trade secret hot topics june 2, 2016 -...
TRANSCRIPT
Topics
• Trade Secret Primer • Trade Secrets and the Cloud
• The Defend Trade Secrets Act of 2016 • Utility Patents v. Trade Secrets
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What Qualifies as a Trade Secret?
• Three requirements: – Secret – Competitive advantage – Reasonable efforts to maintain secrecy
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Common Scenarios for Trade Secret Litigation
• Variations of Trade Secret Owner v. Alleged (Sometimes Accidental) Thief
• Relationship to contract claims
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Reducing Risk and Setting Groundwork for Trade Secret Litigation
• Employee agreements in order • Agreements with suppliers and others • Identifying trade secrets • Provide adequate protection • Trade secret policies • Monitor outgoing documents
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Reducing Risk and Setting Groundwork for Trade Secret Litigation
• Policies for terminated employees • If trade secrets misappropriated, act
quickly and aggressively • Beware of the company’s own liability for
misappropriation of trade secrets
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Data Security Critical in Cloud Agreements
Data security in cloud computing
environments is often the #1 concern for customers
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Data Security & Outsourced Services
What are the Service Provider’s actual contractual obligations
regarding data security?
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Data Security – Example
“[W]e will implement reasonable and appropriate measures designed to help you secure Your Content
against accidental or unlawful loss, access or disclosure.”
Overview of the DTSA • Amendments to the Economic Espionage Act • Creates a federal private right of action for
trade secret misappropriation • Based on Uniform Trade Secrets Act • State causes of action still intact
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What Constitutes Misappropriation Under DTSA?
(A) acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or
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What Constitutes Misappropriation Under DTSA?
• (B) disclosure or use of a trade secret of another without express or implied consent by a person who – (i) used improper means to acquire knowledge of the trade secret; – (ii) at the time of disclosure or use, knew or had reason to know that
the knowledge of the trade secret was • (I) derived from or through a person who had used improper means to
acquire the trade secret; • (II) acquired under circumstances giving rise to a duty to maintain the
secrecy of the trade secret or limit the use of the trade secret; or • (III) derived from or through a person who owed a duty to the person
seeking relief to maintain the secrecy of the trade secret or limit the use of the trade secret; or
– (iii) before a material change of the position of the person, knew or had reason to know that
• (I) the trade secret was a trade secret; and • (II) knowledge of the trade secret had been acquired by accident or
mistake
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What Does “Improper” Mean Under DTSA?
• (A) includes theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means; and
• (B) does not include reverse engineering, independent derivation, or any other lawful means of acquisition.
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When and Where Does the DTSA Apply? • Enacted May 11, 2016 • Interstate or foreign commerce requirement • May apply to foreign activity • It “shall not be construed to be a law pertaining to
intellectual property for purposes of any other Act of Congress.” – e.g., bankruptcy IP exception 365(n) would not apply to licenses
of trade secret information
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DTSA Protects Whistleblowers
• Limited protection for whistleblowers • Does not appear to extend to sharing
trade secrets with press or public at large
• Mandatory notice requirement for employers
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Supplemental Jurisdiction Under DTSA
• Original jurisdiction over trade secrets claim • Common types of supplemental claims • Discretion of district court
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Rights of Trade Secret Owners Under the DTSA
• Restricted disclosure by courts • Right also applies to non-parties • Potentially applicable beyond causes
of action arising under DTSA
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DTSA Allows Ex Parte Seizures • Seizure by federal marshals • Requires “extraordinary circumstances” • No notice to accused trade secret thief • Security bond • Seizure hearing • Relief for victims of wrongful seizure
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DTSA Remedies • “Reasonable” injunctive relief • Reasonable royalty under exceptional circumstances • Compensatory damages • Exemplary damages • Attorney fees
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Update Your Policies in Light of the DTSA • The confidentiality clauses of your employment
agreements may need to be updated to provide notice of immunity
• The clauses can reference another document, such as an employee handbook
• Failure to provide proper notice forfeits rights to attorney fees or exemplary damages under federal law
• Sufficient notice requirements not yet tested in court
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Litigation Strategies in View of DTSA • Federal court may be a friendlier venue • Option for ex parte seizure • Your state options remain open
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DTSA Litigations Have Already Begun: Mahamedi v. Paradice (N.D. Cal.)
• Patent attorney partners split • Partnership Separation Agreement limited Paradice’s
access to old firm files • Instead of following Partner Separation Agreement,
Paradice copied old firm database containing proprietary information
• Prayer for relief – Injunctions – Monetary damages
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Universal Protection Services v. Thornburg (N.D. Tex.)
• Universal sued its former Director of Security Thornburg for trade secret misappropriation, among other claims
• Decided to quit his job and start-up competing company where he could charge Universal’s customers and make more money
• Laundry list of trade secrets • Prayer for relief
– Very specific injunctive relief – Monetary damages
• Motion for temporary restraining order
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M.C. Dean, Inc. v. City of Miami Beach & Local 349 (S.D. Fla.)
• M.C. Dean is electrical design-build and systems integration sub-contracted to Miami Beach project
• As part of contractual obligations, M.C. Dean provides proprietary information to general contractor
• Local 349 made public records request for this information • M.C. Dean authorized disclosure of redacted copies • City clerk inadvertently disclosed unredacted copies • Local 349 refused to delete or destroy this information or
return it to the City • Prayer for relief
– Injunctive relief – Monetary damages
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Bonamar, Corp. v. Turkin & Supreme Crab (S.D. Fla.)
• Bonamar is importer, exporter, and distributor of premium crab meat and various other seafood
• Trade secrets are proprietary customer information (current and prospective), packer information, and business forecast information
• Bad actor is former employee who took proprietary information and then accepted high level position at competitor
• Prayer for relief – Injunctive relief – Monetary damages
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Takeaways From Early-Filed Cases • Cases in their earliest stages but they still
provide some important takeaways: – File suit quickly – Update handbook immediately – Be clear about the type of injunctions you want – Strongly consider ex parte seizure
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Utility Patents or Trade Secrets? • Patents and trade secrets often represent
opposite sides of same coin since both can protect technical subject matter
• But there are important trade-offs
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Trade Secrets Increasing in Value • Trade secrets are becoming more powerful
– Rise of the knowledge economy – Economic Espionage Act – Broad adoption of the Uniform Trade Secrets Act – Increasing employee mobility – DTSA
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Patents Decreasing in Value • Meanwhile, patents are becoming less
powerful – Recent decisions have weakened patent
protection – Rising litigation and prosecution costs – Proliferation of technology and information
increases probability that an invention is obvious – Growing anti-patent bias
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Trade Secrets Offer Potentially Broader Protection
• Patents directed to subject matter set out by 35 U.S.C. § 101
• Trade secrets not so limited • Patents expire 20 years after their filing date plus
adjustments • Trade secrets can last forever if properly protected
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When Should You Choose a Patent?
• Subject matter favoring patent protection
• Subject matter disfavoring patent protection
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When Should You Choose a Trade Secret?
• Subject matter favoring trade secret protection
• Subject matter disfavoring trade secret protection
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Hedging Your Bets? • File for patent protection only in the U.S. and request
non-publication • Results of prosecution determine whether applicant will
have patent or trade secret protection • However, this would preclude seeking patent protection
in other jurisdictions
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Thank You
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Chris Koa Of Counsel Seattle [email protected] 206-903-2377
Ryan Meyer Attorney Seattle [email protected] 206-903-8768