TRADE SECRET SEGMENT PROF. JANICKE JULY 2010

2010 Trade Secret Segment2 SOURCES OF LAW 45 STATES: UNIFORM TRADE SECRETS ACT – CIVIL TEXAS: CASELAW DOCTRINES BASED ON 1st REST. OF TORTS (1939); ALSO CRIMINAL STATUTE TEX. PENAL CODE § 32.05

2010 FEDERAL: –GOVERNMENT CIVIL ACTIONS AND CRIM. PROCEEDINGS – ECONOMIC ESPIONAGE ACT (1997) –NO PRIVATE CIVIL ACTION

2010 Trade Secret Segment4 WHAT IS A “TRADE SECRET” (1) ANY COMPETITIVELY VALUABLE INFORMATION (2) THAT’S NOT WIDELY KNOWN OR EASILY FOUND OUT (3) THAT THE POSSESSOR HAS TAKEN REASONABLE STEPS TO KEEP FROM DISCLOSURE

2010 Trade Secret Segment5 EXAMPLES MFG. METHODS MFG. MATERIALS BUSINESS PLANS

2010 Trade Secret Segment6 USE, OR EVEN PLANNED USE, IN POSSESSOR’S BUSINESS IS NOT NEEDED SECRECY OF INDIVIDUAL COMPONENTS OR STEPS IS NOT NEEDED

2010 Trade Secret Segment7 THE PROBLEM OF CUSTOMER LISTS HAS CAUSED A CASE LAW QUAGMIRE OFTEN ARE EASILY LEARNED BY RIGHTFUL MEANS; HENCE NOT A “TRADE SECRET” CAN BECOME A SECRET BY ADDING PURCHASE HISTORY, PLANS, CONTACTS, ETC.

2010 Trade Secret Segment8 HARD-TO-GET REQUIREMENT LIBERALLY CONSTRUED TO HELP TRADE SECRET OWNER EXAMPLE: OBSCURE PUBLICATION OR SUPPLIER NAME

2010 Trade Secret Segment9 REASONABLE-MEASURES-FOR- SECRECY REQUIREMENT TYPICAL: EMPLOYEE AGREEMENTS MARKING DOCUMENTS AND DRAWINGS “CONFIDENTIAL” CIRCULATING WRITTEN POLICY POSTING WRITTEN POLICY

2010 Trade Secret Segment10 TYPICAL MEASURES (CONT’D): LIMIT TYPES OF EMPLOYEES WHO HAVE ACCESS LIMIT ACCESS TO PROJECT MEMBERS EXIT INTERVIEWS

2010 Trade Secret Segment11 PROTECTIVE MEASURES CAN BE BY IMPLICATION RATHER THAN EXPRESS, BUT RISKY TO LITIGATE

2010 Trade Secret Segment12 OWNERSHIP OF ON-THE-JOB DEVELOPMENTS CONTRACT PROVISION CONTROLS, IF THERE IS ONE IF THERE IS NO CONTRACT PROVISION, RESULT GOES BY THE EQUITIES GENERAL SKILLS OF A CALLING ARE ALWAYS OK FOR EMPLOYEE TO TAKE WITH HIM –DEFINING THESE IS DIFFICULT

2010 Trade Secret Segment13 WHAT IS “MISAPPROPRIATION” USING UNDER WRONGFUL CONDITIONS: –OBTAIN RIGHTFULLY, BUT USE IN BREACH OF AGREEMENT [MANY CASES] –OBTAIN BY FRAUD OR INDUCING A BREACH OF CONFIDENCE [A FEW CASES]

2010 Trade Secret Segment14 WHAT IS NOT COPYING AN OPENLY AVAILABLE PRODUCT REVERSE ENGINEERING OF AN OPENLY AVAILABLE PRODUCT WHOLLY INDEPENDENT DESIGN ADOPTING THE DESIGN, AFTER DISCLOSURE UNDER CONTRACT OF NON- CONFIDENCE

2010 Trade Secret Segment15 MOST CASES INVOLVE RIGHTFUL LEARNING, AND THEN MISAPPROPRIATING TYPICAL PATTERNS: EMPLOYEES LEARN, THEN JUMP JOINT VENTURE PARTNER LEARNS, THEN VENTURE TERMINATES POTENTIAL BUYER OF BUSINESS LEARNS, AND SALE FALLS THROUGH

2010 Trade Secret Segment16 TYPICAL PATTERNS (CONT’D): HARDER TO DECIDE: EXECUTIVE DRIVES THE DEVELOPMENT, THEN JUMPS HARDER TO DECIDE: VENDOR, AGENT, ADVISOR CONTRIBUTES THE SECRET – THEN USES FOR OTHER CLIENTS

2010 Trade Secret Segment17 HARDEST CASES: FLY-OVERS ONE DECIDED CASE TRAILING SHOULD BE OK TRASH COLLECTING MAY BE OK ON THE TRADE SECRET FRONT; PERILOUS ON CRIMINAL FRONT; AND BAD PRESS

2010 Trade Secret Segment18 REMEDIES INJUNCTION BETTER VIEW: IF INFO HAS BEEN MADE PUBLIC BY OWNER, INJUNCTION SHOULD BE LIMITED TO LEAD-TIME –TIME IT TOOK P minus TIME IT TOOK D IS A ROUGH RULE OF THUMB

2010 Trade Secret Segment19 DAMAGES ARE AVAILABLE –COMPENS. AND PUNITIVE [UTSA: TREBLING] CAN BE UNJUST ENRICHMENT OR P’S LOSS OF BUSINESS HIGH SETTLEMENT RATE TR. SEC. CASES SOMETIMES INVOLVE PRELIM. INJUNC. HEARING –SELDOM GO TO TRIAL

2010 Trade Secret Segment20 INJUNCTION AGAINST WORKING FOR A PARTICULAR COMPETITOR CAN BE HANDLED PER CONTRACT WHERE NO CONTRACT, THIS TYPE OF INJUNCTION IS COMMONLY SOUGHT TO PROTECT THE SECRET –ARGUMENT: WORKING FOR “THEM” WILL INHERENTLY DIVULGE –COUNTER-ARGUMENT: NEED TO EARN A LIVING

2010 Trade Secret Segment21 NON-COMPETE INJUNCTION WHERE NO CONTRACT PROVISION POSSIBLE SOLUTIONS: –INJUNCTION REQUIRES KEEPING PERSON ON PAYROLL AND WORKING –INJUNCTION REQUIRES PROVIDING MINIMUM CONSULTING FEES AND POSSIBLE WORK –INJUNCTION LIMITED TO COMPETITOR DIVISION MOST LIKELY TO CAUSE BREACH

2010 Trade Secret Segment22 SPECIAL PROBLEM: CONTINUING TO ENJOIN WRONGDOER WHEN OWNER HAS PUBLISHED COMMONLY UNDERSTOOD: NON- WRONGDOERS ARE RELIEVED OF COVENANTS WHEN OWNER PUBLISHES WHEN A WRONGDOER MOVES TO DISSOLVE: –SHOULD PREVIOUS WRONGDOER NOW BE THE ONLY ONE PRECLUDED FROM USE?

2010 Trade Secret Segment23 SPECIAL PROBLEM: STATUTE OF LIMITATIONS ONE VIEW: MISAPPROPRIATION IS AN ONGOING TORT, NEW VIOLATION EVERY DAY HENCE, ONLY OLD MISUSES ARE CUT OFF; DAMAGES AND INJUNCTION ARE AVAILABLE FOR RECENT/FUTURE VIOLATIONS

2010 Trade Secret Segment24 SPECIAL PROBLEM: STATUTE OF LIMITATIONS ANOTHER VIEW: ORIGINAL MISAPPROPRIATION STARTS THE ONLY CLOCK; WHEN IT RUNS, ALL ACTION IS BARRED TEXAS SOLUTION: SINGLE WRONG, SINGLE RUNNING -- BUT FROM DISCOVERY DATE (KNEW OR SHOULD HAVE KNOWN)