will have word limit.
trade secret.
statutory law, managed by state.
and GATT TRIPS compels countries to recognize trade secret rights.
a trade secret is any 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 secrecy.
in a trade secret claim, you have to prove:
1. the secret is protectable subject matter (under current UTSA, any valuable information not generally known is protectable).
2. under some legal regimes you must show that not only is it protectable
subject matter, but also that you've taken reasonable precautions to keep it secret.
3. you must show misappropriation.
(a) the defendant must have acquired the secret in an improper way. use and disclosure is not wrong, but theft and deception as the means to obtain use and disclosure is wrong.
(b) the secret was taken via breach of relationship (that has an implied duty?) or contract that should
have prevented the theft.
how does this system of claims tie into the theories discussed last week?
- protecting against theft of proprietary information encourages investment in such information.
does this look like a property law claim?
- ruckelhaus v. monsanto co.(1984), SCOTUS found that a federal law requiring disclosure of a trade secret was a taking
- "trade secrets have many of the characteristics of more tangible forms of property: assignability, basis of res of a trust, passes to a trustee in bankruptcy, the owner is vested with an interest (beyond those given in patent law)"
the theory of trade secret protection is tort and property-like:
- in property law we don't care whether the violation was improper or not.
but in IP misappropriation counts. we don't want for people to be
enriched for breaching their duties to maintain commercial morality.
- contracts aren't required to determine whether property rights are
infringed on or not. but in IP there are often contractual relationships,
and many trade secrets arise from a duty explicitly stated in a
contract, such as a technology license or an employment agreement.
IP is more like an intersection of tort, contract and property.
Review the theories of IP law discussed in class 1.
slugworth wants to reduce the differential that the everlasting gobstopper
will create from wonka's innovation. he bribes the kids who are given the
invitee status as guests to the wonka factory to get the gobstopper and
thereby reverse engineer it, and discover the secret formula.
if slugworth gets a gobstopper from the market,
once it's available for purchase, that's cool. he can reverse engineer,
and perhaps create something even better. we don't mind that.
but slugworth bribing children to get a gobstopper is not cool.
can an everlasting gobstopper be a trade secret?
restatement of torts s. 757, cmt (b):
a trade secret may consist of (1) any formula, pattern, device or compilation
of information (2) which is used in one's business, (3) and which gives him an
opportunity to obtain an advantage over competitors who do not know or
use it.
uniform trade secrets act s. 14:
TS means information, including a formula, patterns, compilation,
program, device, method, technique, or process, that... derives
independent 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 is the subject of efforts... to maintain its secrecy.
what's the difference between the two definitions?
advantage over competitors
the formula of an everlasting gobstopper would be a trade secret.
but the gobstopper itself wouldn't be.
why not, and why the distinction?
the physical gobstopper enters the marketplace thereby, as a physical
thing in the physical world in the physical market,
under the UTSA, its only a trade secret if you're making efforts to
keep it a secret.
the subject matter of trade secrets.
how do we determine whether information qualifies as a trade secret?
metallurgical v. fourtek
misappropriation is the issue. met's position was that their process is a trade secret in the carbide biz.
court concluded that met's particular modification efforts an be as yet nknonw industry wide.
1. subject matter: the fact that scientfic principles involved in a process are generally known does not necessarily refult a TS claim of a process.
(a) value to met is evidenced by the competitive advantage of the zinc recovery process.
(b) value is also shown through cost involved in developing the device: much work and ingenuity have bee applied to the development of a practical and successful device"2. protection: the evidence shows that met made efforts to keep its process modifications secret. subjective belief of a TS is suggestive of TS if supported by objective factors in determining if TS exists. met had a non-disclosure agreement. had security measures onsite. these measures constitute evidence probative of a TS. secrecy does not have to be absolute -- you can communicate the secret to others to limited extent w/o destroying status as TS.
3. policy: a commercial advantage can vanish once the competition learns of it, therefore the law should protect the bixman's efforts to keep his achievements secret
notes
4. courts have made it clear that strict novelty is not req for TS protection. but if its not generally known or readily ascertainable to the competitiors in an industry, it may still qualify for TS protection. TS must 'possess at least that modicum of originality which will separate it from everyday knowledge.'
test for whether or not a TS (rest of torts s. 757 cmt (b)) and see also CB p. 45
1. the extent to which the info is known outside of P's business;
2. the extent to which is known by EE and others involved in P's biz
3. the extent of measures taken by P's to guard the secrecy of info;
4. the value of info to P and to P's competitors;
5. the amount of effor or $ expended by P in developing info;
6. the ease or difficulty with which the info could be properly acquired
or duplicated by others.
7. TS are not misappropriated unless info is taken by improper means or from confidentail relationship
broad scope to TS law, because it allows a plaintiff to protect info that could have been acquired properly but in fact was not.
info is not a TS if its generally known or readly ascertainable by proper means
once a secret is readily available through public sources, it loses all TS protection.
if info is generally known to the public or even within a special industry it doesn't quality TS protection.
rest. s.39: many diffiernt companies can possess the same info and each protect it as a secret.
at the heart of trade secret is the bargain between us and the innovator....
ultimately the argument of the trade secret and IP realm is, "if i'd known
my ideas weren't protected, i wouldn't have come up with them!"
factors we look at when determining if info is a trade secret:
1. must be protected secret
2. circumstances of disclosure - who did the P disclose to? to people on
need-to-know basis? to people who signed confidentiality agreements?
3. must be a valuable secret (and often the value must derive from the fact
that it's a secret for business)
4.
reasonable efforts to maintain secrecy.
why require efforts to maintain secrecy?
rockwell v. DEV
theoretical issues:
evidentiary issues:
remedial issues:
what types of efforts will be "reasonable"?
misappropriation
the defendant got this info by improper means
E.I duPont v. rolfe:
who's to say that espionage isn't moral or commercially innovative?
things that are unanticipated or unexpected -- in the future, do we
want for companies like duPont to have to guard against this level
of competitive activity or not?
cost and benefit: it would be unreasonable (reasonableness of protective efforts)
and anything that takes advantage of not putting up the roof is going to be
improper
are there any proper means for a competitor to acquire a trade secret?
- reverse engineering
-
n.b. - a patent is different from a trade secret, predominantly in that the patent
expires.
misappropriation.
in breach of a "confidential relationship"
smith v. dravo
rest. 3d of unfair competition s. 41:
"a person to whom a trade secret has been disclosed owes a duty of confidence to the owner of the trade secret ... if:
(a) the person made an express promise of confidentiality prior to the disclosure of the trade secret;
(b) the trade secret was disclosed to the person under circumstances in which the relatinship between
the parties to the disclosure or the other facts surrounding the disclosure justify the conclusions that,a tthe time of the disclosure,
(1) the person knew or had reason to know that the disclosure was intended to be in confidence, and
(2) the other party to the disclosure was reasonable in inferring that the person consented to an
obligation of confidentiality.
let's say veruka gave slugworth the gobstopper. what recourse would wonka have?
usually, trade secret information has to do with ER/EE relationships of
competition. there are issues that come up, between the EE's right to make
a living and the ER's right to protect its trade information.
courts have come up with various ways of striking a balance, where sometimes
they distinguish between general know-how and specific techniques and
information.
SI handling v. heisley
wexler v. greenberg
reed roberts assoc. v. straumarr
a client list is a protectable trade secret.
UTSA s.1(2)(B)
(I) derived from or through a person who had utilized improper means to acquire it;
(II) acquired under circ giving rise to a duty to maintain its secrey or limit its use; or
(III) derived under or through a person who owed a tudy to the person seeking relief to maintian seccy or limit use;
(4)(i) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainiable by proper means by
three essential elements:
1. subject matter involved must qualify for trade secret protection, be the type of knowledge or info that TS law was meant to protect and not generally knonw by all, and of econ value to the P ("gives him an opportunity to obtain an advnatgage over competitors who do not know how or do not use")
2. P took reasonable precautions under the circ to prevent disclosure
3. TSP also must prove that D acquired the info wrongly: misappropriated. use or disclose is wrong in the eyes of TSL, when the info is acquired through decption, skudggery or theft. a D's use is wrongful because of preexisting oblig to P to not disclose. duty can be explicit or implicit.
two theories of TSL
1. utilitiarian: proetct againt the theft of propierty info encourages investment in the info.
2. deterrence: deter wrongful acts to punish and prevent illicit behavior that interrupts commerce/market
notes.
5. test for wehtehr info constitutes a TS under restatement:
* extent info is known beyond claimant's
* extent it is known by others in the biz
* value of the info to the biz and competitors
* amount of money expended to develop info
* ease or difficulty with which info could be accquired and dupicated.
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