What is a Trade Secret?

Transcript

[Music] for trade secrets the definition of a trade secret is confidential or proprietary information that is not generally known or ascertainable derives independent economic value from not being generally known and is the subject of reasonable efforts by the owner to preserve their the secrecy of that information and trade secrets includes information that may not be protected by other types of IP so for example recipes we saw that for copyrights list of ingredients are not copyrightable but the recipe may be retained as a trade secret I would cover processes the location of oil wells and compilations of information trade secrets are governed by state law where each state has implemented its version of the model Uniform Trade Secrets Act as well as federal law specifically the defense rate Secrets Act and the important thing to note here is that those legal systems coexist so the defend trade secrets Act did not preempt the Uniform Trade Secrets Act turning to the issues in transacting with trademarks the primary exposure here is that trade secrets that were acquired by improper means by your target so for example if your target is a technology company that poached employees from its largest competitor and encouraged them to take a lot of documents on their way out by acquiring that tech company you're walking into a trade secret misappropriation lawsuit you also want to be mindful of the ability to reverse-engineer a product that's developed by that target that contains the trade secret and this would be reverse engineering by proper means so if anybody could deduce what the trade secret is from taking apart the product you'll lose your trade secret protection so you may want to consider patents or you you know you may want to consider not following through with the acquisition it may allow many competitors to enter the market and the last point on exposure is you want to make sure that your target has adequate policies and agreements to preserve the secrecy of the trade secrets and so for agreements you'd be looking at non-disclosure agreements or even provisions in other agreements with consultants contractors employees basically anyone who would have access to the trade secrets and fortunately there are limitations on diligence and trade secrets without risking losing rights in those trade secrets so if it's for example a competitive auction process and there are a number of bidders if the trade secrets are disclosed to each of those butters even if it's subject to an NDA if too many people know the trade secret have you really kept it secret and so you may gut the value of the company by disclosing it during diligence you also want to consider where the trade secrets can actually exist independently of the employees or contractors that develop them or use them and so even if you may only be contemplating acquiring trade secrets as the primary asset you may also want to consider the employees and contractors to come over across in an asset purchase or have some lock-in for some key employees that know the trade secrets tech transfers could be an alternative to that and so that would be putting in the transaction agreement itself an obligation on the part of the seller to teach the buyer how to use the trademarks sorry the trade secrets post closing turning to the second segment the structures for transacting and commercializing IP and the issues that arise from those structures [Music] you [Music]