Trade Secrets

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Trade Secrets
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Trade Secrets Introduction

• Lets begin our discussion of trade secrets with
  the following video and article
• (Video) Shh! Food trade secrets you'll never
  know
• (Article) Closely Guarded Secrets

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Famous Trade Secrets

• Kentucky Fried Chicken (KFC) - Famous trade
  secret comes home to beefed-up security
• Notice steps taken to protect security of secret
• Lockheed The Cost of Misconduct
• Notice lack of diligence regarding trade secret
• Coca-Cola Worlds most famous trade
  secret revealed? and Original Recipe

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Famous Trade Secrets

• Listerine Trade Secret Licensing The
  "Listerine" Formula Case

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Trade Secret Definition

• A trade secret is secret information owned or
  developed by a business that gives it a
  competitive advantage

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Sources of Trade Secret Laws

• In the United States, trade secret protections
  come from a combination of state and federal laws

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Trade Secret Subject Matter

• Under United States law, trade secret law
  protects information, including a formula,
  pattern, compilation, program, device, method,
  technique, or process, that
• Derives independent economic value from not being
  generally known or readily ascertainable by
  proper means by other persons, and
• Is the subject of efforts that are reasonable
  under the circumstances to maintain its secrecy

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Maintaining Trade Secrets

• Companies should consider the following methods
  to protect trade secrets
• Review all company operations and proprietary
  information to determine where trade secrets
  exist
• Use nondisclosure (confidentiality) agreements
  with all individuals having access to the trade
  secrets, including employees, officers, bankers,
  vendors, etc.

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Maintaining Trade Secrets

• Consider use of noncompetition agreements
  (covenants not to compete)
• A covenant not to compete is a contract clause
  where a person agrees not to engage in a
  specified business or occupation 
• The covenant will identify the applicable time
  and geographic region, e.g., the employee will
  not leave the company's employ and work in the
  meat processing industry for the next two years,
  within the United States

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Maintaining Trade Secrets

• Examine physical and network security issues
• Restrict access to company trade secrets
• Utilize computer passwords, "confidential"
  stamps/legends, record-keeping procedures,
  entrance and exit interviews, etc.

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Covenants not to Compete

• Covenants not to compete in employment contracts
  are disfavored by the law in many countries, such
  as the United States
• In the United States, employment covenants not to
  compete usually will be upheld only where the
  employer has a legitimate business interest to
  protect, and the time and geographic employment
  restrictions are reasonable

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Covenants not to Compete

• Regarding employment contracts, legitimate
  business interests have been found where
  employees were provided special training, or
  allowed access to trade secrets, confidential
  business information, or confidential customer
  lists

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Proper Means

• Trade secrets may be legally discovered by the
  following proper means
• Independent invention
• Reverse engineering", that is, starting with the
  known product and working backward to find the
  method by which it was developed (assuming the
  reverse engineering is not prohibited by
  contract)
• Observing the item in public use or on public
  display
• Obtaining the trade secret from published
  literature

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Improper Means

• A partial list of improper means includes theft,
  bribery, misrepresentation, breach, or inducement
  of a breach of a duty to maintain secrecy or
  espionage through electronic or other means