Source: http://www.starrgern.com/?t=40&an=41340&anc=635&format=xml
Timestamp: 2019-04-23 00:16:27+00:00

Document:
Consider the case of a client who comes to you claiming that a competitor has stolen his trade secrets and asks you to bring an action against the competitor. The client makes molded plastic dishwasher parts for which it developed the design, and claims a competitor has obtained from some source a copy of the schematics and is using that information to make an exact replica of the product, which it is selling to the client's customers. So far, it sounds like a pretty good trade secret misappropriation case, you think. Be careful though, because there may be a defense to the claim that you are not considering. On the other hand they may be other causes of action that are available.
I. When is a secret not a trade secret?
Under New Jersey's law against misappropriation of trade secrets, information can only be protected if the plaintiff has a business advantage because that information is not known to its competitors and cannot be easily developed by them using proper means. (1) It follows, naturally, that if the information in question is readily ascertainable by a competitor, without resort to misappropriation, then trade secret protection is not available.
This is a curious gap in the protection offered to a business as trade secrets because it would appear to allow a competitor to take product design information from a manufacturer by any means at all, proper or otherwise, as long as the particular product involved could be reverse engineered. There are, however, limits to this defense, as logic would suggest. Some of these limits are imposed from within the framework of trade secret law itself, and others by other causes of action that might apply to any misconduct by the competitor in obtaining the information. These limits serve to define and circumscribe the defense of reverse engineerability itself, of course, but they also help to illuminate the conceptual framework of trade secret protection itself, and the role it plays in a larger jurisprudence.
3. the extent of measures taken by the plaintiff to guard the secrecy of the information.
6. the ease by which information could be acquired or developed by proper means.(7).
In this framework, then, secrecy is paramount. While all elements of the claim must be proven by the plaintiff, (8), the determination of whether or not the information meets the definition of a trade secret is the first inquiry, and if plaintiff cannot carry that burden, all other elements are moot.
The reverse engineerability defense to a trade secrets action arises as a result of the priority the New Jersey/Restatement trade secret cause of action gives to the nature of the information itself over the conduct of the parties. (11) To establish liability under the trade secret elements, a plaintiff must prove that the information it seeks to protect is held closely enough to fall within the scope of the protection of the cause of action. (12) In discussing the secrecy required to establish a trade secret in the context of product design, the comments to the relevant section of the Restatement specify that "[m]atters that are fully disclosed by the goods which one markets cannot be his secret." (13) In other words, a plaintiff might establish all of the other elements of a trade secret claim, including, significantly, the elements of misappropriation, and yet not succeed if it is found that the design information at issue could be ascertained from the product itself.
This defense is not absolute, however. In its discussion of the issue, the Rycoline court recognized that if the subject design information could only be obtained through a lengthy and expensive reverse engineering process, then the information was not, in fact, "readily ascertainable" from the product itself. (29) In discussing the defense, the court noted that to be successful, A defendant must demonstrate that [the product] is "quickly reverse engineerable." The more difficult, time consuming and costly it would be to develop the product, the less likely it can be considered to be "reverse engineerable." (30) Thus, in such a case, a competitor would still be free to undertake the actual reverse engineering of the product, but could not use the original manufacturer's information and rely on the product's susceptibility to reverse engineering as a defense.
Notwithstanding these limiting factors, it is nevertheless striking that, at least for the purposes of a trade secret claim, the mere fact of a product's susceptibility to reverse engineering grants carte blanche to a misappropriator to use the information in competition against the original manufacturer, without regard for the propriety of the means by which that information was obtained. Given the potentially inequitable results that might follow from this approach, it is not surprising that there are other causes of action that effectively limits even further the application of the reverse engineerability defense.
A defense of reverse engineerability, of course, is an affirmative defense, in that it accepts the premise that the defendant used the plaintiff's information, and challenges only that the information is protectable as a matter of law. It is relevant to inquire, then, as to how the defendant came to possess information considered to be confidential by the plaintiff, and correspondingly, as to whether the means by which the defendant's acquired the information might itself give rise to liability.
Significantly in the context of the trade secrets defense of reverse engineerability to note that in the Lamorte Burns case the priority given to the conduct of the parties in relation to that given the nature of the information at issue is reversed from that in trade secrets cases; here the conduct of the parties is the key element, while the nature of the information is a relevant, but less significant factor.
A defense of reverse engineerability, then, would not likely succeed outside of the context of the cause of action of misappropriation of trade secrets. The focus of the other causes of action on the conduct of the defendant and the very broad range of information considered to be protectable under these causes of action, would likely overcome the argument that product design information could not be protected from misappropriation on the basis that it was discoverable by reverse engineering.
As is made clear by the discussion above regarding the defense to a trade secret claim of reverse engineerability and potential alternative causes of action in such a case, there is substantial overlap between trade secret claims and unfair competition torts, including breach of protective covenants. Notably, in any case in which any of these latter claims would apply to protect the interest of a business in protecting its confidential information, the scope of information potentially covered by the action would include any information that could also be protected as a trade secret. (58) Thus, these claims do effectively fill the reverse engineerability gap in trade secret law.
The converse, however, is not true. Much of the information that might be protected through one of these alternatives to a trade secret claim would not meet the definition of a trade secret. Given that fact, and the fact that any of these more inclusive actions can obtain for a plaintiff substantially the same relief, both injunctive and monetary, as a successful trade secrets claim, it is tempting to wonder whether a trade secrets claim is worth the bother.
The answer is related to the purpose underlying the separate protection afforded trade secrets, and the conceptual relationship between that protection and the broader protection available for business information that is confidential, but which does not rise to the level of a trade secret. The Lamorte Burns Court and others have differentiated the two categories of claims by noting that a trade secret claim is founded upon the nature of the information at issue while the unfair competition claims are founded on the misconduct of the competitor. This distinction is accurate as far as it goes, but in the end proves to be of little moment.
As our discussion regarding the defense of reverse engineerability and the means by which it can be circumvented demonstrates, the same protections are available in both cases involving trade secrets and in those involving valuable confidential information. Thus, in terms of the protection available for a business's information, there is effectively little distinction between information which rises to the level of a trade secret and that which does not.
The significant difference of fact between trade secrets and processes or devices which are not secret is that knowledge of the latter is available to the copier without the use of improper means to procure it, while knowledge of the former is ordinarily available to him only by the use of such means. It is the employment of improper means to procure the trade secret, rather than the mere copying or use, which is the basis of the liability under the rule stated in this Section. . . . The suggestion that one has a right to exclude others from the use of his trade secret because he has a right of property in the idea has been frequently advanced and rejected. The theory that has prevailed is that the protection is afforded only by a general duty of good faith and that the liability rests upon breach of this duty; that is, breach of contract, abuse of confidence or impropriety in the method of ascertaining the secret. Apart from [these], trade secrets may be copied as freely as devices or processes which are not secret.
According to the restatement, there really is nothing inherently significant about information that meets the definition of a trade secret. Trade secret law is simply another restraint on improper business conduct, as are the other causes of action discussed above that seek to curtail unfair competition. Like the others, it has a niche, in that it applies to create a clear path to liability in certain particular factual circumstances. In a breach of the duty of loyalty claim, competitive conduct by an employee while still employed creates a defined basis for liability. In the case of a claim under contract, it is the contract itself that provides the factual foundation. For tortious interference, the key facts are an ongoing relationship and the expectation that it will continue. The clear basis for liability in a trade secrets claim is that the information at issue is so to be closely held by the business that improper behavior.
Given the specific targets of these causes of action, it is natural that any one of them will have gaps that leave unprotected information that is yet of value to a business, such as the reverse engineerability gap in the trade secrets claim. By capturing all of the factual premises included in their collective scope, though, they effectively provide strong and broad protection for businesses against unfair competition arising from the misappropriation of proprietary information.
(1) See, Sun Dial Corp. v. Rideout, 29 N.J.Super. 361 (1954); Rycoline Products, Inc. v. Walsh, 334 N.J.Super. 62 (2000); SI Handling Systems, Inc. v. Heisley, 753 F.2d 1244 (1985).
(2) See, Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141 (1989).
(3) This term appears in Rycoline, supra discussed infra.
(4) Although forty-five state, along with the District of Columbia and the United States Virgin Islands, have adopted into statute some form of the Uniform Trade Secret Act, misappropriation of a trade secret is still a common law cause of action in New Jersey. Because, however, both New Jersey's common law elements of the claim and the provision of the UTSA are largely derived from the Restatement of Torts definition of the claim [citations], the differences between the two are not substantial.
(5) See, Rycoline, 334 N.J.Super. at 71, citing Rohm & Haas Co. v. Adco Chem Co., 689 F.2d 424, 429-30 (3rd Cir. 1982) and Stone v. Goss, 65 N.J.Eq. 756, 759-60 (E&A 1903).
(6) See, Restatement of Torts 757, comment b (1939); Hammock by Hammock, 142 N.J. 356, 384 (1995); Smith v. BIC Corp., 869 F.2d 194, 199 (1989).
(7) See, Restatement of Torts 757, comment b (1939); Hammock, 142 N.J. at 384; Smith, 869 F.2d at 200.
(8) See, Rycoline, 334 N.J. Super. at 71.
(9) See, Bonito Boats, 489 U.S. 141, at 146-53; citing, inter alia, U.S. Const. Art. I, 8.
(10) See, Sun Dial Corp., 29 N.J.Super. at 368; Rycoline, 334 N.J. Super. at 74-75.
(11) See, Lamorte Burns & Co., Inc. v. Walters, 167 N.J. 285, 300 (2001).
(12) See, Rycoline, 334 N.J. Super., at 71.
(13) Restatement of Torts 757, comment b.
(14) Supra, 753 F.2d 1244.
(15) Id. at 1262. The SI Handling case was decided under Pennsylvania law, which, at that time, was substantially similar to New Jersey trade secret law as it was also derived from the Restatement definition of the cause of action. See, Rohm and Haas, supra, noting in a trade secret case that the relevant law in Pennsylvania and New Jersey was so similar that it mooted the choice of law question before the court.
(16) Supra, 142 N.J. 356.
(17) Supra, 334 N.J.Super. 62.
(19) 79 N.J.Super. 156 (1963).
(21) See, id., at 162-63.
(23) See, id., at 159-62.
(24) 681 F.2d 161 (1982).
(25) See, id., at 162.
(27) See, id., at 163.
(29) See, Rycoline, 334 N.J.Super. at 74-75.
(30) Id., at 75, citing Electro-Craft Corp. v. Controlled Motion, Inc., 332 N.W.2d 890 (Minn. 1983); Zatos Int'l, Inc. v. Young, 830 F.2d 350 (D.C. Cir. 1987); and ILG Industries, Inc. v. Scott, 273 N.E.2d 393 (Ill. 1973).
(31) See, Rycoline, 334 N.J. Super., at 74.
(32) Supra, 167 N.J. 285.

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