Complaint For Copyright Infringement, Misappropriation Of Trade ...
Protecting Trade Secrets in the Current Economy - Trade Secret Misappropriation
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Transcript of Protecting Trade Secrets in the Current Economy - Trade Secret Misappropriation
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PROTECTING TRADE SECRETS IN THE CURRENT ECONOMY
BY:KIRBY DRAKE
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Trade Secrets
• Protection extends to confidential information that gives a company a competitive edge
• No formal registration requirement• Balancing test
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Trade Secrets
• Disclosure may destroy protection• Trade secrets usually endure as long as
the information is kept secret
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Trade Secrets
Commercial Life of Product
Reverse Engineering
Independent Development
Tipping Off Competitors
Type of Subject Matter/Industry
Ease of Keeping Secret
Time Needed to Obtain Patent
Economic Effects
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Trade Secrets Considerations
• Non-exclusive rights• Independent development not
actionable• Must breach non-disclosure obligation
or obtain trade secret via improper means to be actionable
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Trade Secrets Considerations
• Commercial life of product• Economic considerations
• Patents may give a signal that IP was created – good for future investments, competitive positioning
• Less upfront investment to maintain as trade secret but loss may be financially devastating
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The Overlap – Patents and Trade Secrets
• Innovations protectable with patents or trade secrets
• Cannot usually protect same innovation by both patents and trade secrets
Patent?
Trade Secret?
Both?
Neither?
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What Is Protectable as a Trade Secret?
• Manufacturing processes• Ideas• Manufacturing drawings• Software• Chemical formulae and processes
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Examples of Possible Trade Secrets
Customer Lists Know-How
Pricing Information Negative Know-How
Product Technical Specs
Computer Hardware
Marketing Plans Computer Software
Business Methods Chemical Formulae
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Effects of Trade Secret Disclosure
• Claim for Trade Secret Misappropriation• Preliminary Injunction• Reassignment of Patent• Destruction of Trade Secret Protection
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Remedies
• Injunctive relief• Monetary damages (royalty)• Attorneys’ fees• Punitive damages
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Damages Remedies for Misappropriation of Trade Secrets
• Remedies are state-specific (whether in federal or state court), though most have some version of the UTSA and include:
1. Actual loss by plaintiff• Lost profits• Out-of-pocket expenses• Loss-in-value of business or trade
secrets• Other losses (consequential)
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Damages for Trade Secret Misappropriation
2.Alternatively, or in addition, to actual loss • Unjust enrichment by the defendant
• Defendant’s profits• Market value of misappropriated trade secrets• Cost savings or value of “head start” benefit
gained by defendant
3.Alternatively…• Reasonable royalty for use of trade secrets• Use of patent damages construct
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Damages MatrixAmount
High $1,606,784
Low $580,806
Plaintiff's Salary Adjustments $55,365
Individual Defendants': Plaintiff's Partial Salary $216,670
Lost Plaintiff Training Investment $52,720
Lost Plaintiff Business Development Investment $221,661
Loss in Value $1,606,784
Reasonable Royalty $779,090
Defendant's Unjust Enrichment: Profits $1,446,106
Individual Defendants' Profits: Defendant's Salary $690,939
Defendant's Avoided Cost: Training Expense $63,833
Defendant's Avoided Cost: Business Development Expense $484,121
DamageA
ctua
l Dam
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Plaintiff's Lost Profits
Disg
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t
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Damages MatrixClaim 1 - Breach of Contract
Claim 2 - Tortious
InterferenceClaim 3 -
Conversion
Claim 4 - Misappropriation
of Conf Info & Trade Secrets
Claim 5 - Unauthorized Possession of
Computer InfoPlaintiff's Lost Profits 6,934,721$ 6,934,721$ 6,934,721$ Defendant's Profits 2,243,044$ 2,243,044$ Individual Defs' Profits: Salary @ Def 363,114$ 363,114$ Individual Defs' Profits: Salary @ Pl 110,159$ Actual Loss: Software Costs 1,790,444$ 1,790,444$ 1,790,444$ Loss/Avoided Cost: R&D Expense 324,342$ 324,342$ 324,342$ Loss/Avoided Cost: Marketing Expense 281,468$ 281,468$ 281,468$ Actual Loss: Training Investment Cost 550,413$ 550,413$ Actual Loss: New Employee Cost 154,879$ Reasonable Royalty @ 10% 2,425,746$
Co-defendant employees with various NDA, non-compete, and non-solicit agreements went to work for a competitor B and used their former employer A’s proprietary customer database with B’s consent to sell business to A’s customers
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DuPont, Competitor, and Employees
• DuPont lawsuit against former employee• DuPont lawsuit against Invista• Invista lawsuit against DuPont partner• DuPont lawsuit against Kolon Industries
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Coca-Cola and Pepsi
• Coca-Cola sued former employee for trade secret misappropriation (formula for Coke)
• Former employee had offered knowledge of formula to Pepsi but Pepsi did not use
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The New Economy – Trade Secrets
• Opting for trade secret protection in lieu of other forms of intellectual property protection
• Rise of trade secret audits• Increased enforcement of non-competes
and NDAs• Modifications to damages model in
litigation• Other considerations?
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