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Intellectual Property

• Four (6) Types
  –   Trade Secrets
  –   GI
  –   Trademarks
  –   Copyrights
  –   Industrial design
  –   Patents
Trade Secrets

• Definition
  – Information that is sufficiently secret to
    derive economic value from not being
    generally known and is the subject of
    reasonable efforts to maintain its secrecy.
  – A trade secret can be any information that
    derives independent economic value from not
    being     generally   known    or    readily
    ascertainable.
What are TS?
• Among the things that can be trade secrets are a
  formula, pattern, compilation, program, device,
  manuals, method, technique, or process.

• Businesses to consider whether its
   – techniques,
   – manuals,
   – recipes,
   – prospect list,
   – pricing
   can be protected as trade secrets
What are TS?

• Among things courts have found to be "trade
  secrets" are
  – machining processes,
  – blueprints,
  – stock-picking formulae,
  – customer lists,
  – pricing information,
  – and non-public financial data.
  On the other hand, information such as overhead rates
    and profit margins that help define a price may be
    found to be a trade secret even if the price itself is
    known.
Trade Secrets

Factors to determine if information amounts
 to a TS:
  – Is it known outside the company
  – Have measures been taken to guard its
    secrecy
  – How much money was spent developing it
  – What is the value of the information for your
    company and to your competitor
Trade Secrets

• Trade Secret Audit – to establish a trade secret protection
  and compliance programme
• Consider appointing a Trade Secret Compliance Officer
• Advantages of a written policy includes:
   – Clarity (how to identify and protect) &
   – Demonstrates commitment to protection
• Educate and train staff in need to protect Trade Secrets
• Make it known that disclosure of a TS may result in
  termination and/or legal action.
• Monitor compliance
Trade Secrets (cont’d)

• Protection Available
   – Trade Secrets are protected by common
     law, state statutes and contract law in the
     U.S. and in most other countries.
   – No registration is available.
• Term of Protection
   – Trade secrets are protectable as long as
     secrecy is maintained (perpetual)
Trade Secrets (cont’d)

• Notice and Marking
  – Documents and visually perceptible
    copies of trade secret information should
    be clearly marked as “confidential,”
    “proprietary,” “secret” or “restricted.”
Trade Secrets (cont’d)

• Infringement
  – The unauthorized disclosure or use of
    trade secrets constitutes misappropriation
    and is actionable under state laws.
  – Criminal penalties may apply.
TRADE SECRETS: BACKGROUND


•   Genesis in state common law, unlike other IP
•   Grounded in policy of business ethics
•   Rights can be perpetual, but are nonexclusive
•   All patents begin life as trade secrets
Background

• Trade secret protection stems from the
  common law and dates back to the 1800's.
  Today, every state recognizes some form of
  trade secret protection. Most states have
  legislation that specifically recognizes trade
  secrets, though some still rely solely on
  common law principles.
Background

• Most of the states that have trade secret laws use
  the Uniform Trade Secrets Act, which has helped
  create a more uniform body of law from state to
  state than if each state had its own unique law. In
  sharp contrast to patents, copyrights and
  trademarks, which are all Federal-based forms of
  intellectual property, trade secret protection
  originates and is primarily maintained through
  state law.
USE OF TRADE SECRET
         PROTECTION

• Advantage: long life, no disclosure
• Disadvantage: no exclusivity
• Increasingly chosen over patent
  – Cheap self-help vs. expensive registration
  – Short lifespan of innovation
  – Patent infringement difficult to police
THREE TYPES OF AGREEMENTS


• NDA: reinforces obligation to respect
  confidence
• Assignment: transfers rights to invention
• Non-compete: temporarily prohibits post-
  employment competition
NDA => EFFECT ON
  BEHAVIOR USUALLY LOW


• Provides notice & proves reasonable efforts
• Standard NDA not controversial
• Prohibiting reverse engineering?
EMPLOYEE ASSIGNMENT =>
      SOME EFFECT


• Rationale: what the company pays for
• Problem of post-employment restriction
NONCOMPETES =>
     SUBSTANTIAL EFFECT

• Justification: avoid trade secret battle
• Vague standards (e.g., “reasonable time and
  scope”)
CRIMINAL

•   Criminalization relatively recent
•   State laws
•   Economic Espionage Act
•   Problems of criminalization
    – Overreaction of the uninformed prosecutor
    – Standards vary (e.g., technical vs. business info)
CONCLUSION

• Need clearer standards, more uniform
• Criminalization should be watched &
  studied carefully
• Need recognition of value of imperfect
  protection
  – Some loss inevitable
  – Value of mobility: the “leaky bucket”
Trade Secrets                                Patents


       no registration costs                                fees
          but: costs to keep secret              registration + maintenance


            can last longer                          limited in time
        - but: limited to economic life             - generally: max 20y
- uncertain lifespan: leak out is irremediable     - but: can be invalided

             no disclosure                              disclosure
      - but: practical need to disclose          - publication 18m after filing
             - if leak out: TS lost                - if P not allowed: no TS
Trade Secrets                                      Patents


     Large subject matter                         Subject matter limited:
    Protection of virtually anything          - Requirements: new, non obvious, useful
  maintained in secret by a business                   - Scope: patent claim
  that gives competitive advantage

  Only protection against                              Right to exclude
 improper acquirement/use                         monopoly to prevent others from
                                                     exploiting the invention


   More difficult to enforce                             "Power tool"
         - some countries: no laws
- ability to safeguard TS during litigation
Business and Marketplace
     Considerations
1. Market life of the subject matter



Some products have commercial life of only a few
months

Patent typically takes 25 months to be issued →
Patent protection may not exist until after market life of
the product has expired

↔ TS allows immediate commercial use
2. Difficulty of maintaining the
        subject matter secret

– Time, willingness and funds to:
  • Develop internal policies
  • Implement protection program
  • Initiate immediate legal action to protect trade secrets
    from disclosure (preliminary injunction)
– Risk of disclosure ∼ number of persons needing
  access to the TS
  • Employees
  • Need for investors
  • External contractors
3. Likelihood of subject matter being
              reverse engineered

• Easy to control RE?
  – Products widely sold to consumers → difficult to prevent RE → P
  – Products sold to limited number of persons → control, e.g. license
    agreement which forbids RE and requires licensee to maintain the
    technology secret → TS


• Difficult/expensive to do RE?
  – Secret ∼ manufacturing method or formula → difficult → TS
  – Secret embodied in product → easy (e.g. raw material) → P
Example no. 1

• Decades ago, Coca-Cola decided to keep its soft drink
  formula a secret
• The formula is only known to a few people within the
  company

• Kept in the vault of a bank in Atlanta
• Those who know the secret formula have signed non-
  disclosure agreements
• It is rumored that they are not allowed to travel
  together
• If it had patented its formula, the whole world would
  be making Coca-Cola
• In the past, you could not buy Coca-Cola
  in India, because Indian law required that
  trade secret information be disclosed


• In 1991, India changed its laws, and Coca-
  Cola can now be sold in the country
Examples no. 2

• Secret technique for
  jeans washing

• Secret textile
  weaving techniques
  for saris

• Content of dye
  mixtures
Example no. 3

• Glamourmom® applied for patent for
  breastfeeding bra
• Allows mothers to discretely and
  confidently breastfeed
• Built-in soft cup frame and elastic shelf
  provides full nursing bra support.
• But unlike any other nursing bra on the
  market, it covers the tummy. Looks like
  a regular top.
4. Likelihood of subject matter being
           independently developed

• Complexity of invention

• Number of competitors working in the field

• Potential payoff for achieving market success
   – e.g. drug that cures cancer


• Alternative option: defensive publication
5. Type of subject matter

– New basic technology
   • “pioneer patent”
   • many licensees: allows to set low licensing fees → competitors have
     no incentive to risk patent litigation
– Minor improvement in well-developed field
   • P will be narrowly construed
   • easy to invent around
   • or: competitors likely to use preexisting technology
– Protectable in all countries?
   • in some countries not patentable?
   • too costly to protect in all countries?
Example - Invention for putting a permanent
            image on a piece of apparel


 • Condé System Inc. produces • The fabric remains soft and
   DyeTrans Wearables™ by        absorbent with less pile than
   using a patented process to   cotton or cotton blends and
   treat fabric so it captures   resists wrinkling and
   photographic-quality artwork  shrinkage.
   and text in the fabric rather
   than on the surface of the
   fabric.


Source: http://www.corporatelogo.com/articles/031feat3.html
• Potential long market life
• Potential many licensees
• Would be difficult to keep secret
  – many licensees
  – risk for reverse engineering

     Patent: only 20y,
     but exclusive rights

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Trade secret1 [compatibility mode]

  • 1. Intellectual Property • Four (6) Types – Trade Secrets – GI – Trademarks – Copyrights – Industrial design – Patents
  • 2. Trade Secrets • Definition – Information that is sufficiently secret to derive economic value from not being generally known and is the subject of reasonable efforts to maintain its secrecy. – A trade secret can be any information that derives independent economic value from not being generally known or readily ascertainable.
  • 3. What are TS? • Among the things that can be trade secrets are a formula, pattern, compilation, program, device, manuals, method, technique, or process. • Businesses to consider whether its – techniques, – manuals, – recipes, – prospect list, – pricing can be protected as trade secrets
  • 4. What are TS? • Among things courts have found to be "trade secrets" are – machining processes, – blueprints, – stock-picking formulae, – customer lists, – pricing information, – and non-public financial data. On the other hand, information such as overhead rates and profit margins that help define a price may be found to be a trade secret even if the price itself is known.
  • 5. Trade Secrets Factors to determine if information amounts to a TS: – Is it known outside the company – Have measures been taken to guard its secrecy – How much money was spent developing it – What is the value of the information for your company and to your competitor
  • 6. Trade Secrets • Trade Secret Audit – to establish a trade secret protection and compliance programme • Consider appointing a Trade Secret Compliance Officer • Advantages of a written policy includes: – Clarity (how to identify and protect) & – Demonstrates commitment to protection • Educate and train staff in need to protect Trade Secrets • Make it known that disclosure of a TS may result in termination and/or legal action. • Monitor compliance
  • 7. Trade Secrets (cont’d) • Protection Available – Trade Secrets are protected by common law, state statutes and contract law in the U.S. and in most other countries. – No registration is available. • Term of Protection – Trade secrets are protectable as long as secrecy is maintained (perpetual)
  • 8. Trade Secrets (cont’d) • Notice and Marking – Documents and visually perceptible copies of trade secret information should be clearly marked as “confidential,” “proprietary,” “secret” or “restricted.”
  • 9. Trade Secrets (cont’d) • Infringement – The unauthorized disclosure or use of trade secrets constitutes misappropriation and is actionable under state laws. – Criminal penalties may apply.
  • 10. TRADE SECRETS: BACKGROUND • Genesis in state common law, unlike other IP • Grounded in policy of business ethics • Rights can be perpetual, but are nonexclusive • All patents begin life as trade secrets
  • 11. Background • Trade secret protection stems from the common law and dates back to the 1800's. Today, every state recognizes some form of trade secret protection. Most states have legislation that specifically recognizes trade secrets, though some still rely solely on common law principles.
  • 12. Background • Most of the states that have trade secret laws use the Uniform Trade Secrets Act, which has helped create a more uniform body of law from state to state than if each state had its own unique law. In sharp contrast to patents, copyrights and trademarks, which are all Federal-based forms of intellectual property, trade secret protection originates and is primarily maintained through state law.
  • 13. USE OF TRADE SECRET PROTECTION • Advantage: long life, no disclosure • Disadvantage: no exclusivity • Increasingly chosen over patent – Cheap self-help vs. expensive registration – Short lifespan of innovation – Patent infringement difficult to police
  • 14. THREE TYPES OF AGREEMENTS • NDA: reinforces obligation to respect confidence • Assignment: transfers rights to invention • Non-compete: temporarily prohibits post- employment competition
  • 15. NDA => EFFECT ON BEHAVIOR USUALLY LOW • Provides notice & proves reasonable efforts • Standard NDA not controversial • Prohibiting reverse engineering?
  • 16. EMPLOYEE ASSIGNMENT => SOME EFFECT • Rationale: what the company pays for • Problem of post-employment restriction
  • 17. NONCOMPETES => SUBSTANTIAL EFFECT • Justification: avoid trade secret battle • Vague standards (e.g., “reasonable time and scope”)
  • 18. CRIMINAL • Criminalization relatively recent • State laws • Economic Espionage Act • Problems of criminalization – Overreaction of the uninformed prosecutor – Standards vary (e.g., technical vs. business info)
  • 19. CONCLUSION • Need clearer standards, more uniform • Criminalization should be watched & studied carefully • Need recognition of value of imperfect protection – Some loss inevitable – Value of mobility: the “leaky bucket”
  • 20. Trade Secrets Patents no registration costs fees but: costs to keep secret registration + maintenance can last longer limited in time - but: limited to economic life - generally: max 20y - uncertain lifespan: leak out is irremediable - but: can be invalided no disclosure disclosure - but: practical need to disclose - publication 18m after filing - if leak out: TS lost - if P not allowed: no TS
  • 21. Trade Secrets Patents Large subject matter Subject matter limited: Protection of virtually anything - Requirements: new, non obvious, useful maintained in secret by a business - Scope: patent claim that gives competitive advantage Only protection against Right to exclude improper acquirement/use monopoly to prevent others from exploiting the invention More difficult to enforce "Power tool" - some countries: no laws - ability to safeguard TS during litigation
  • 22. Business and Marketplace Considerations
  • 23. 1. Market life of the subject matter Some products have commercial life of only a few months Patent typically takes 25 months to be issued → Patent protection may not exist until after market life of the product has expired ↔ TS allows immediate commercial use
  • 24. 2. Difficulty of maintaining the subject matter secret – Time, willingness and funds to: • Develop internal policies • Implement protection program • Initiate immediate legal action to protect trade secrets from disclosure (preliminary injunction) – Risk of disclosure ∼ number of persons needing access to the TS • Employees • Need for investors • External contractors
  • 25. 3. Likelihood of subject matter being reverse engineered • Easy to control RE? – Products widely sold to consumers → difficult to prevent RE → P – Products sold to limited number of persons → control, e.g. license agreement which forbids RE and requires licensee to maintain the technology secret → TS • Difficult/expensive to do RE? – Secret ∼ manufacturing method or formula → difficult → TS – Secret embodied in product → easy (e.g. raw material) → P
  • 26. Example no. 1 • Decades ago, Coca-Cola decided to keep its soft drink formula a secret • The formula is only known to a few people within the company • Kept in the vault of a bank in Atlanta • Those who know the secret formula have signed non- disclosure agreements • It is rumored that they are not allowed to travel together • If it had patented its formula, the whole world would be making Coca-Cola
  • 27. • In the past, you could not buy Coca-Cola in India, because Indian law required that trade secret information be disclosed • In 1991, India changed its laws, and Coca- Cola can now be sold in the country
  • 28. Examples no. 2 • Secret technique for jeans washing • Secret textile weaving techniques for saris • Content of dye mixtures
  • 29. Example no. 3 • Glamourmom® applied for patent for breastfeeding bra • Allows mothers to discretely and confidently breastfeed • Built-in soft cup frame and elastic shelf provides full nursing bra support. • But unlike any other nursing bra on the market, it covers the tummy. Looks like a regular top.
  • 30. 4. Likelihood of subject matter being independently developed • Complexity of invention • Number of competitors working in the field • Potential payoff for achieving market success – e.g. drug that cures cancer • Alternative option: defensive publication
  • 31. 5. Type of subject matter – New basic technology • “pioneer patent” • many licensees: allows to set low licensing fees → competitors have no incentive to risk patent litigation – Minor improvement in well-developed field • P will be narrowly construed • easy to invent around • or: competitors likely to use preexisting technology – Protectable in all countries? • in some countries not patentable? • too costly to protect in all countries?
  • 32. Example - Invention for putting a permanent image on a piece of apparel • Condé System Inc. produces • The fabric remains soft and DyeTrans Wearables™ by absorbent with less pile than using a patented process to cotton or cotton blends and treat fabric so it captures resists wrinkling and photographic-quality artwork shrinkage. and text in the fabric rather than on the surface of the fabric. Source: http://www.corporatelogo.com/articles/031feat3.html
  • 33. • Potential long market life • Potential many licensees • Would be difficult to keep secret – many licensees – risk for reverse engineering Patent: only 20y, but exclusive rights