BFV Perspectives, Noncompete & Trade Secrets, | Jan 01, 2016

Trade Secret Lessons

Trade secrets are critical to innovation. At the end of last year, I had the privilege to attend and speak at the American Intellectual Property Law Association (AIPLA) Trade Secrets Summit in Boston. Below are some takeaways on this important form of intellectual property protection:

  1. The tone for trade secret protection has to be set at the top; company leaders must understand the threats, risks and the legal framework.
  2. Companies should identify what information is a trade secret and develop a plan to protect it — this can be a daunting process, but companies have to start somewhere.
  3. Everyone in the company probably does not need access to everything.
  4. Confidentiality and Non-Disclosure Agreements with employees are critical.
  5. Trade secrets policies should also be included in Employee Handbooks.
  6. Employees should be trained on the proper use and protection of company secrets.
  7. It is not a trade secret unless you make a reasonable effort to keep it secret.
  8. Choosing trade secret protection has certain advantages over patent protection especially in light of the changes to patent law effectuated by the America Invents Act (AIA). Advantages of trade secrets include unlimited duration, immediate protection (no prosecution delay), no prosecution expense and no required public disclosure.
  9. Recent decisions concerning patent eligible subject matter could lead to greater use of trade secret protection in lieu of patent protection.
  10. The AIA eliminated the best mode defense to a patent claim. This allows the IP owner to withhold certain aspects of the process as a trade secret even when seeking patent protection.
  11. Patents and trade secrets are not mutually exclusive; they are complementary.
  12. If you don’t have any way to detect infringement of a patent, you should consider keeping your invention secret and not patent it.
  13. One way to protect trade secrets is to “split up” the information among employees so very few individuals have the complete picture. This might be hard to implement as a practical matter.
  14. Failed mergers and acquisitions present significant risk of trade secret misappropriation.
  15. Be careful not to disclose trade secrets to third parties without a non-disclosure agreement or without marking it “confidential” or “trade secret.”
  16. In due diligence, be sure to keep careful track of confidential information and trade secrets that are disclosed so you can get them back if the deal fails.
  17. If you are the suitor in a proposed acquisition, you need to be sure any new developments after the acquisition fails are not tainted by confidential information or trade secrets disclosed by the target.
  18. When trade secrets are kept in a repository it is best to track access to that repository.
  19. If the invention can be reverse engineered, trade secret protection is not a desirable alternative to patent protection.
  20. Judges really don’t like when people steal information from their employers and will help companies get their information back and protect it.
  21. A federal trade secrets statute is coming…
  22. When you are looking to sell your company, a prospective buyer is going to conduct due diligence around the precautions you have taken to protect your confidential information and trade secrets.
  23. The FBI has significant resources devoted to the investigation and prosecution of trade secret theft and they are willing to help companies better protect their trade secrets.
  24. Non-Competes are often used as a tool to protect trade secrets.
  25. Some states are considering legislation that would ban non-competes, like California. Some states are considering legislation that will allow for greater enforcement of non-competes.
  26. Hawaii recently banned the use of non-competes in the tech industry.
  27. When Michigan law changed in 1985 to allow greater enforcement of non-competes, job mobility decreased significantly.
  28. Greater enforcement of non-competes may result in “brain drain” to states with lesser enforcement or bans (e.g. California).

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BFV Perspectives, Noncompete & Trade Secrets, | Jan 01, 2016
Benjamin I. Fink
Benjamin I. Fink

Benjamin Fink is known for his work in noncompete, trade secret and competition-related disputes. A shareholder at Berman Fink Van Horn, Ben concentrates his practice in business and employment litigation.