Trade Secret Protection Gone Rogue the Walter White Case Study by Anthony M

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WEDNESDAY, OCTOBER 7, 2020

Trade Secret Protection Gone Rogue The Walter White Case Study By Anthony M. Fares, Randall E. Kay and Cheryl L. O’Connor

alter White perfected a recipe for cooking crystal meth that revolutionized the drug trade, and W his fictional efforts to protect his secret recipe gained worldwide attention. White’s enterprise illustrates a number of lessons for companies seeking to protect trade secrets.

Under the Defend Trade Secrets grew, he needed help to produce the recipe, he held it close within Pinkman out of business for life. Act, information must meet three enough product to meet demand, his partnership with White. While Fortunately, most companies requirements to earn trade secret so he had to disclose his secret Pinkman taught the recipe to rival have more peaceful solutions to protection: (1) it derives value recipe to three others to assist cartel members, Gus Fring subse- prevent intra-company conflicts from not being generally known; with manufacturing. Businesses quently murdered them, eliminat- about trade secret ownership. (2) others can obtain economic of all types face this same dilem- ing threat of improper disclosure. For example, many businesses value from its disclosure or use; ma of maintaining secrecy while Similarly, White’s disclosure to use invention disclosure agree- and (3) the owner took reason- needing to disclose trade secrets his understudy Gale Boetticher ments, or IDAs, which assign all able measures to keep it secret. to employees or business partners. did not destroy the recipe’s secre- intellectual property created by 18 U.S.C. Section 1839(3). Walter A trade secret does not lose its cy because they were coworkers employees to the company. IDAs White’s infamous journey pro- protection by the owner disclos- in Gus Fring’s business organiza- prevent employees from walking vides a useful construct for ex- ing it to employees or business tion. Nor did White’s disclosure to away with trade secrets and avoid amining protection of trade secret associates with a need to know, Todd Alquist destroy the secrecy disputes about ownership that information. as long as they have obligations because Alquist was a coworker otherwise could end in expensive All trade secrets share one thing to maintain its confidentiality. assisting White’s production. litigation. Similarly, businesses in common — their secrecy. Ini- White’s disclosures demonstrate Pinkman eventually murdered use nondisclosure agreements, or tially, White had his recipe entire- this principle. Although White’s Boetticher because Boetticher’s NDAs, to prevent employees who ly within his head — undoubtedly wayward business partner and lab knowledge of the secret reci- gain access to company trade se- nonpublic. As White’s business assistant Jesse Pinkman learned pe threatened to put White and crets from using or sharing that information with future employers product had massive earning po- may result in a rival reverse engi- and mark trade secret documents or the public. tential: Fring offered White $3 neering the secret, so companies “confidential” so that employees These strategies are equal- million to cook for three months, should determine whether to pat- know not to disclose them to un- ly important to implement with and White calculated Fring would ent on a case-by-case basis. authorized personnel. Moreover, business partners and executives. make $96 million from his efforts. Courts conduct a fact-intensive employers should stress the im- Pinkman was forced to teach a Moreover, the fact that various analysis when determining wheth- portance of maintaining confi- competitor cartel how to make competitors fought over White’s er a company made “reasonable dentiality by requiring employees crystal meth. If these competitors innovation evinces its value to a efforts” to maintain a trade se- to sign nondisclosure agreements had not been murdered by Gus competitor and difficulty to dupli- cret’s secrecy, often taking into and holding regular trainings. Fi- Fring, this disclosure may have cate. account a company’s size and re- nally, restricting employee access destroyed the secrecy of the rec- While White did not pat- sources. White and Pinkman ran to trade secrets, encrypting trade ipe. Companies may face similar ent his innovation, most major a relatively small operation and secret data, placing restrictions issues — in which one member companies do. So why do some worked in remote areas (e.g., an on USB port usage, monitoring of a collaboration leaves to start companies that have built their RV in the middle of the New Mex- email use, and requiring password her own company or work for a multi-billion dollar brands on a ico desert, the basement of a laun- protection also help prevent mis- competitor. To avoid questions trade secret, such as Coca Cola dromat, and fumigated houses) appropriation. Even just a few of about trade secret ownership in and KFC, not patent them? While to prevent others, including law these techniques could have pre- such cases, IDAs and NDAs help each company may have their enforcement, from learning their vented Boetticher’s inadvertent companies protect IP rights in the own reasons, the answer likely recipe. When the police obtained disclosure. event of the departure of a busi- lies in the fact that trade secrets a video recording of the trade se- When a rival drug operation ness partner or company leader. In confer a number of advantages cret (and their identities), White kidnapped Pinkman for his trade the absence of such agreements, a that patents do not. For exam- and Pinkman spent significant secret knowledge, Walter White’s company’s trade secrets face un- ple, trade secrets have protec- time and money on a very large lawyer Saul Goodman advised certain fate. tion indefinitely, while patents magnet to destroy the recording. him to skip town. Legitimate busi- Trade secret protection analysis are only protected for 20 years. Without even considering the nesses who have had trade secrets boils down to whether the trade se- Trade secrets remain secret (so lives sacrificed to keep the recipe stolen better not call Saul. Instead, cret would be useful to a compet- long as appropriate procedures secret, they made significant ef- they should hire experienced trade itor and would require cost, time, are in place), as opposed to pat- forts in light of the small size of secret litigators to investigate pur- and effort to duplicate. White, a ents, which are published for the their operation. In contrast, Gale suing a misappropriation lawsuit highly-qualified chemist, previ- whole world to study, dispute in Boetticher did not follow best against the responsible parties. ously co-founded a multi-billion court, and improve upon. Trade practices for protecting trade se- The court system will remedy dollar company based on a high secrets are not susceptible to cret information. He wrote the theft of trade secrets — with in- tech invention he developed with a Alice patentability challeng- secret recipe down in his lab note- junctions, civil seizures, and mon- college friend. When he turned to es. See Alice v. CLS Bank Int’l book, which he left unsecured on etary remedies — better than vigi- meth production, his talent served (2014). Furthermore, trade se- his coffee table, where the police lante justice.  as the foundation of his business. crets avoid the formalities, ex- discovered it after his murder. The purity of White’s product penses, and waiting periods of Fortunately, American busi- The views and opinions set forth indicates that his recipe would patent registration — which can nesses ordinarily do not have to herein are the personal views be difficult to reproduce, and its take several years. Trade secrets take such extreme or criminal or opinions of the authors; they popularity and profitability show may not provide appropriate pro- measures as White and Pinkman do not necessarily reflect views the usefulness of the secret recipe tection in all cases, for example did to protect their trade secrets. or opinions of the law firm with to a competitor. Hank Schrader, failing to patent an invention Companies should clearly identify which they are associated. White’s DEA agent brother-in- law, said it was the purest meth the Anthony M. Fares is an associate and Randall E. Kay is a partner in Jones Day’s San Diego office and DEA had ever seen; sophisticated Cheryl L. O’Connor is a partner in Jones Day’s Irvine office. chemist Gale Boetticher stated that its purity was beyond anything he had seen or could produce; and Jesse Pinkman, a meth consumer himself, called it “the best shizz ever.” Boetticher’s comment that the extra 3% purity of White’s product may not sound like a lot, but was “tremendous”, and Todd Alquist’s inability to achieve the same high level of purity also demonstrate the difficulty of du- plicating White’s recipe. White’s