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The University Startup Company Law Firm California Massachusetts Florida (310) 993-9664 Stephen P.

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Presentation on theme: "The University Startup Company Law Firm California Massachusetts Florida (310) 993-9664 Stephen P."— Presentation transcript:

1 The University Startup Company Law Firm California Massachusetts Florida (310) 993-9664 Stephen P. Rothman, Esq. 1 Trade secrets

2 2 Trade Secrets Contrasted to Patents

3 3 Uniform Trade Secret Act (UTSA) Trade Secret Law is traditionally state law Most states have adopted the UTSA in some form Provides for more consistent standards across states

4 4 "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 not 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. Uniform Trade Secrets Act, Section 1 (4). What is a Trade Secret?

5 5 Consider the Options… Before pursuing the TS route consider carefully whether trade secret protection is practical, for example, in view of a sophisticated reverse engineering effort Some material is not reasonably protectable via patents, for example, “negative know-how” in the form of documentation of failed efforts

6 6 Trade Secret Enforcement Establish Misappropriation (UTSA section 1(2)) Generally requires: Trade Secret acquired by “Improper Means” (theft, bribery, misrepresentation, breach of duty to maintain secrecy, espionage) Unauthorized disclosure without consent under circumstances which give rise to duty to maintain secrecy or limit use Uniform Trade Secrets Act section 2

7 7 Proper means include: 1. Discovery by independent invention; 2. Discovery by "reverse engineering", that is, by starting with the known product and working backward to find the method by which it was developed. The acquisition of the known product must, of course, also be by a fair and honest means, such as purchase of the item on the open market for reverse engineering to be lawful; 3. Discovery under a license from the owner of the trade secret; 4. Observation of the item in public use or on public display; 5. Obtaining the trade secret from published literature. Uniform Trade Secrets Act, Comment to Section 1 (4). “Proper” Means

8 8 America Invents Act (AIA) Trade Secrets may be more practical Best mode requirement eliminated Already in effect Prior use rights Prove TS held for more than one year previous to filing of patent application AIA Derivation Proceedings Patent applicant derives (TS) invention from you

9 9 1.Money compensation for the misappropriation a.Loss to trade secret owner; b.Unjust enrichment of the one who misappropriated, if that is higher than the loss to the trade secret owner. Damages may be measured by imposition of a royalty for the use. 2.In the case of willful and malicious misappropriation, punitive damages up to twice the actual damages. 3.Court order a.Prohibiting use or disclosure b.Requiring return or destruction of confidential information Remedies (Civil)

10 10 Both state and federal statutes make theft of trade secrets a crime California Penal Code Section 499c Fine of up to $5,000.00, imprisonment of up to a year, or both 18 U.S. Code Section 1832 (Economic Espionage Act of 1996) For an individual, fine of up to $500,000 or imprisonment of up to ten years or both; for an organization, fine of up to $5,000,000 Criminal Penalties

11 11 Commercial enterprises are used to relying on trade secret protection as well as patents. This creates tension in their deals involving academic institutions. Scrutinize NDAs proposed for your signature by corporate research sponsors or others – They should prohibit disclosure only of information provided by the sponsor. – They may seek to prohibit publication of research from your lab – Usual resolution of this is a 30-day delay on publication and advanced review of manuscript drafts, during which the research sponsor can confirm absence of their own trade secrets in the publication; discuss patenting and licensing with the university’s tech transfer office What the Researcher Needs to Know – Trade Secrets

12 12 Not all agreements titled Non-disclosure Agreement are just non- disclosure agreements. Agreement executed in favor of Cetus involved in Stanford v. Roche lawsuit, was titled “Visitor’s Confidentiality Agreement,” but was not only a confidentiality agreement but also an invention assignment agreement. It assigned to Cetus everything he conceived “as a consequence of access to Cetus information.” This is extremely broad language. It could be argued to cover something he invents 20 years from now. What the Researcher Needs to Know – Trade Secrets II, More On NDAs

13 13 Stephen P. Rothman, ESQ. ROTHMAN AND COMPANY, P.A. E-MAIL: (310) 993-9664 Questions?

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