TRADE SECRETS

What are Trade Secrets

Trade secrets are confidential information that
has commercial value by virtue of being kept
secret and reasonable steps have been taken to
keep it secret.

Idea: By keeping valuable information secret,
you can prevent competitors from learning about
and using it and thereby enjoy a competitive
advantage in the marketplace.

General principles:

Information that has commercial
value and that has been
scrupulously kept confidential will be
considered a trade secret (TS).

Owner will be entitled to court
relief against those who have
stolen or divulged it in an illegal
manner.
TRADE
SECRET
Financial
information
Technical &
scientific
information
Commercial
information
Negative
information
Technical and Scientific Information
product information
technical composition of a product (medicine,
paint, recipe for a sauce), data about product
performance, product design information
manufacture information
manufacturing methods and processes
(weaving technique, device process),
production costs, refinery processes, raw
materials, machinery
know-how necessary to perform a
particular operation

Commercial Information
customer list
business strategies/plans
marketing strategy/research
customer buying preferences and
requirements
consumer profiles
sales methods
Financial, Legal and HR Information
Pricing information
Salary and compensation plans
Employee evaluation
Secret Documents of a Firm:
Technical data about product performance.
Software development agreements
Pending patent applications
Business plans & strategies
New product names
Financial projections
Marketing plans, unpublished promotional
material

Secret Documents Of a Firm: (Cont.)

Cost & pricing information
Sales data
Customer lists
Info re: new business opportunities
Personnel performance
Software design documents



























Three essential legal requirements:


1. The information must be secret

2. It must have commercial value because its
secret

3. Owner must have taken reasonable steps to
keep it secret







1.Secret



Not required that be known only by
one person



e.g. based on supplier relationship, joint development
agreement, etc.


2. Commercial value

Must confer some economic benefit on 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)

How to demonstrate:
benefits derived from use
costs of developing the TS


3. Reasonable steps

you cannot have a TS unless you have
taken reasonable precautions to keep the
information confidential
Reasonable case by case
reasonable security procedures
Non-disclosure agreements (NDA)
such that the information could be obtained
by others only through improper means
Importance of proper TS management
program
How are trade secrets stolen?
A Growing Problem. Why Does It Occur?
Way we do business today (increased use of
contractors, temporary workers, out-
sourcing)
Declining employee loyalty: more job changes
Organized crime : discovered the money to
be made in stealing high tech IP
Storage facilities (DVD, external memories,
keys)
Expanding use of wireless technology


departing or disgruntled employees
intentional (malicious)
by ignorance

80% of trade secret loss
< employees, contractors, trusted
insiders!
Factors to determine if information is a TS
(Cont.)


What is the potential value for your competitors?

How much effort/money spent in developing it?

How difficult would it be for others to acquire,
collect of duplicate it?

2. Develop a protection policy
Advantages of a written policy:

Clarity (how to identify and protect)

How to reveal (in-house or to outsiders)

Demonstrates commitment to protection
important in litigation


3. Restrict access

to only those persons having
a
need to know
the information

computer system should limit each
employees access to data actually
utilized or needed for a transaction


4. Mark documents

Help employees recognize TS
prevents inadvertent
disclosure
Uniform system of marking
documents
paper based
electronic (e.g. confidential
button on standard email
screen)


5. Physically isolate and protect

Separate locked depository
Authorization
Access control
log of access: person, document reviewed
Surveillance of depository/company premise
guards, surveillance cameras
Oversight; audit trail
6. Maintain computer secrecy

Secure online transactions, intranet, website
Password; access control
Mark confidential or secret (legend pop, or
before and after sensitive information)
Physically isolate and lock: computer tapes,
discs, other storage media
No external drives and USB ports
Monitor remote access to servers
Firewalls; anti-virus software; encryption
Trade secret audit
Conducting an TS audit is to determine
whether or not you have any trade secret
assets; then to identify them; and final to
take measures to make sure they retain
their status as protectable trade secrets
Should be done periodically
Team trusted people who know the
company
Why should you conduct a TS audit
Identify assets that would otherwise be
unknown
By identifying and protecting prevent their
loss
A court is more likely to give TS status to
information identified internally as TS
Establish clarity
Patent or Trade Secret Protection
Such information may qualify for patent
protection or trade secret protection. A
company may choose trade secret
protection even for information that qualify
for patent protection.
Trade Secrets or Patents
No registration
(costs/time factor)
Duration is not limited
to specified period of
time
No disclosure
Wider information
Difficult to enforce
No protection against
independent
discovery
Registration required
(cost/time factor)
Limited duration
Disclosure required
Limited to claims
Easier to enforce
Exclusive rights

1. ANY innovative idea should be kept
as a secret in the beginning

to preserve option of patenting (or industrial
design) at later stage
Things to bear in mind
2- Choice between patent or TS
must be made both from legal
and business perspectives

(if patentable)
Things to bear in mind
(Cont.)

3. Once patent published TS lost
in ALL COUNTRIES

patent documents easily
accessible to public
if patent application published and
later rejected you lose both patent
and TS rights
Things to bear in mind
(Cont.)

Remember...
No need for absolute secrecy, but
reasonable measures

Developing and maintaining TS
program
< good business practice to prevent
< legal requirement to enforce TS
protection


TS: Only legal protection against
dishonest
acquisition/disclosure/use

You can use someone who violated
your TS, but that often doesnt save
the TS

Consider alternative protection
Remember...

The choice between TS and
patent protection for an invention
is a turning point.
Therefore: carefully consider all
relevant advantages and
disadvantages from each choice
both from legal and business
viewpoint
Remember...

Patent and TS are often
complementary to each other:

Patent applicants generally keep inventions secret
until the patent application is published by the patent
office.
A lot of valuable know-how on how to exploit a
patented invention successfully is often kept as a trade
secret.
Some businesses disclose their trade secret to ensure
that no one else is able to patent it (defensive
publication).
Remember...
As to whether TS or patent is the more
appropriate protection depends on the
kind of product, nature of the business and
the policies of the company.
Some products have a short commercial
life (TS better), some information may be
difficult to keep secret and some products
may be more easily reverse engineered
than others (patent better).
Remedies
Civil remedies based on breach of contract
or tort law; damages, injunctions, seizures
and impoundment
Criminal remedies - rarely a criminal
offense in its own right but could attract
criminal liability by committing criminal
offenses for procuring the information
(theft, trespass etc)
Final thought
You may not know that you have valuable
business information recognized by law as
trade secrets till it is too late.
Identify and protect them
They may be the key to your
competitiveness