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Trade Secret Protection for Employers


Trade Secret Protection Programs- The Key P's ... Photo ID. Need to know access. Secrecy Efforts Documents. Marked confidential. Electronic sensors ... – PowerPoint PPT presentation

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Title: Trade Secret Protection for Employers

Trade Secret Protection for Employers
  • Randy Kay
  • and
  • Diane Mack
  • October 27, 2005

Trade Secrets
  • Company crown jewels
  • Stealth IP
  • Nature of the Problem

Protecting Trade Secrets
  • Trade Secret Protection Programs
  • Identifying Company Trade Secrets
  • Disputes
  • Departing Employees
  • Competitors

Trade Secret Protection Programs- The Key Ps
  • Pinpoint-- Identify your trade secrets and where
    they are
  • Protect
  • Paper Protections (e.g. agreements)
  • NDAs
  • Confidentiality/Proprietary Rights Agreements
  • Document Control Processes
  • Physical Protections
  • Security of buildings, files
  • IT Security
  • Policy Protections
  • Employee education
  • Police your Program
  • Respond to threatened misappropriation
  • Take action against offenders

Defining Trade Secrets
  • Why Identify Trade Secrets Prior to Litigation?
  • Prevent and detect misuse
  • Cease Desist Letters
  • Avoid knee-jerk reaction form letters
  • Strategize regarding how to state the claim
  • To frame the complaint

What is a Trade Secret?
  • Information
  • Has independent economic value
  • Not generally known
  • To the public
  • To others who can obtain economic value from its
    disclosure or use
  • Kept secret

Trade Secrets What Are They?
  • Formula
  • Pattern
  • Compilation
  • Program
  • Device
  • Method
  • Customer List
  • Technique
  • Process
  • Other

Trade Secrets What Are They?
  • Advertising strategies
  • Bidding methods
  • Cost information
  • Customer lists
  • Databases
  • Engineering drawings
  • Formulas in notebooks
  • Machinery processes
  • Marketing strategies
  • Negative research
  • Payment terms
  • Pricing information
  • Production techniques
  • Profit margins
  • Promotional discounts
  • Strategic plans

Information NOT Deemed Trade Secret
  • Client names
  • Course materials
  • Customer lists
  • Product design features
  • Functional features
  • Job classifications
  • Marketing information
  • Patented inventions
  • Government filings
  • Salary information
  • Sales pitches
  • Technical know-how
  • Telemarketing information
  • Employee lists

Where Does One Find a Trade Secret?
  • Entire development process
  • Lab notebooks
  • Computer files
  • Databases
  • Drawings
  • Rolodexes
  • Whiteboards
  • Email
  • In ones head

Deriving Independent Economic Value
  • Economic
  • Is the information obtainable through public
  • Does the information aid in directing efforts?
  • Information regarding bankrupt customer had no
  • Business procedures?
  • Customer names?
  • Salary information?

Is Information Generally Known?
  • Do competitors have the information?
  • Is information public?
  • Examples
  • Insureds v. renewal dates
  • Customer names
  • Course materials

Secrecy Efforts Physical Facility
  • Security
  • Badges
  • Limited access to site
  • Receptionist
  • Lobby
  • Escorts
  • Photo ID
  • Need to know access

Secrecy Efforts Documents
  • Marked confidential
  • Electronic sensors
  • Limit copies
  • Passwords
  • Checkout procedure
  • Shred

Losing trade secrets
  • Public disclosure
  • Website
  • Technical literature
  • Service manuals
  • Product releases
  • Trade shows
  • Press releases
  • Journal articles

Losing trade secrets
  • Patent applications
  • Relying on implied promise of secrecy
  • Garbage bins
  • Government filings
  • Being suspicious and not reporting it
  • Unlocked files/computer systems

Trade Secret Issues for Employers
  • Pre-employment
  • Background checks
  • Confidentiality/Proprietary Rights agreements
  • Make signing it a condition of employment
  • Install process to ensure you are getting signed
  • Audit Personnel Files to confirm whether process
    is working

5 Must-Haves in Agreement
  • Define Innovations
  • Include anything created on any company time or
    with any company resources that relates to
    employers business or results from the work
    employee performs for employer
  • Promise to disclose all Innovations and assign
    ownership of them to employer (Complex!)
  • Definition of whats Confidential
  • Include all Innovations
  • Promise not to ever disclose Confidential
    Information to third party
  • In Cal., Labor Code 2872 Limited Exclusion

Should-Haves in Agreement
  • Disclosure of Prior Innovations
  • Cooperation in Assignment of Rights
  • No Violation of Third-Party Rights
  • Return of All Employer Property, including
    Confidential Info
  • Future Innovation Clause
  • Non-solicitation Clause?

Trade Secret Issues for Employers
  • During Employment
  • Educating employeesbuilding a culture regarding
  • Training
  • Reminders
  • What to do if suspected breach
  • Limit Access to Need to Know
  • Rigorous Enforcement of Conflict of Interest
  • Moonlighting?
  • Give employees tools to make security easy
  • Encryption
  • Locks for laptops
  • E-mail blocks

Laptop Security - Information Security
Announcement No.1
  • The current installment discusses the physical
    security of laptops, which often times contain
    sensitive and proprietary data and are easily
    stolen. Over the past couple years there have
    been numerous instances of laptops with very
    sensitive data being stolen from high-profile
    companies. There are numerous methods you can
    use to protect your laptop and make it more
    difficult for a thief to be successful. The list
    below describes some of these methods. 1) Laptop
    bags are easily recognizable. Consider using a
    standard backpack, briefcase, or courier bag to
    obscure the presence of a laptop.
  • 2) Keep it in sight at the airport. Do not let
    your laptop go through the airport security x-ray
    until you have a clear path to it on the other
    side. If you get stopped going through the
    scanner, keep a constant eye on the laptop as it
    exits the x-ray machine. Also, prevent someone
    from stealing the laptop out of the bag when you
    set it down by always keeping a hand or leg on
    the bag.

Laptop Security - Information Security
Announcement No.1 (cont.)
  • 3) Never leave the laptop in your car. Take it
    into your hotel, home, or even restaurant. This
    is easier using a backpack or courier bag as
    indicated in number 2 above.
  • 4) If you have to leave the laptop in a hotel
    room or conference room, use a laptop cable lock
    to secure it in place.
  • 5) Be paranoid! Never assume your laptop is
    safe. Treat your laptop as if it was 2000 in
    cash (for the laptop itself) or the price of your
    company in cash (if you store sensitive or
    proprietary data)!! In the event your laptop is
    stolen please call the police and ITCS
    (858--) as soon as possible.

Here are a few ways information can be
inadvertently disclosed…
  • (1) Email sent outside the company intranet,
    sent to recipients who have no need to know.
    (2) Inadequately protecting laptops,
    software/hardware, and documents when on travel
    status or outside company facilities.  (3)
    Disposing of proprietary information in common
    trash instead of the shred bins located in all
    buildings throughout the company. (4) Discarding
    proprietary information in residential trash if
    generated during work at home. (5) Leaving
    proprietary information unsecured and on desks
    and work stations after hours.

Here are a few ways information can be
inadvertently disclosed… (cont.)
  • (6) Not cleaning / erasing white boards in
    conference rooms and other locations used by
    employees and visitors. (7) Leaving documents
    and material in conference rooms and common
    areas. (8) Discussing sensitive information or
    concepts with co-workers outside of
    company facilities in places such as restaurants,
    on airplanes, and other public venues. (9)
    Discussing sensitive information or concepts with
    outside friends and acquaintances. (10)
    Providing information to telephone callers
    without verifying the identity of the caller.

Trade Secret Issues for Employers
  • Post-employment
  • Provide copy of signed agreement
  • Reminder re on-going obligations
  • Get specific if warranted (e.g. do not take copy
    of your customer contacts list)
  • FYI Letters to new employer if direct competitor
  • Inform new employer of employees
    confidentiality, non-solicitation obligations

Dont Forget About…
  • Contractors
  • Must sign a special Confidentiality/Proprietary
    Rights Agreement
  • With agency employees, dont leave it up to
  • International employees
  • Different laws require different agreements
  • Working with universities
  • Your non-engineers

Detecting Trade Secret Abuses
  • Dummy names on customer lists
  • Strategic typos in documents or source code
  • Monitoring computer systems
  • Archiving hard drives and not reassigning

Protecting Trade Secrets
  • Considerations and risks re litigation
  • Disclosure
  • Losing in court
  • Fees and expenses
  • Exposure to other sides fees
  • Being on opposite side of issues in future

Protective Orders
  • Court approved
  • Multi tiered
  • Define confidential information
  • Who gets access
  • In house counsel access
  • Brown Bag test
  • Sealing
  • At conclusion of case
  • Burdens
  • Modifications
  • Designations
  • Challenges
  • Remedies
  • Trial

Identifying Trade Secrets
  • Plaintiff Issues
  • Planning the case complexion
  • Deciding upon causes of action
  • Drafting the complaint
  • Preparing the trade secret designation

Identifying Trade Secrets
  • Defendant Issues
  • Planning the defense
  • Propounding discovery
  • Challenging the trade secret designation
  • Motion to compel/motion for protective order
  • Summary judgment
  • Motion in limine

  • Make v. Buy Decisions
  • The problem
  • Tread carefully
  • Paper trail
  • Ideas v. trade secrets
  • Division of labor
  • Nonconfidentiality agreements or Unsolicited
    Submission Agreements
  • Subpoenas

Trade Secret Protections
  • Trade secret privilege
  • Criminal proceedings
  • In camera hearings
  • Excluding public from proceedings
  • Sealing court records

Trade Secret Protection for Employers
Questions? Randy Kay Diane Mack Thanks for