1. SSHHHH! It’s a Trade Secret
Slides 1-19 Adapted from Steve Baron

2. A Trade Secret is Information:
that has economic value
that is not generally known
over which reasonable efforts to maintain secrecy have taken place.

3. Types of Trade Secret Information
Technical or non-technical data
Formula
Pattern
Compilation
Program
Device
Method
Technique
Drawing
Process
Financial data
List of actual or potential customers

4. Economic Value
Actual (could be development/implementation costs; lost profits, etc.)
Potential (value that would have been gained had the secret not been misappropriated).

5. Availability of Information
Not generally known by competitors

6. “Reasonable” Efforts to Maintain Secrecy
Absolute secrecy not required
Reasonable under the circumstances
Comprehensive program

7. Examples of Methods to Maintain Secrecy
Lock & Key
Passwords
Restricted access
Sign-in sheets
Confidential stamps
Non-Disclosure Agreements

8. “Beware” of Agreements you are bound by under terms of employment.
Employer expectations and behavior that may be inappropriate (turning you into a spy)
Questions you ask your new employees about their former employment.

9. The sum may be a trade secret, even if each part is not.

10. Advantages/Disadvantages of Trade Secrets
No time limit
No public disclosure
No governmental filing process
Depends on employee-employer relationships, and those can change.
Pandora’s box
May distract from your knitting

11. What Law Governs Historically – Common Law Uniform Trade Secrets Act
Illinois Trade Secrets Act
Economic Espionage Act
[the American Law Institutue’s Restatement of Torts, 1939 – and subsequent updates—have/has played an important interpretative role.

12. Historically – Common Law – Six Factor Test
Extent known outside company
Extent known by employees
Measures taken to guard secrecy
Value to company and competitors
Time, effort and money to develop
Difficulty of proper acquisition

13. Uniform Trade Secrets Act
Adopted by nearly 40 states

14. Illinois Trade Secrets Act
Effective since 1988
Adjunct to common law
Gives “teeth” to infringement claims

15. Illinois Trade Secrets Act
Remedies
Injunction
Compensatory damages
Punitive damages
Attorney’s fees

16. Economic Espionage Act
Gives U.S. Attorney sweeping powers to prosecute any person or company involved in trade secret misappropriation
Punishes intentional stealing, copying or receiving of trade secrets
For product produced or placed in interstate commerce

17. Economic Espionage Act
Penalities
Individual fines up to $500,000
Company fines up to $5 million
Prison – up to 10 years for individuals and 15 years if theft performed for foreign government

18. Proper Methods to Obtain Trade Secrets
Legitimate Observation
Reverse Engineering
Independent Invention

19. DVD Copy Control Assn. , Inc. v. Bunner, 31 Cal
DVD Copy Control Assn., Inc. v. Bunner, 31 Cal. 4th 864, 889 (2003) DVD-CCA v. Bunner, Court of Appeals of the State of California, 6th Appellate District, HO21153 Santa Clara County Super. CT. No. CV786804, (Feb. 27, 2004) Trial court issued injunction, CA court reversed, CA SC remanded [perhaps compromising the free speech claim], DVD-CCA withdrew. Lessons? Free speech may not protect hacking; the internet is the ultimate Pandora’s box

20. McRoberts Software Inc. v. Media 100 Inc. , 329 F. 3d 557 (7th Cir
The 7th Circuit noted that it is possible to recover damages based on more than one legal theory in the same suit, provided the plaintiff provides sufficient evidence of his injuries. [Copyright infringement and trade secret misappropriation].
7th Circuit held that it was an error for the District Court to vacate the jury’s award of $300,000 to MSI for trade secret damages as duplicative of the copyright infringement damages

21. IDX Systems Corp. v. Epic Systems, Corp., 285 F.3d 581 (7th Cir. 2002)
It’s not good enough to just show that valuable information has been transferred.
One has to be able to specify which part(s) were protected, how they were protected, and specifically that the alleged violation involved those parts.

22. EF Cultural Travel BV v. Explorica, Inc., 274 F.3d 577 (1st Cir. 2001)
In many instances, you can’t take what you know with you and apply it in direct competition against your former employer.
Note here, though, that without the contractual agreement, it’s possible this case could have gone the other way.