
obtain an advantage over competitors who do not
know or use it.
Legal Basis for
Trade Secrets Protection (Cont’d)
 In recent years, trade secret law has
become largely statutory.
 The Uniform Trade Secret Act (UTSA) has
now been adopted in 46 states and the
District of Columbia.
 Washington adopted the UTSA as of
January 1, 1982. RCW 19.108 et seq.
Trade Secret =
1.
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4.
Information used in business
Information is secret
Reasonable efforts to maintain secrecy
Provides competitive advantage
Legal Basis for
Trade Secrets Protection
The Restatement also lists six factors to be considered in
determining the existence of a trade secret:
 the extent to which the information is known
outside the business;
 the extent to which it is known by employees
and others involved in the business;
 the extent of measures taken to guard
the secrecy of the information;
 the value of the information;
 the amount of efforts or money expended in
developing the information; and
 the ease or difficulty with which the information
could be properly acquired or duplicated by others.
Protectable Subject Matter
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Almost any knowledge or information used in
conjunction with one’s business may be held as
a trade secret. Specific examples include:
 Formulas for chemicals, drugs, cosmetics, foods,
etc.
 Industrial Processes
 Technical “know-how”
 Blueprints and drawings
 Computer software
 Sources of supply, pricing information, identity of
vendors or suppliers, and customer lists
Trade Secret Protection Programs
 A formalized Trade Secret Protection
Program generally consists of three
components:
employee / contractor relations
documentation
physical security
Easy Safeguards
 Contracts; Contracts; Contracts!
 Marking Trade Secret Documents as
Confidential
 Use of Confidential Information
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Cover Page
Change of Passwords Regularly
Education and Awareness
Meeting Reminders and Awareness
Follow Existing Protocol for Document
Destruction and Retention
Maintain Awareness of Physical Security
Precautions
E-mail Encryption
Colored Badges
Easy Safeguards
 Controlling plant access to company
files and facility locations;
 Central control of blueprints and
engineering drawings (software too);
 Use of security systems and guards;
 Providing locked storage for sensitive
information such as laboratory
notebooks;
 Implementation of document
protection and retention policies; and
 Use of computer passwords and
firewalls throughout the organization
Easy Safeguards
 Establishing/enforcing clear policies about
confidential business information;
 Identifying technological and technical
information deemed to be secret;
 Advising/training employees and others of
the existence of trade secrets;
 Use of nondisclosure and confidentiality
agreements with employees and others;
 Limiting access to trade secrets on a
“need-to-know-basis”;
 Trade Secret Audits and Follow-Up Audits
Trade Secret Litigation
Tips For Defense & Prosecution
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Identify the Trade Secrets – Rule 30(b)(6)
Motions In Limine (prima face)
Protective Orders
Motion to Dismiss - Rule 12(b)(6)
Summary Judgment – Rule 56
Special Topics: Inevitable Trade
Secret Misappropriation
 Under the common law, liability for trade secret misappropriation required
acquisition by another by improper conduct or unfair means together with
the use or disclosure by such person to the trade secret owner’s
detriment.
 Under the UTSA, the definition of misappropriation
is much broader; it can include simple acquisition of a trade secret by a
person who knows or has reason to know that the trade secret was
acquired by improper means – no subsequent or impending
use of the trade secret is required.
Special Topics: State Criminal Laws
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Ala. Code Section 13A-8-10.4 (Supp. 1986)
Ark. Stat. Ann. §§ 41-2201; 41-2207 (1977)
Cal. Pen. Code Ann. § 499c Colo. Rev. Stat. § 18-4-408
(Fla. Stat. Ann. § 812.081 (West 1976 and Supp. 1986)
Ga. Code Ann. § 16-8-13 (1984)
Ill. Rev. Stat. ch. 38, § 15-1 (Smith-Hurd Supp. 1986)
La. Rev. Stat. Ann. §§ 14:73.1, 14:73.2 (West 1986)
Me. Rev. Stat. Ann. Title 17-A § 352 (1964)
Mass. Ann. Laws ch. 266 § 30(4) (1986)
Mich. Comp. Laws §§ 752.771 to 752.773 (1991)
Minn. Stat. Ann. § 609.52 (Supp. 1986)
Mo. Stat. Ann. §§ 569.093, 579.095
N.H. Rev. Stat. Ann. § 637:2 (1974)
N.J. Stat. Ann. § 2c:20-1 (Supp. 1986)
N.M. Stat. Chap. 30 § 30-16-24
N.Y. Consol. Laws Ann., Penal § 155 (McKinney 1975)
Ohio Rev. Code Ann. § 1333.51
Okla. Stat. Ann. Title 21 § 1732 (1983)
Pa. Consol. Stat. Ann. Title 18 § 3930 (Purdon 1983)
Tenn. Code Ann. § 39-3-1126 (1982)
Tex. Pen Code Ann. § 31.05 (Vernon 1974)
V.I. Code Ann. tit. 14, § 1665 (1992)
RCW § 9A.56.010
Wis. Stat. Ann. § 943.205
Wyo. Stat. § 6-3-502 (1992)
Contact Information
COURIER/MAILING ADDRESS
617 Lee Street
Seattle, WA 98109 USA
DIAL ADDRESS
Telephone 206.381.8888
Facsimile 206.381.1988
INTERNET ADDRESS
www.McCormackLegal.com
E: tim@McCormackLegal.com
Timothy B. McCormack
Attorney at Law