The University of Arizona Center for Innovation | Presents Keeping Secrets Best Practices

Transcript

my name is ivankore and I'm a litigator I'm a commercial litigator and what I do typically is intellectual property litigation and trade secret is one of those topics that is ever expanding in the law and recently we had a few enormous jury Awards uh for for uh misappropriation of Trade Secrets so I think it is an increasingly important topic and uh what I'm gonna do today is talk about it in a fairly introductory level because it's a huge topic um and when you talk to a group of people that are in different developing different Technologies in possibly different Industries it's very hard you know to get into the nitty gritty and it's really a topic that has to be tailored for your own company but what I do hope to do today is to equip you with an outline of the factors that you have to consider when you develop your customized uh trade secret protection plan so if that if I hope that makes sense is my goal for today and if it's too obvious I apologize uh hopefully hopefully you'll get a nugget or two from this conversation so you know you guys are all in the business of developing some technology so it's very it's not very far-fetched or straight a stretch to say that IP information is absolutely your most valuable information and um there's little doubt that protecting this information is critically important to the very existence and future of your companies So today we're gonna talk about one way of protecting your IP Trade Secrets that's one vehicle right and and I think the initial question is to pattern or not a patent um we already know that one legal vehicle for protecting IP is a patent right now we're going to talk about patents because that's a huge topic by itself but we all I assume generally know that when you patent an invention the law gives you essentially a monopoly over practicing this invention for for the term of the patent uh so no one can practice this invention without your permission without your license right um but it's also true that not every type of valuable information could or should be protected by a patent so that's the first thing you want to talk about pattern or not patent so first of all some information only outside jump the gun some information only remains viable when it's patented why is that because and this is quite rhetorical so forgive me if it's but now but when you patent a novel invention you basically give a recipe of that invention to the world right the patented the document that shares with the world your inventive process and reduction of practice and you tell the world here's my invention take a look the deal that you get with the law when you patent something is that uh you have Monopoly over practicing this invention for the term of the patent nobody can do it without your license but when the pattern expires Society gets the benefit of your invention forever for free right so that's the deal with patents a super good example of that is a guy named Horace golden who was the celebrity magician in the 1920s um and he's the one who um Pat who who um came up with the magic trick he called sawing a woman in half of course it had to be a woman um and uh in 1923 I think he patented his invention so obviously he has a patent with illustrations of where the lady's legs are going so she doesn't actually got sun in half a few years later the Reynolds tobacco company had a an ad campaign where they published illustrations from the golden patents and the the witty slogan was it's fun to be fooled but more fun to know terrible cigarettes no tricks just better tobacco so golden sued Reynolds for unfair competition basically saying hey using my my secret trick and the New York Court sent him home packing this Mr complaint why is that because gold impacted the invention golden made the rookie mistake of choosing the vehicle of patent to protect his IP so when Reynolds company published pieces of what is already a public record there's no problem with that it's not patent infringement because the cigarette company is not practicing the invention they're just basically republishing what is already in the public domain so clearly some information is only valuable when it's a secret and it should it should be protected via the vehicle of a trade secret not a pound another you know super um traditional example is the Coca-Cola formula that for many years was kept as a secret and that's you know probably because it would have been really hard to enforce uh uh the the uh uh intellectual property via patent but that's another story so one category of information is information that only remains valuable while secret the second category is quite obvious and that is information that needs to remain secret while you're working on a patent right so while you're working on a patent you you have to keep your your research or your technology secret until you get a patent so during that period you will have Trade Secrets and number three uh is for whatever legal reasons you you have valuable information that that is that is not in the public domain that for whatever legal reason simply cannot be protected or for whatever strategic reasons like the coke formula you wanna you wanna uh refrain from putting the recipe out there for the world so the first thing you're going to consider is what is the best vehicle but assuming you you have something secret that you must protect at the trade secret what is a trade secret and again this is this is um a legal term it is defined by both state and federal law uh we don't need to go into the legal definitions of either you it's enough for you to know that Arizona like uh 48 other states has a version of the uniform trade secret act I think New York is the only exception to that with somewhat different version and the federal the federal Congress finally in 2016 after years and years of lobbying past the defend trade secret act so now we have straight to your protection in both federal and state level and both of those uh legal vehicles um uh say pretty much the same thing a trade secret can be any type of information that meets two conditions one it derives value from not being generally known um uh it can be any type of information it can be Financial technical engineering economic business marketing what have you um and it can be in any format it can be formula code design drawing list process it can be an actual chemical material it can be anything but it derives independent economic value from not being generally known and then that's critical the owner of this information takes reasonable measures to preserve that secrecy so let's let's break this down because this is this is really really important and I'm gonna give up give up the animation um the information has to actually be a secret um if this information made its way to the public domain because you made no effort to keep it a secret you have no secret and no protection if somebody else is using it so this very definition of the legal term trade secret entails self-help this is critical that you remember you only have a great secret if you took reasonable affirmative ongoing measures to keep it a secret now it doesn't have to be perfect it's like a diet it has to be sustainable right you only have to take reasonable measures but the law will not protect you from somebody else's usage of this information unless you took such affirmative measures so just for example if you wake up one morning to discover that your former partner is using some information you developed in the marketplace in order to have a chance to either stop him or her from using it or recover damages for that use you will have to show that previously to this unpermitted use you recognize this information as a valuable secret and that you took some measures to preserve it as secret before this happened it just happens to be just happens to be the case that this information remained unknown to the public but not due to any affirmative measures you took you're going to have a problem and I've seen that so many times Time After Time with clients who never took the time to actually identify what do I consider a secret and we're going to talk about exactly how you do that but you know suddenly some some company in India is using this information and they go oh my God I have a claim they're making millions and and nobody ever actually thought oh oh this is a secret that's a problem um you you don't discover this is just the same thing for differently you don't discover that you happen to have a trade secret when somebody else is using it you have a trade secret if you made a thoughtful affirmative ongoing efforts to identify and preserve the secrecy before that happened um again we're going to talk about those measures in a few minutes now let's assume that you have a trade secret that you met the initial conditions and you have a trade secret what kind of protection do you get from the law the law only protects against misappropriation and that too is a legal concept and the definitions of the federal and the state law are slightly different but the gist of it is the same trade secret means acquisition of a trade secret by some improper means some something bad it's not so let's give an example um what misappropriation you know obvious examples um sorry theft bribery uh breach of an NDA or a confidentiality agreement those would be improper means more in importantly what is proper licensed use is obviously proper for the duration of the license right because you gave somebody information it may switch to the improper category you know if they continue using it after the license expired so that's one reason why you need to be on top of when your license is expire um Discovery by independent invention if somebody is as genius as you independently that's perfectly fine reverse engineering Discovery is perfectly fine so the Coca-Cola formula is one one example and discovering the public domain so if for example you took reasonable measures but through some inadvertent happenstance information leaked to the public domain and some third party that has no Duty towards you uses it that's your problem you're not going to have protection so inadvertent disclosure is probably your biggest risk and we'll talk about in a minute um this is now I'm not going to go into the legal issues um but generally if you do have a trade secret and somebody did misappropriate it and you want to go after that person in whatever format you may be able to to get an injunction so to stop them from from using it you may be able to recover damages it may be a violation of the trade secret act on the federal state level it may also be a breach of contract claim if that person is a party to a say an NDA with you or a confidentiality agreement there's some other causes of action we're not going to talk about but generally this is when you will have a claim um so what are those reasonable measures that you have to take we're going to talk about it in three parts the first and to me the most maybe the most important one is how to identify your trade secrets with particularity the second is how to tailor a practical plan that you can sustain and that will be very specific to your business in the 30s the the need to execute consistently this plan and have a record this is the lawyer in me talking about evidence we'll talk about in a second so let's talk about number one um identify your Trade Secrets um you must identify your trade secrets with particularity it can I can't emphasize this enough you cannot when you think about your trade secrets and when you think about how am I going to what kind of record do I have what how do I establish what my secrets are you cannot possibly think generally about categories or type of information it has to be very specific you can say all of my computer code or anything that I have in the business relating to gene expression no it has to be something specific this particular plasmid that I developed in this particular way is a trade secret this particular code this particular piece of code is a trade secret and that you know the the scope of the secret and the type of secret is obviously different from business to business but that's important not to overreach again think about um how you can identify a trade secret in the way that doesn't uh Embrace any public information they have to be modest about it in order for it to be actually protectable um let's talk about something that's really a Hot Topic in in the law now and that's do you keep a list you know it sounds pretty straightforward if I have to identify my trade secrets I'm going to have a list can anybody tell me what are the benefits it's quite obvious what are the benefits of having a list somebody all right I will I will share the you know very it's very tough the the better heavy list is that you obviously have a clear record of what you consider a secret long before any misappropriation happens and uh it's worth knowing that there's some new software tools that for a price allow the owner of a trade secret to identify and record and track Trade Secrets as they evolve and identify who may access them and the time and identity of anybody who did access them and that may be a very good thing uh and obviously if you have a list that is in itself a highly protected trade secret now what are the drawbacks of having a list come on somebody say something so what are the obvious drawbacks of having a list hi this is Scott zetnik an obvious drawback would be someone who discovers the list and pofers all your Trade Secrets okay what other that's good what else uh just to guess um if I've written a list um I've kind of implicitly said anything not written on that list isn't trade secret gold star to you yes it's really hard you know obviously somebody discovers that that's a problem but that's a general problem with our trade secret having a list is good but it's really hard to do and that's why most people don't do it uh it may be very doable for you but it may not it's hard to maintain because trade secret may change and evolve and be modified during during over the years and during time and then you have to be on top of it and that's exactly the point that was made here if you have a list it will be assumed that it is inclusive and if something is not listed on it or Worse was removed from it at some point there will be an inference that that you never considered it a secret you may be able to overcome this inference through other evidence but you will be facing a problem so you need to think about whether you want to have all this information Aggregate aggregated and compiled in a nice list but if you do that it's not the legal requirement if you do that it can be a very powerful tool but it has to be you have to be on top of it uh obviously importantly whether or not you choose to have a list you need to have a record of what you identify as a trade secret again with particularity it doesn't all have to be in one list but you have to have records showing contemporaneously that's something that you own is secret and must remain secret it can be in in lab notebooks it can be in in you know whatever other files it can be in corresponds it can be a report to the board it can be a bunch of stuff it really doesn't matter it can be uh in an email exchange ideally you know as a lawyer I would rather have organized records that will show what you consider to be secret and we will talk about how you do that but uh it you know in many situations in indeed I think in most situations um it will be you know a collection of emails and reports and lab notebooks and you know random computer record I mean so it doesn't all have to be in one list but you would need to consider what records you have and then that obviously gets us to the second uh um prong of how you tailor a sustainable plan so you need to start the plan by assessing your risk what information are you dealing with and where are you most vulnerable so who needs access to this information who needs to know it is it just you is it your partners is it your staff are they employees are there independent contractors are there investors are there clients a bunch of outside third parties may need to have you know access to information what kind of access do they get it you know uh completely unencrypted do they get it in some other form where they don't have full access to it think through those questions and those are very specific to your business um how fluid is it does it evolve does it change you know it can be as simple as a client list my client list can be a trade secret does it often change yeah if so I need to be on top of it excuse me the second question that you're going to ask yourself when you tailor a plan is what are the optimal sustainable measures that you need to take and again only reasonable that you need to take to preserve secrecy so obviously there can be technological tools right that's obvious so it can be uh you know limited access to to to you know technological information to file the encryption password I'm sure people on this call have a much better idea of what security technological security tools exist to limit access to information you may have physical security measures especially if they have tangibles like you have lab you know lab materials you know whatever whatever it is you're working on if you have loud notebooks if you have paper files if you keep any if you have computers the servers whatever it is not anybody getting into your business can can stroll up to any to anything that that contains Trade Secrets you critically have to have contractual protections to ensure that people both inside and outside of your organization have a contractual duty to maintain secrecy um they they can be non-disclosure agreements they can be confidentiality agreements agreements like that may may or may not include non-compete Provisions that are a whole different topic we're going to talk about um but you need to remember that and this is a general statement that may be inaccurate in certain times particularly with respect to employees but assume for the sake of this discussion that nobody has an automatic duty to maintain secrecy again it could be different in the case of employees and there's all sorts of or some academic settings but assume for the sake of this discussion that nobody will have a default duty to maintain your Trade Secrets even if they know that those are your secrets so you need to have contractual measures you know relatedly training um your contracts are not going to spell out your trade secrets you know in NDA is not going to say I acknowledge that I have a duty to maintain secrecy of these and then there's going to be a list of everything going back to our list of Trade Secrets typically those contracts are going to have generalized Provisions like I'm going to uh I have a duty to keep secret everything that is a trade secret including but not limited to blah blah blah blah blah General high level so just having somebody sign say an NDA is not enough you have to show that they have a reason they either know or have reason to know what your actual particular secrets are and that probably requires training that certainly requires a record of communicating this information to people and you have to remember that as information changes this has to be you have to be on top of it you have to update it so there will you know there will be some record that those people know exactly what your secrets are and again it's way too detailed to cover now and we have to be done in a second so I'm gonna I'm gonna stop there um again inadvertent disclosure is your biggest risk uh I can't tell you how many times I've seen situations where uh a customer you know Tech relation Tech or a license manager communicates with clients or or you know even potential clients or competitors by email it just kind of spits out their stuff that that you're like oh my God I can't believe they wrote that and and whether or not that is a problem depends on how strong your plan your your execution of your plan is uh did you did you take reasonable measures it doesn't have to be perfect if you took what court considered to be reasonable that is that's not not I don't think I'm impossible just reasonable you know inadvertent disclosure uh may not may not be the end of the world if the person say say just for the sake of art of discussion your man your license manager uh gives information to a client that should not be communicated but that client has an NDA then that that's probably not going to be a problem the third one is consistent execution and that is key uh again you can have the perfect plan uh but you don't you don't keep keep on top of it and you let it go and you neglect it that can be worse than not having a plan having a plan or having a list and having records and having training and that just stop doing it infers that this information is no longer secret so you must put together something that's programmatic and sustainable for your business and you and you really really have to have records you really have to make sure you keep thinking about it it's not enough for you you have to have some paper trial so that is it I realized that was super high level um so let me know if I'm if if this was a complete waste of time and if anybody has questions I'm happy to answer