PROTECTING YOUR INTELLECTUAL PROPERTY RIGHTS-TRADE SECRETS
A company's intellectual property (IP) is an integral and valuable part of its business success. Federal and California law protect IP that are:
• Patents • Trademarks and trade names • Copyrights • Trade Secrets • Others too numerous to mention
A discussion of all IP areas in one newsletter would not do justice to any. Over the coming months, a newsletter will be dedicated to each of the above areas. This issue will focus on one of the lesser known, but important, IP rights of any business, i.e. its trade secrets.
Legal Basis for Trade Secrets
Protection is conferred upon a business's trade secrets by California's Uniform Trade Secret Act. California law defines a trade secret as "information, including a formula, pattern, compilation, program, device, method, technique, or process, that derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and is the subject of efforts that are reasonable under the circumstances to maintain its secrecy."
Types of Trade Secrets Protected
California law protects nearly anything that is valuable and kept secret. The following types of technical and business information are examples of material that can be protected by trade secret law:
• Customer lists. • Designs. • Instructional methods. • Manufacturing processes. • Document-tracking processes. • Formulas for producing products.
Inventions and processes that are not patentable can be protected under trade secret law. Patent applicants generally rely on trade secret law to protect their inventions while the patent applications are pending.
Misappropriation
Trade secrets, once subjected to efforts to maintain their secrecy, are thereafter misappropriated by any "improper means." An improper means includes, but is not limited to:
• Theft • Bribery • Misrepresentation • Breach or inducement to breach of a duty to maintain secrecy • Espionage through electronic or other means.
Certain types of misappropriation may result in criminal activity, e.g. theft or bribery.
Misappropriation does not include:
• Acquiring the information from public domain sources • Reverse engineering • Independent discovery • Employee skill development
Though the IP right in a trade secret may potentially last forever, there is no right in exclusive use, but rather only a right against misappropriation. Once the trade secret becomes known by a lawful means, or is abandoned, it may be used by anyone lawfully acquiring it.
Confidential Relationships
Trade secrets have their origins in the common law recognition of confidential relationships. Obligations of confidentiality are both implied and expressed. Implied confidence in normal business relationships include:
• Negotiations for sale of a business • Licensing negotiations • Independent contractor relationships • Employment relationships • Vendor relationships • Joint venture relationships • Manufacturer and supplier relationships • Business negotiations
Hence, to prevent litigation, through misappropriation, it is prudent for the above relationships to be subject to a properly drafted non-disclosure agreement.
Maintaining Secrecy
Businesses must take adequate measures to protect their trade secrets. These measures may include any or all of the following:
• Using non-disclosure agreements both "within" and "outside" the company, which may be part of other agreements, e.g. employee agreements. • Using specific instructions regarding trade secrets and employee awareness programs. • Notifying departing employees of their obligations in an exit interview or departure letter. • Giving notice to a departing employee's new employer. • Restricting physical access to trade secrets to both employees and visitors. • Placing proprietary legends on documents containing trade secrets. • Imposing "copying" limitations on documents containing trade secrets. • Using shredders to impose controls over waste disposal or maintaining security over dumpsters or other waste disposal areas. • Establishing information dissemination policies and procedures related to trade secrets. • Implementing security procedures for computers and computer networks containing or accessing trade secrets and controlling the disposition of such equipment. • Implementing adequate procedures for limiting disclosure through product sales.
Remedies for Misappropriation
Actual or threatened trade secret misappropriation may be enjoined by court order. The business may also seek damages for actual losses, as well as unjust enrichment of the person misappropriating the trade secret. Moreover, if the misappropriation is willful and malicious, punitive damages of twice the damages may be recovered. Any lawsuit based on trade secret misappropriation must be brought within 3 years of the actual discovery of the misappropriation or from when it should have been discovered by the exercise of reasonable diligence.
A company's intellectual property (IP) is an integral and valuable part of its business success. Federal and California law protect IP that are:
• Patents • Trademarks and trade names • Copyrights • Trade Secrets • Others too numerous to mention
A discussion of all IP areas in one newsletter would not do justice to any. Over the coming months, a newsletter will be dedicated to each of the above areas. This issue will focus on one of the lesser known, but important, IP rights of any business, i.e. its trade secrets.
Legal Basis for Trade Secrets
Protection is conferred upon a business's trade secrets by California's Uniform Trade Secret Act. California law defines a trade secret as "information, including a formula, pattern, compilation, program, device, method, technique, or process, that derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and is the subject of efforts that are reasonable under the circumstances to maintain its secrecy"
Types of Trade Secrets Protected
California law protects nearly anything that is valuable and kept secret. The following types of technical and business information are examples of material that can be protected by trade secret law:
• Customer lists. • Designs. • Instructional methods. • Manufacturing processes. • Document-tracking processes. • Formulas for producing products.
Inventions and processes that are not patentable can be protected under trade secret law. Patent applicants generally rely on trade secret law to protect their inventions while the patent applications are pending.
Misappropriation
Trade secrets, once subjected to efforts to maintain their secrecy, are thereafter misappropriated by any "improper means." An improper means includes, but is not limited to:
• Theft • Bribery • Misrepresentation • Breach or inducement to breach of a duty to maintain secrecy • Espionage through electronic or other means.
Certain types of misappropriation may result in criminal activity, e.g. theft or bribery.
Misappropriation does not include:
• Acquiring the information from public domain sources • Reverse engineering • Independent discovery • Employee skill development
Though the IP right in a trade secret may potentially last forever, there is no right in exclusive use, but rather only a right against misappropriation. Once the trade secret becomes known by a lawful means, or is abandoned, it may be used by anyone lawfully acquiring it.
Confidential Relationships
Trade secrets have their origins in the common law recognition of confidential relationships. Obligations of confidentiality are both implied and expressed. Implied confidence in normal business relationships include:
• Negotiations for sale of a business • Licensing negotiations • Independent contractor relationships • Employment relationships • Vendor relationships • Joint venture relationships • Manufacturer and supplier relationships • Business negotiations
Hence, to prevent litigation, through misappropriation, it is prudent for the above relationships to be subject to a properly drafted non-disclosure agreement.
Maintaining Secrecy
Businesses must take adequate measures to protect their trade secrets. These measures may include any or all of the following:
• Using non-disclosure agreements both "within" and "outside" the company, which may be part of other agreements, e.g. employee agreements. • Using specific instructions regarding trade secrets and employee awareness programs. • Notifying departing employees of their obligations in an exit interview or departure letter. • Giving notice to a departing employee's new employer. • Restricting physical access to trade secrets to both employees and visitors. • Placing proprietary legends on documents containing trade secrets. • Imposing "copying" limitations on documents containing trade secrets. • Using shredders to impose controls over waste disposal or maintaining security over dumpsters or other waste disposal areas. • Establishing information dissemination policies and procedures related to trade secrets. • Implementing security procedures for computers and computer networks containing or accessing trade secrets and controlling the disposition of such equipment. • Implementing adequate procedures for limiting disclosure through product sales.
Remedies for Misappropriation
Actual or threatened trade secret misappropriation may be enjoined by court order. The business may also seek damages for actual losses, as well as unjust enrichment of the person misappropriating the trade secret. Moreover, if the misappropriation is willful and malicious, punitive damages of twice the damages may be recovered. Any lawsuit based on trade secret misappropriation must be brought within 3 years of the actual discovery of the misappropriation or from when it should have been discovered by the exercise of reasonable diligence.
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