KEEPING CONFIDENCE:
TRADE SECRETS IN BUSINESS STRATEGY AND
STARTING YOUR BUSINESS
WIPO-ARIPO - Feb. 7 -9, 07 - C. Schwab - WIPO SMEs Division
WHAT IS A TRADE SECRET?
Why Trade Secret
Protection Is Important
WHAT IS A TRADE SECRET?
In its simplest terms, a trade secret is information which a
business wants to keep secret, because keeping the
information secret helps the business or the release of the
information could harm the business and help its
competitors.
Unfortunately, application of the trade secret law is a good
deal more difficult than stating what it does. There is no trade
secret law, although some statutes provided similar
protection in certain limited circumstances.
Why Trade Secret
Protection Is Important
Why Trade Secret Protection Is
Important
Patents,
trademarks and
copyrights are
obtained
through
application to
government
agencies and
defended by
lawsuits against
infringers.
TRADE
SECRETS
Trade secrets
are the
neglected
sibling, and yet
may represent
the largest
single
contribution to
intangible
assets.
WHAT IS A TRADE SECRET?
"Trade secret" means information, including a formula,
pattern, compilation, program device, method, technique, or
process, that:
(i) derives independent economic value, actual or potential,
from no being generally known to, and not being readily
ascertainable by proper means by, other persons who can
obtain economic value from its disclosure or use, and
(ii) is the subject of efforts that are reasonable under the
circumstances to maintain its secrecy.
Why Trade Secret
Protection Is Important
“COCA-COLA”
TRADE SECRETS
Pemberton, a medicine
inventor and morphine
addict, created Coca-Cola out
of a secret mixture of
stimulant coca-leaf and
African kola nuts, which
contain caffeine.
He originally sold it as
Pemberton’s French Wine
Coca — a knock-off of the
popular Mariani wine
favoured by Queen Victoria
that was produced by a
Corsican entrepreneur by
adding cocaine to low-grade
Bordeaux.
When Atlanta declared
Prohibition in 1886,
however, Pemberton
recreated his beverage as
a “temperance drink”
and gave it the name
suggested by his bookkeeper, Coca-Cola.
Bradham, a medical
school drop-out, entered
the market in 1893 with a
concoction initially
intended to cure stomach
pains, or dyspepsia. His
recipe contained pepsin, a
digestive enzyme
extracted from pigs’
stomachs. “Brad’s
Drink” became Pepsin
Cola in 1896 and then
Pepsi-Cola in 1898.
THREE CHARGED WITH STEALING
COCA-COLA TRADE SECRETS
The soft-drinks makers have
been battling ever since
Caleb Bradham, of North
Carolina, came up with
Pepsi-Cola, originally called
“Brad’s Drink”, to rival
Coca-Cola, concocted by
John Pemberton, an Atlanta
pharmacist, seven years
earlier, in 1886.
When PepsiCo received a
mysterious letter in May
offering “very detailed
and confidential
information” on Coke,
the company quickly
tipped off its main
competitor.
The FBI mounted a sting
operation and made
three arrests —
including the secretary of
a top Coke executive —
on the day a $1.5 million
payment was to be made.
COCA-COLA
TRADE SECRET
CASE
By Edward Wei - Epoch Times
Nashville Staff Jul 08, 2006
SECRET INTACT:
Vanilla Coke products are
seen in a grocery store in
Park Ridge, Illinois. (Tim
Boyle/Getty Images)
Three people were charged with the illegal theft
and sale of trade secrets from The Coca-Cola
Company to its main rival, PepsiCo Inc.
Ibrahim Dimson of Bronx, New York; Edmund
Duhaney of Decatur, Georgia; and Joya Williams
of Norcross, Georgia, have been arrested and
charged in a criminal complaint for wire fraud
and unlawfully stealing and selling trade secrets
from Coca-Cola, according to a press release
issued from the office of Attorney General David
E. Nahmias of the Northern District of Georgia.
On May 1, 2006, the Purchase, New York-based
PepsiCo received a letter in an official business
envelope from Coca-Cola. The letter, postmarked
from Bronx, New York, was sent from an
individual named "Dirk," who claimed to be a
top-level employee from Coca-Cola and offered
"very detailed and confidential information."
PepsiCo immediately notified Coca-Cola and
later contacted the FBI.
COCA-COLA
TRADE SECRET
CASE
By Edward Wei - Epoch Times
Nashville Staff Jul 08, 2006
SECRET INTACT:)
Coke's
secret is
safe; but
what
about
others?
After nearly two months of investigation, the FBI
made three arrests on July 5, when an undercover
agent offered to buy the remaining trade secrets for
$1.5 million from "Dirk." One of the three arrested,
Joya Williams, was an administrative assistant
employed by Coca-Cola in Atlanta who had access
to highly confidential corporate information.
Company surveillance videos showed Williams at
her desk searching through multiple files, looking
for documents and stuffing them into bags. She also
was observed holding a liquid container with a white
label—a new Coca-Cola product sample—and
placing it into her bag.
Coca-Cola later verified the sample as genuine and
in fact a product under development. When asked
for the name of the new product and its possible
launch, company spokeswoman Crystal Walker
replied, "This is corporation secret. I can't provide
any information."
COCA-COLA
TRADE SECRET
CASE
By Edward Wei - Epoch Times
Nashville Staff Jul 08, 2006
"Sadly, today's arrests include an individual within
our company," wrote Neville Isdell, CEO of CocaCola, in a memo to company employees. "While this
breach of trust is difficult for all of us to accept, it
underscores the responsibility we each have to be
vigilant in protecting our trade secrets. Information
is the lifeblood of the company."
Williams was released on a $25,000 bond late last
week after a court hearing. Outside the courthouse,
Williams' parents and attorney denied any
wrongdoing. They claimed that "she was merely
taking some work home," and she put a bottle of the
new product sample in her purse because "she
thought she might be thirsty."
SECRET INTACT:
Vanilla Coke products are
seen in a grocery store in
Park Ridge, Illinois. (Tim
Boyle/Getty Images)
Walker said the original recipe is still safely locked
in an underground safe inside a SunTrust Bank
location. She refused to comment on whether the
high media exposure will help increase the sale of its
soft drinks.
On Friday, Coca-Cola's shares fell 15 cents to
$43.18 on the New York Stock Exchange.
Why Trade Secret Protection Is
Important
Today, the value of a company's intangible
assets exceed those of its tangible assets.
This difference in value is the market's
assessment of the value of a company's
intangible assets: good will, branding, patents,
trademarks, copyrights, and trade secrets.
Of these, trade secrets are the neglected sibling,
and yet may represent the largest single
contribution to intangible assets.
Why Trade Secret Protection Is
Important
Good will is established and managed by the
company's public relations and customer service
organizations.
Branding is accomplished and maintained by the
company's marketing communications and
advertising departments.
The intellectual property - patents, trademarks,
copyrights and trade secrets - is managed by the
company's legal department.
Why Trade Secret Protection Is Important
Identify the information which is considered
to be a TRADE SECRET.
Failure to identify trade secrets is a common
stumbling block to proving a trade secret in
court.
There is no way that someone can be expected
to maintain information as a trade secret when
the fact that it is considered a trade secret has
never been expressed.
Identifying the trade secrets in a written notice
that is signed by those expected to keep the
secret, such as a non-disclosure agreement, is
best, because it can later be proven in court.
Don't try to identify everything as a trade secret.
Often non-disclosure and confidentiality agreements
try to cover everything with general language (i.e.
"All information provided by ABC, Co. is considered
proprietary, confidential and a trade secret.").
The more general and sweeping the identification of
the information considered a trade secret, the more
likely a court is to find that the identification of what
is really a trade secret is insufficient.
Don't try to identify everything as a trade secret.
The court could then find there were no trade secrets.
Writing a confidentiality agreement, in which the
scope of the information to be protected is broad but
still enforceable, is a job for an attorney familiar with
trade secret law.
Not all information will qualify as a trade secret
Not all information can be protected as a trade
secret. Some information, even if all the proper
steps are taken, simply will not qualify to be a
trade secret.
Most commonly, this involves information which
is already in the public domain (available to the
public).
Not all information will qualify as a trade secret.
A client list made up of all the bottling companies
in an area will not be a trade secret.
Anyone can obtain that information from
telephone books or a dozen other sources.
However, a client list made up of all the bottling
companies, with the names and birthdays of the
purchasing agent and the inventory selection most
requested by that agent, could be a trade secret.
Why Trade Secret Protection Is
Important
Trade secrets are different from the other forms of
intellectual property, in that the protection of trade
secrets requires establishment and maintenance.
In this way, trade secrets are more like good will and
branding.
Trade secrets require continuous effort in order to allow
defense by lawsuits against infringers at a later time,
rather than a single application and grant by a federal
agency.
It is no wonder, then, that the management of trade
secrets is often poorly understood and poorly performed
even in the best of companies.
Why Trade Secret Protection Is
Important
.
Yet trade secret protection offers much
broader scope than patents, trademarks, or
copyright.
Patents require that the invention be novel,
useful, and non-obvious, be publicly
disclosed, and conform to a definition of
patentable subject matter. In addition,
exclusive rights expire no more than 20
years after application.
Why Trade Secret Protection Is
Important
.
Trademarks protect only the printed word
or image referencing a product or service in
commerce.
Copyrights protect only the manner of
expression, but not the content - the idea,
information, or concept - being
communicated.
Why Trade Secret Protection Is
Important
Trade secrets are eternal.
They need not conform to any definition of
patentable subject matter.
They need not be novel or non-obvious, only
useful.
They protect the content as well as the
expression.
The only requirement is that trade secrets be
kept secret and that the people who are informed
be brought to sign NDAs and other legal
documents, engaging them to observe total
confidentiality.
Actually protect the information identified
as TRADE SECRETS
It is not uncommon for companies to require
confidentiality or non-disclosure agreements
be signed at the outset of employment or at the
beginning of a project and then do nothing further to
protect the information.
It is not enough to have a non-disclosure
agreement!
The information must then be treated as
SECRET!
Actually protect the information identified
as TRADE SECRETS
It is not uncommon for companies to require
confidentiality or non-disclosure agreements be signed at
the outset of employment or at the beginning of a project
and then do nothing further to protect the information.
It is not enough to have a non-disclosure agreement!
The information must then be treated as if it were a
secret.
It can not be made available to anyone, taken home at
will, shared with customers or clients, or left out on desks
overnight. The law requires reasonable efforts to protect
the secrecy of the information.
Absent those efforts, courts will not find that there is a
trade secret.
Why Trade Secret Protection Is
Important
The typical response to keeping trade
secrets secure is to use better and more
sophisticated ways to lock them up.
Passwords and dongles, secure facilities,
security guards and name badges, and
internet firewalls all serve to lock trade
secrets up more securely.
Companies spend billions of dollars per
year on such methods.