Source: https://www.neustel.com/trade-secrets/
Timestamp: 2019-04-19 07:13:32+00:00

Document:
A trade secret is maintained when an inventor or business takes reasonable precautions to keep important information confidential. Trade secret protection generally arises under state statutes. Trade secrets comprise chemical formulas, mechanical structures, manufacturing processes and chemical compositions such as the formula for COCA-COLA. Once an individual has publicly disclosed a trade secret, any protection enjoyed by state statute is lost.
It is frequently stated that customer lists are generally not protectable as trade secrets. This statement is incorrect where: (i) the customer list contains information not generally known in the trade, (ii) not generally in use by good faith competitors, and (iii) the proprietor has taken reasonable steps to preserve the secrecy of the list. Also, lists containing specialized information have been protected.
Novelty and prior art. A trade secret may be a device or process which is patentable; but it need not be that. It may be a device or process which is clearly anticipated in the prior art or one which is merely a mechanical improvement that a good mechanic can make. Novelty and invention are not requisite for a trade secret as they are for patentability.
Although some minimal amount of novelty is required, absolute novelty is not required because trade secret protection does not protect against independent creation, as does patent protection. Maintaining secrecy of the information, in the context of trade secrets, implies at least minimal novelty.7 Information cannot qualify for trade secret protection if it is generally known to others in the same field.
Direct evidence of a trade secret’s value is the strongest evidence. Indirect or circumstantial evidence is permitted, however. Evidence can consist of the (i) time, money and effort spent in producing the trade secret, (ii) licensing to others in the industry, and (iii) measures the trade secret owner has taken to preserve the confidentiality of the information.
A company which utilizes the above stated eight requirements will increase its odds for receiving and maintaining trade secret protection.
The UTSA is expressly premised on deterring “breach of faith and reprehensible means of learning another’s secret.”20 Accordingly, the UTSA bases misappropriation on the use of “improper means.” However, the analysis only begins after it has been decided that a protectable trade secret exists. Misappropriation is defined under two broad categories: (i) acquisition, and (ii) disclosure and use.
Damages may be measured by either (i) unjust enrichment, (ii) actual loss, or (iii) a reasonable royalty.28 Punitive damages may be awarded up to twice the amount of any damages if a (i) willful and (ii) malicious misappropriation exists.29 It should be noted that the court awards the punitive damages, not the jury.
Obviously, when an individual publicly discloses their “trade secret” information the information is no longer a trade secret. Many leaks of trade secret information are the result of deliberate (but negligently prepared) publications. Many leaks also come about through casual conversation, loose talk at trade shows and in restaurants, and leaving sensitive documents where they might be seen by others. The lesson to be learned is this: the most important way to protect trade secrets against misappropriation is to educate those to whom the secrets have been entrusted, namely employees.
Since patent applications are initially maintained in secrecy, the information stated in the application is protected as a trade secret until the patent application is publicly disclosed after 18 months from the filing date.34 After the “trade secret” information is published in an issued patent or a published patent application, the information is no longer entitled to trade secret protection. Any “trade secret” information which is not disclosed in the resulting patent is still protected by its trade secret status. However, the applicant may abandon the patent application prior to the 18 months of pendency thereby retaining trade secret protection.
From the date an inventor conceives his invention to the date a patent issues, the only protection that he has is trade secret protection. Hence, it is extremely important for an individual to have confidentiality agreements signed by third parties who receive information relating to his invention to avoid losing trade secret rights. This is applicable during the licensing stage also.
the useful life of the invention.
If maintaining confidentiality of the information is going to be expensive and complex, or if the invention is susceptible to reverse engineering, then patenting the invention should be considered. If the invention’s useful life is less than 20 years, then patent protection should be considered since trade secret protection will not increase the time of protection compared to a patent. If the invention is not patentable, then the only protection available is obviously trade secrets.
One interesting aspect of a trade secret is that the information does not need to be patentable to receive trade secret protection. The information only needs to be slightly novel in order to receive trade secret protection, regardless of how obvious it would be to create the material.
Another benefit of a trade secret over a patent is that the term of protection is perpetual as long as it is not discovered or reverse-engineered by another. An additional benefit of a trade secret is that the inventor does not have to go through an expensive patent application process. The inventor only needs to retain the material in a confidential manner so as to prevent public disclosure. Lastly, a trade secret is not publicly disclosed like a patent, therefore the inventor may make improvements to their invention without competition from other businesses.
A trade secret can be difficult to maintain when considering accidental public disclosures and reverse engineering. Also, a trade secret does not prevent another individual who independently develops the subject matter of the trade secret, whereas a patent protects the subject matter regardless if the infringer copied or independently developed the infringing product.
A trade secret may consist of any formula, pattern, device or compilation of information which is used in one’s business and which gives him an opportunity to obtain an advantage over competitors who do not know or use it. It may be a formula for a chemical compound, a process of manufacturing, testing or preserving materials, a pattern for a machine or other device, or a list of customers * * * Generally, it relates to the production of goods, as for example, a machine or formula for the production of an article. It may, however relate to the sale of goods or to other operations within the business such as a code for determining discounts, rebates or other concessions in a price list or catalog, or a list of a specialized customers or a method of bookkeeping or other office management. Id., at cmt. b.
UNIFORM TRADE SECRETS ACT §1(4); N.D.C.C. §47-25.1-01 (emphasis added).
Surgidev Corp. v. Eye Technology, Inc., 828 F.2d 452 (8th Cir. 1987).
RESTATEMENT OF TORTS, §757, cmt b.
21 C.F.R. §20.61, 701.3(a), 720.8 (1987). See also, Zotos International Inc. v. Young, 830 F.2d 350 (D.C. Cir. 1987).
Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470 (1974).
USM Corp. v. Marson Fastener Corp., 467 N.E.2d 1271 (Mass. 1984).
Kewanee Oil, at 470 (“However, some novelty will be required if merely because that which does not possess novelty is usually known; secrecy, in the context of trade secrets, thus implies at least minimum novelty”).
Such as theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means. N.D.C.C. §47-25.1-01.
RESTATEMENT OF TORTS, §757 comment b (1939).
Electro-Craft Corp. v. Controlled Motion, Inc., 332 N.W.2d 890 (Minn. 1983).
Nationwide Chemical Corp. v. Wright, 458 F.Supp. 828 (M.D. Fla. 1976), aff’d, 484 F.2d 714 (5th Cir. 1978).
Evidence of the security measures the trade secret owner undertook is also relevant in determining whether the acquisition was improper, whether the alleged misappropriator knew or should have known the information was a trade secret, and whether the disclosure was accidental.
Electro-Craft, 332 N.W.2d at 903.
Id. A pure heart, empty head defense is not available.
Ruckelshous v. Monsanto Co., 104 S.Ct. 2862 (1984) (“The right to exclude, indeed, is fundamental to the concept of a property right”).
Conmar Products Corp. v. Universal Slide Fastener Co., 172 F.2d 150 (2d Cir. 1949).
Religious Technology Center v. Wollersheim, 796 F.2d 1076 (9th Cir. 1986).
18 U.S.C. §1962(c); Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479 (1985).
Cataphote Corp. v. Hudson, 422 F.2d 1290, 1293 (5th Cir. 1970).
Videotronics, Inc. v. Bend Electronics, 564 F.Supp. 1471 (D. Nev. 1983). The propriety of reverse engineering mask works has been codified at 17 U.S.C. §906.
N.D.C.C. §47-25.1-05; See also Rule 507 of the North Dakota Rules of Evidence.

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