1. Keeping Confidence:
Trade Secret
Protection Program

2. This PresentationThis Presentation
• PART 1 - Outline
– Definition
– Legal requirements
– Legal rights
– Enforcement
• PART 2 - Proper Management of Trade Secrets
– Protection strategies for trade secrets
• PART 3 - Trade Secret or Patent?
– Legal considerations
– Business considerations

3. PART 1PART 1
WHAT ARE TRADEWHAT ARE TRADE
SECRETS ?SECRETS ?

4. DefinitionDefinition::
What are trade secrets?What are trade secrets?
any confidential
information
which provides an
enterprise with a
competitive edge
can qualify as a trade secret
→ entitled to legal protection

5. Typically, a company will have
confidential information ...
• Which may be
protected by other
types of IP
– application for
protection foreseen
in the near future
– no application
foreseen
• Which doesn’t
qualify for
protection under
other types of IP

6. A trade secret can relate to
different types of information
T e c h n ic a l a n d S c ie n tific In fo r m a tio n
F in a n c ia l In fo r m a tio n
C o m m e r c ia l In fo r m a tio n
N e g a tiv e In fo r m a tio n
in s o m e la w s
Trade Secret

7. • Technical and scientific information:
– product information
• technical composition of a product: medicine, paint,
beverage
• technical data about product performance
• product design information
– manufacture information
• manufacturing methods and processes (weaving technique,
device process)
• production costs, refinery processes, raw materials
• specialized machinery
– know-how necessary to perform a particular
operation

8. • Technical and scientific info (contd.):
– designs, drawings, patterns, motifs
– test data, laboratory notebooks
– computer codes

9. • Commercial information:
– customer list
– business plan
– marketing strategy
– supplier arrangements
– customer buying preferences and
requirements
– consumer profiles
– sales methods

10. • Financial information:
– internal cost structure
– pricing information
– salary and compensation plans
– price lists

11. • Negative information:
– details of failed efforts to remedy
problems in the manufacture of certain
products
– dead-ends in research
– unsuccessful attempts to interest
customers in purchasing a product

12. Legal requirementsLegal requirements::
What can be protected as aWhat can be protected as a
trade secret?trade secret?

13. • Three essential legal requirements:
1. The information must be secret
2. It must have commercial value because
it’s secret
3. Owner must have taken reasonable steps
to keep it secret

14. 1. The information must be secret
• “not generally known among or readily accessible
to persons within the circles that normally deal
with this kind of information”
• price list on your website is no trade secret
• wheel technique for pottery is no trade secret
• no absolute requirement → NDA/CA
– e.g. based on supplier relationship, joint development
agreement, due diligence investigation, etc.

15. 2. It must have commercial value because
it’s secret
• confers some economic benefit to the holder
• this benefit must derive specifically from the fact
that it is not generally known, not just from the
value of the information itself
• actual or potential
• not easy to know exact value of trade secret
because it is a secret

16. 3. Owner must have taken reasonable
steps to keep it secret
• under most trade secret regimes, a TS is not
deemed to exist unless its holder takes
reasonable steps to maintain its secrecy
• ‘reasonable’ → case by case
• importance of proper TS management program

17. Legal rightsLegal rights::
What kind of protection doWhat kind of protection do
you have under the law?you have under the law?

18. • Only protection against improperly
acquiring, disclosing or using:
– people who are automatically bound by duty of
confidentiality (incl. employees)
– people who have signed non-disclosure
agreement
– people who acquire a trade secret through
improper means (such as theft, industrial
espionage, bribery)
Legal rightsLegal rights::

19. • Some people cannot be stopped
from using information under
trade secret law:
– people who discover the secret
independently, without using
illegal means or violating
agreements or state law
– people who discover through
reverse engineering

20. Reverse engineering is
taking apart an object
to see how it works
in order to duplicate or
enhance the object

21. Example no. 1Example no. 1
• Decades ago, Coca-Cola decided to
keep its soft drink formula a secret
• The formula is only know 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

22. Example no. 2Example no. 2
• Patent for stud and tube
coupling system (the way
bricks hold together)
• But: Today the patents
have long expired and the
company tries hard to keep
out competitors by using
designs, trademarks and
copyright

24. Enforcement:Enforcement:
What can you do if someoneWhat can you do if someone
steals or improperlysteals or improperly
discloses your trade secret?discloses your trade secret?

25. Trade secret protection may be based on...
– Contract law
• when there is an agreement to protect the TS
– NDA/CA
– anti-reverse engineering clause (enforceability debated)
• where a confidential relationship exists
– attorney, employee
– Principle of tort / unfair competition
• misappropriation by competitors who have no
contractual relationship
– theft, espionage, subversion of employees

26. –Criminal laws
• e.g. for an employee to steal trade secrets from a
company
• theft, electronic espionage, invasion of privacy, etc.
• circumvention of technical protection systems
–Specific trade secret laws
• US: Uniform Trade Secrets Act; Economic
Espionage Act

27. Remedies
1. Order to stop the misusing
2. Monetary damages
• actual damages caused as a result of the misuse (lost profits)
• amount by which defendant unjustly benefited from the
misappropriation (unjust enrichment)
3. Seizure order
• can be obtained in civil actions to search the defendant's
premises in order to obtain the evidence to establish the theft of
trade secrets at trial
4. Precautionary impoundment
• of the articles that include misused trade secrets, or the products
that resulted of misusing

28. To establish violation, the owner
must be able to show :
– infringement provides competitive
advantage
– reasonable steps to maintain secret
– information obtained, used or disclosed
in violation of the honest commercial
practices (misuse)

29. PART 2PART 2
BUSINESS STRATEGIESBUSINESS STRATEGIES
TO HANDLE & PROTECTTO HANDLE & PROTECT
TRADE SECRETSTRADE SECRETS

30. Loss of trade secrets -Loss of trade secrets -
a growing problema growing problem (1)(1)
• Why is this occurring?
– way we do business today (increased use of
contractors, temporary workers, out-sourcing)
– declining employee loyalty, more job changes
– organized crime : discovered the money to be
made in stealing high tech IP
– storage facilities (CD-ROM, floppies, etc)
– expanding use of wireless technology

31. Loss of trade secrets -Loss of trade secrets -
a growing problema growing problem (2)(2)
• Examples of outside threats
– burglaries by professional criminals
targeting specific technology
– attempted network attacks (hacks)
– laptop computer theft: source code,
product designs, marketing plans,
customer lists
– inducing employees to reveal TS (Apple case)
– corporate spies

32. Loss of trade secrets -Loss of trade secrets -
a growing problema growing problem (3)(3)
• Examples of inside threats
– 80% of information crimes <
employees, contractors, trusted
insiders!
– malicious destruction/erasure of R&D
data by avenging employee
– theft by former employee of business
plans
– ignorance

33. What can be done?What can be done?
↓↓
9 basic protection strategies9 basic protection strategies

34. 1. Identify trade secrets1. Identify trade secrets
Considerations in determining
whether information is a trade
secret:
– Is it known outside the company?
– Is it widely known by employees and
others involved within the company?
– Have measures been taken to guard its
secrecy?

35. – What is the value of the information for
your company?
– What is the potential value for your
competitors?
– How much effort/money spent in collecting
or developing it?
– How difficult would it be for others to
acquire, collect of duplicate it?

36. 2. Develop a protection policy2. Develop a protection policy
Advantages of a written policy:
– Clarity (how to identify and protect)
– How to reveal (in-house or to outsiders)
– Demonstrates commitment to protection
→ important in litigation

37. – Educate and train:
• Copy of policy, intranet, periodic training & audit, etc.
Make known that disclosure of a TS may result in
termination and/or legal action
• Clear communication and repetition
– TS protection must be part of the enterprise
culture
• Transform every employee into a potential security
officer
• Every employee must contribute to maintain the
security environment (e.g. anonymous security hotline)
– Monitor compliance, prosecute violators

38. 4.4. Restrict accessRestrict access
to only those persons having
a
need to know
the information
→ computer system should limit each
employee’s access to data actually
utilized or needed for a transaction

39. 5. Mark documents5. Mark documents
–Help employees recognize
trade secrets → prevents
inadvertent disclosure
–Uniform system of marking
documents
• paper based
• electronic (e.g. ‘confidential’ button
on standard email screen)

40. 3. Educate employees3. Educate employees
– Prevent inadvertent disclosure
(ignorance)
– Employment contract :
• Brief on protection expectations early
• NDA/CA/NCA
• obligations towards former employer!
– Departing employees :
• exit interview, letter to new employer, treat
fairly & compensate reasonably for patent
work, further limit access to data

41. 6. Physically isolate and protect6. Physically isolate and protect
– Separate locked depository
– Authorization
– Access control
• log of access: person, document reviewed
• biometric palm readers
– Surveillance of depository/company
premises
• guards, surveillance cameras
– Shredding
– Oversight; audit trail

42. 7. Maintain computer secrecy7. Maintain computer secrecy
– Secure online transactions, intranet,
website
– Authorization (password); access control
– Mark confidential or secret (legend pop,
or before and after sensitive information)
– Physically isolate and lock: computer
tapes, discs, other storage media
– No external drives and USB ports
– Monitor remote access to servers
– Firewalls; anti-virus software; encryption

43. 8. Restrict public access to8. Restrict public access to
facilitiesfacilities
– Log and visitor’s pass
– Accompany visitor
– Sometimes NDA/CA
– Visible to anyone walking through a
company’s premises
• type of machinery, layout, physical handling of work in
progress, etc
– Overheard conversations
– Documents left in plain view
– Unattended waste baskets

44. 9. Third parties9. Third parties
– Sharing for exploitation
– Consultants, financial advisors, computer
programmers, website host, designers,
subcontractors, joint ventures, etc.
– Confidentiality agreement, non-
disclosure agreement
– Limit access on need-to-know basis

45. PART 3PART 3
PROTECTING INVENTIONS:PROTECTING INVENTIONS:
TRADE SECRETSTRADE SECRETS
OR PATENTS?OR PATENTS?

46. IntroductionIntroduction
• Certain types of inventions may be
protectable under patent + trade secret
law.
• However, not under both.

47. Choice between patent protection and
trade secret protection is a
LEGAL and BUSINESS
decision

48. Legal ConsiderationsLegal Considerations

49. n o re g is tra tio n c o s ts
b u t: c o s ts to k e e p s e c re t
c a n la s t lo n g e r
- b u t: lim ite d to e c o n o m ic life
- u n ce rta in life s p a n : le a k o u t is irre m e d ia b le
n o d is c lo s u re
- b u t: p ra c tic a l n e e d to d isc lo se
- if le a k o u t: T S lo st
T ra d e S e c re ts
fe e s
re g istra tio n + m a in te n a n ce
lim ite d in tim e
- g e n e ra lly: m a x 2 0 y
- b u t: c a n b e in v a lid e d
d is c lo s u re
- p u b lic a tio n 1 8 m a fte r filin g
- if P n o t a llo w e d : n o T S
P a te n ts

50. L a rg e s u b je c t m a tte r
P ro te c tio n o f v irtu a lly a n y th in g
m a in ta in e d in s e c re t b y a b u s in e s s
th a t g iv e s c o m p e titiv e a d v a n ta g e
O n ly p ro te c tio n a g a in s t
im p ro p e r a c q u ire m e n t/u s e
M o re d iffic u lt to e n fo rc e
- s o m e c o u n trie s : n o la w s
- a b ility to s a fe g u a rd T S d u rin g litig a tio n
T ra d e S e c re ts
S u b je c t m a tte r lim ite d :
- R e q u ire m e n ts : n e w , n o n o b v io u s , u s e fu l
- S c o p e : p a te n t c la im
E x c lu s iv e rig h ts
m o n o p o ly to e x p lo it
th e in v e n tio n
" P o w e r to o l"
P a te n ts

51. Business and MarketplaceBusiness and Marketplace
ConsiderationsConsiderations

52. 1. Market life of the subject matter1. Market life of the subject matter
Some products have commercial life of only a
few months
Patent typically takes 25m to be issued →
Patent protection may not exist until after
market life of the product has expired
↔ TS allows immediate commercial use

53. 2. Difficulty of maintaining the2. Difficulty of maintaining the
subject matter secretsubject 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

54. 3. Likelihood of subject matter3. Likelihood of subject matter
being reverse engineeredbeing 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. cleaning fluid) → P

55. 4. Likelihood of subject matter4. Likelihood of subject matter
being independently developedbeing 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

56. 5. Type of subject matter5. 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?

57. ConclusionConclusion
• The choice between trade secret and
patent protection for an invention is
irrevocable
• Therefore: carefully consider all relevant
advantages and disadvantages from
each choice both from legal and
business viewpoint

58. ConclusionConclusion
• Patent and trade secrets are often
complementary to each other:
– Patent applicants generally keep inventions secret until the
patent application is published by the patent office.
– A lot of valuable know-how on how to exploit a patented
invention successfully is often kept as a trade secret.
– Some businesses disclose their trade secret to ensure that
no one else is able to patent it (defensive publication).

59. Remember...Remember...
TS: No registration, but 3 requirements
for legal protection
No need for absolute secrecy, but
‘reasonable measures’
Developing and maintaining TS program
< good business practice to prevent
< legal requirement to enforce TS protection

60. Only legal protection against dishonest
acquisition/disclosure/use
Consider alternative protection

61. Thank You!