Trade Secrets Introduction
Let’s begin our discussion of trade secrets with the
following video and article
 (Video) “Shh! Food trade secrets you'll never know”
 (Article) “Closely Guarded Secrets”
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Pittman
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Famous Trade Secrets
 Kentucky Fried Chicken (KFC) - “Famous trade
secret comes home to beefed-up security”
 Notice steps taken to protect security of secret
 Lockheed – “The Cost of Misconduct”
 Notice lack of diligence regarding trade secret
 Coca-Cola – “World’s most famous trade
secret revealed?” and “Original Recipe”
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Pittman
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Famous Trade Secrets
 Listerine – “Trade Secret Licensing: The
"Listerine" Formula Case”
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Pittman
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Trade Secret Definition
 A trade secret is secret information owned or
developed by a business that gives it a competitive
advantage
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Pittman
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Sources of Trade Secret Laws
 In the United States, trade secret protections come
from a combination of state and federal laws
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Pittman
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Trade Secret Subject Matter
 Under United States law, trade secret law protects
information, including a formula, pattern,
compilation, program, device, method, technique, or
process, that:
 Derives independent economic value from not being
generally known or readily ascertainable by proper
means by other persons, and
 Is the subject of efforts that are reasonable under the
circumstances to maintain its secrecy
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Pittman
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Maintaining Trade Secrets
Companies should consider the following methods to
protect trade secrets:
 Review all company operations and proprietary
information to determine where trade secrets exist
 Use nondisclosure (confidentiality) agreements with
all individuals having access to the trade secrets,
including employees, officers, bankers, vendors, etc.
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Pittman
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Maintaining Trade Secrets
 Consider use of noncompetition agreements
(covenants not to compete)
 A covenant not to compete is a contract clause where a
person agrees not to engage in a specified business or
occupation
 The covenant will identify the applicable time and
geographic region, e.g., the employee will not leave the
company's employ and work in the meat processing
industry for the next two years, within the United States
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Pittman
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Maintaining Trade Secrets
 Examine physical and network security issues:
 Restrict access to company trade secrets
 Utilize computer passwords, "confidential"
stamps/legends, record-keeping procedures, entrance
and exit interviews, etc.
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Pittman
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Covenants not to Compete
 Covenants not to compete in employment contracts
are disfavored by the law in many countries, such as
the United States
 In the United States, employment covenants not to
compete usually will be upheld only where the
employer has a legitimate business interest to protect,
and the time and geographic employment restrictions
are reasonable
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Pittman
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Covenants not to Compete
 Regarding employment contracts, legitimate business
interests have been found where employees were
provided special training, or allowed access to trade
secrets, confidential business information, or
confidential customer lists
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Pittman
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Proper Means
Trade secrets may be legally discovered by the following
proper means:
 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
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Pittman
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Improper Means
 A partial list of improper means includes theft,
bribery, misrepresentation, breach, or inducement of a
breach of a duty to maintain secrecy or espionage
through electronic or other means
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Pittman
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