Driving Advantage

1 TRADE SECRETS by Vickie L.HenryandClaireby Vickie Laporte Products, andServices Professionals InvolvedinLegallyProtecting A Guidebook for Technical and Business Trade Secrets

Foley Hoag eBook Hoag Foley Contents

Introduction...... 3

Chapter 1 What Is a Trade Secret?...... 4

Chapter 2 Trade Secrets Versus ?...... 6

Trade Secrets Versus Patents at a Glance...... 10

Chapter 3 Keeping Trade Secret Information Secret...... 11

Chapter 4 What is Trade Secret ?...... 17

Chapter 5 Remedies for Trade Secret Misappropriation...... 19

Chapter 6 Criminal Enforcement of Trade Secrets...... 22

Chapter 7 The Flip Side of Trade Secrets: How Not to Misappropriate...... 26

Conclusion...... 27

About Foley Hoag LLP...... 28

Vickie L. Henry...... 28

Claire Laporte...... 29 Trade Secrets A Guidebook for Technical and Business Professionals Involved in Legally Protecting Products, Technologies and Services by Vickie L. Henry and Claire Laporte

Introduction

Trade secrets can be a valuable component of an intellectual (IP) portfolio, whether as a complement to patents or as an alternative. Companies benefit from an IP portfolio that matches the unique benefits of trade secrets and patents to the types of information they seek to protect. Trade secret protection can be available immediately, without going through a government agent, whereas a is available only after an application to and approval by the government. And unlike patents, trade secrets provide IP protection of potentially infinite duration. Trade secret protection is also available for a broad array of information for which patents are not available.

Although trade secret protection can provide an economical and effective means to protect a company’s information, it is critical to act prospectively to protect trade secrets. Taking precautions with employees, vendors, and business partners now can avoid costly losses in the future.

3 3 TRADE SECRETS own merits. law analysis.Asalways,everysituationhastobeevaluatedonits generally, andisnotasubstituteforindividualizedstatefederal is intendedtoprovide guidancetothelawoftradesecrets The lawoftradesecrets variesfrom statetostate.Thispublication TRADE SECRETS 4

is the subject of efforts that are reasonable under the is the subject of efforts reasonable that are its secrecy. to maintain circumstances derives independent economic value, actual or potential, from value, actual or potential, from derives independent economic to, and not being readily not being generally known can other persons who means by, ascertainable by proper and or use, its disclosure obtain economic value from What Is a Trade Secret? Is a Trade What , New Jersey, , and Texas follow the older follow and Texas New York, Massachusetts, New Jersey, to Section 757, although movements Restatement (First) of Torts of states. Regardless in those adopt the UTSA occur frequently is information that a trade secret jurisdiction, the key factors are that is: • industry); Not generally known to the public (or in the relevant • Economically valuable because it is not known; and • efforts The subject of reasonable to maintain its secrecy. 2)  The precise definition of “trade secret” varies by state, just as “trade secret” definition of The precise to state. Forty state the District of six states, from other laws vary some variation Islands have adopted the U.S. Virgin Columbia, and law designed Act (UTSA) − a model Secrets of the Uniform Trade articulated principles that judges have to simplify the over several as: UTSA defines trade secret centuries. The pattern, compilation, program information, including a formula, that: or process, device, method, technique, 1)  Chapter 1 Chapter 5 TRADE SECRETS secret. increase thelikelihoodthatinformationwillqualifyasatrade wrongfully taken.Severalstepsdiscussedinthispublicationcan the informationisinfactatradesecret and,ifso,whetheritwas secret underthelaw. Trade secret lawsuitsoften focusonwhether willrecognizeguarantee thatacourt thatinformationasatrade Just becauseacompanyconsidersinformation asecret doesnot Publiclyavailableinformation • Abstractideasorgoals • Generalindustryskillsand knowledge • secret protection: Examples ofinformationthatdoesnotqualifyfortrade Supplierlists • Membershiporemployee lists • Customerlistsorcompilations ofinformation • Software source codeandoveralldesign • Businessinformation(e.g., businessplans;cost/pricingdata; • Ingredient formulasandrecipes • Manufacturingdrawingsandmethods • Scientificdata • protection: Examples ofInformationthatcanqualifyfortradesecret continuous use. Some jurisdictionsalsorequire thatthetradesecret bein budgets andforecasts) TRADE SECRETS 6

Trade Secrets Versus Patents? Versus Secrets Trade Trade secrets and patents are both , but they both intellectual property, patents are and secrets Trade differ can cover information in key ways. In short, trade secrets potentially unpublished, of be patented and are that can and cannot limited to , and nonexclusive. Patents are indefinite duration definite published, of subject matter and are statutorily defined exclusive. duration, and Can Cover Information That Is Not Patentable Secrets Trade category than patents. encompass a broader secrets Trade something may be novelty. In other words, Patents require an may cover secrets Trade patented only if it is inventive. information you do not want your invention but may also cover be novel, need not Because trade secrets competitors to know. even protection secret trade from owners can sometimes benefit is not available. patent protection where would not be patentable but may be Customer lists, for example, for trade secret Generally, protection. trade secret afforded create. If, a customer list must be sufficiently difficult to protection intensive requires the customer list for example, creating secret solicitation or investigation – the list can qualify for trade (assuming, of course, that the owner takes steps to protection keep the list secret). Must Be Secret Secrets Trade must be protected trade secrets court protection, benefit from To public. Indeed, this public Patents, in contrast, are and kept secret. Chapter 2 Chapter 7 TRADE SECRETS and independently. method solongasCompany Bdevelopedthemethodlegitimately as atradesecret, itcannotprevent CompanyBfrom usingthe Company Bfrom usingitsmethod.IfCompanyAkeptmethod the samemethod.IfCompanyAhasapatent, itcanprevent advantage. Severalyearslater, CompanyBindependentlydevelops manufacturing computerchipsthatgives itacompetitive For example,assumeCompanyAdevelops amethodof the exclusiverighttopracticepatentedinvention. independent development.Incontrast,theholderofapatenthas each onearrivesatthesecret through legitimatemeans,suchas Many different ownerscanusethesametradesecret solongas Trade Secrets CanBeNon-exclusive practice thepatentedinvention. twenty yearsafterfiling).Oncethepatentexpires, anyonecan patents bytheirnature expire afterasetnumberofyears(typically, remains secret andthecompanyownerusesit.Incontrast, benefit from tradesecret protection solongastheinformation A tradesecret needneverexpire. Thetradesecret ownercan Trade Secrets Are ofPotentiallyIndefiniteDuration disclose thebestmodeforpracticinginvention). adequate, theinventionmustbeenabled,andapplication disclosure (thewrittendescriptionmustbe isnotsufficient months aftertheyare filed.Andthepatentmaynotbevalidif U.S., generallyevenapplicationsforpatentsare publishedeighteen government-granted temporarymonopolyontheinvention.In disclosure ofthebargain ispart theinventormakesfor TRADE SECRETS 8 One risk of relying on trade secret protection is that another is that another protection on trade secret of relying One risk and trade secret the same develop can independently company patent its try to enforce could then it. That company patent method patent. the patent is a business unless Reverse Engineered Can Be Secrets Trade a competitor In other words, engineering. reverse The law permits take it apart, how determine product, a company’s can fairly obtain reasons Various use that information to compete. it works, and should be engineering have been articulated for why reverse is akin to a of the product permitted. One is that the sale spurs engineering reverse publication. A second is that for apply for patents and to search - it encourages inventors to to reverse if the invention is easy patentable ideas. Therefore, to a trade secret. superior protection provides a patent engineer, on provided are not mass-marketed but that are For those products have had some success in a contract basis, companies clauses. Of course, a engineering incorporating anti-reverse deception through product company that obtains a competitor’s misappropriation of trade secret leaves itself open to a challenge evidence of the value of the product may create at the least, or, subsequently be opponents in patent should the two companies infringement litigation. Patents Exists Immediately Whereas Protection Secret Trade A Through Process Issued After An Administrative Are Government Agency patent protection is immediate whereas protection secret Trade an inventor to apply for a patent to the United States requires equivalent). The patent Office (or a foreign Patent and 9 TRADE SECRETS prove theinformationindeedisatradesecret. litigation, the party claiming the existence of a trade secret has to is not valid and should not have been issued. In trade secret burden ofproving, byclearandconvincingevidence,thatthepatent challengingthepatenthas that thepatentisvalid.Theparty Office, a patent holder asserting rights in court enjoys a presumption addition tohaving,literally, thestampofapproval ofthePatent issued bytheUnitedStatesPatentandTrademark In Office. existence ofthepatentbyshowinga“ribboncopy”as existence ofatradesecret. tolitigationproves Aparty the It iseasiertoprove thevalidityofapatentthan incourt Of APatentInCourt It IsEasierTo Prove TheExistenceAndValidity publishes orapatentissues. protection isavailableunlessanduntilthepatentapplication application process cantakeseveralyears.Ofcourse,tradesecret TRADE SECRETS 10

to

fails written

enabled;

insufficient

not

is has

mode;

indefinite;

is best

Patents useful, new, are that inventions Qualifying and non-obvious and publication disclosure Require patent in result may disclosure Insufficient invalidity Only after patent issues filing from years 20 usually term, Fixed application Legal monopoly issued patent(s) Limited to country(ies) that engineered reverse be can product a When or is likely to be independently developed not would secrecy maintaining When be practical competitors, for important is it When investors or others to know about the IP and the fact you have it other (in file and first invent U.S., the In countries, file first) Invent and publish the patent around your patent is not valid (is not new; is Prove obvious; disclose description) for your patent is not enforceable Prove the Patent Office inequitable conduct before year a than more invention the use Publicly filing for patent before than more invention the sell to offer or Sell filing for patent one year before become to work own your permit Otherwise to your patent application Patent the to disclosure insufficient an Make during or application patent the in Office of the application prosecution assignment invention have to Fail with key employees agreement

Trade Secrets Trade you do not want yourInformation to know competitors secret Must be kept Immediately Potentially infinite or developed independently be can – None engineered reverse Potentially international patentable not is matter subject the When (e.g., customer lists) possible is best If the longest protection The cost of obtaining a patent is prohibitive Independently develop Reverse engineer the information is not a trade secret Prove employees knowledgeable your Hire (without obligations) Publish the information without secret trade the Disclose confidentiality without employees knowledgeable Lose confidentiality or non-compete obligations Lax security to application the allow patent, a for Apply patent publish and not receive

own your defeat you can How rights? intellectual property

your avoid someone can How or rights property intellectual deprive you of them? When is one clearly better better clearly one is When Exclusivity of rights? Geographical scope? than the other? Duration of rights? When are rights enforceable? rights When are

Subject matter? Disclosure? Trade Secrets Versus Patents At A Glance Glance A At Patents Versus Secrets Trade 11 TRADE SECRETS Chapter 3 secrets proactively. Instead, one of the most common scenarios A critical part of security can be defining the company’s trade trade secret. of the information may mean the information is not a protectable parties without appropriate agreement as to the trade secret nature applications or marketing. Of course, voluntary disclosure to third “readily ascertainable” by third parties, for example through patent the information has been placed in the or rendered disclosure withoutconsentisprohibited; andthedegree towhich or toathird giverisetoareasonable party) inference thatfurther whether the circumstances of the disclosure (either to an employee nature andextentofsecurityprecautions toprotect theinformation; trade secret protection to prove its case. Courts also consider: the secret claim but it does make it harder for a company claiming absence ofawrittenconfidentialityagreement isnotfataltoatrade a written confidentiality agreement restricting disclosure. The typicallyconsiderseveralfactors,includingwhetherthere courts is In evaluating whether a party has taken reasonable precautions, reasonable. must keep pace in order for courts to deem the security measures determined onacase-by-casebasis.Asbusinessesgrow, security circumstances to maintain its secrecy. Reasonableness is must be the subject of efforts that are reasonable under the For information to be protected as a trade secret, the information Information Secret Keeping Trade Secret

TRADE SECRETS 12

other specifying that the information is trade secret that the information is trade secret other businesses specifying of the information as well as the legitimate uses business partners access to restricting or cabinets, information in locked rooms putting password information is stored, locations where on computer files) restrictions confidential on off-site computers) information stored of marketing products process (and one of the most common problems in litigation) is that until is that in litigation) common problems of the most (and one been has secret trade a concerned becomes someone trade a company’s what are has defined nobody misappropriated, has is concerned misappropriation Once a company secrets. trade a is believes it what about overbroad be can it occurred, secret. to want they information what about advance in think who Owners – protection court getting of chance better much a stand protect than − place first the in loss information preventing of and arise. to problems for wait that companies Precautions Examples of Reasonable • with employees, partners, or agreements nondisclosure Written • with employees or other non-competition agreements Written • access to information on a need-to-know basis Granting • access to information (e.g., keeping unauthorized Preventing • Sign in/sign out procedures • policies trade secret Educating employees on the company’s • information as Marking documents that contain trade secret • Implementing a computer security policy (e.g., limiting access to • in the trade secrets Ensuring that sales employees do not reveal 13 TRADE SECRETS design was notatradesecret. Timexwasnot liablefortrade taken noprecautions toprotect thesecrecy of its design,the ruledthatbecauseIncase had lengthy lawsuit,the appeals court designed packaging atalowercost,IncasesuedTimex.After a had subsequentlyhired aPhilippinecompanytocreate theIncase- packages thanIncaseexpected.When learnedthatTimex ordered somepackagesforits watches from Incase,butfewer case,Timex customers withnostringsattached.Inthis particular standpoint, Incaseprovided thepackagingdesignstopotential recoup from thecostofdesign.Unfortunately atradesecret a clientcompany’s packagingforfree andrelied onfuture orders to different products. ofitsbusinessmodel,Incasedesigned Aspart Incase,wasinthebusinessofdesigningpackagingfor plaintiff, In IncaseInc.v. TimexCorp.,488F.3d 46(1st Cir. 2007), the precautions wasabletoprotect itsinvestment. their information,butonlythecompanythattookreasonable from theoutset.Bothcompanieshadinvestedmoneyindeveloping control ofitsinformationbecauseittookreasonable precautions precautions toprotect it.Inthesecondcase,vendorkept control ofitsinformationbecauseithadnottakenreasonable hopes ofgeneratingbusiness.Inthefirstcase,vendorlost vendor companiesdisclosedinformationabouttheirproducts inthe precautions tokeepacompany’s information secret. Inbothcases, Two recent oftakingreasonable casesillustratetheimportance Case Studies protectioninformation, itwillbeeasiertoseekcourt andremedies. information. Second,ifsomeonedoeswrongfully takethe benefits. First,ownersare abletoexercise more control overtheir By takingtheseandotherprecautions, ownersgettwovaluable TRADE SECRETS 14 secret misappropriation for using Incase’s packaging design with design packaging Incase’s for using misappropriation secret vendor. the other Inc. v. Solutions, TouchPoint second case, Incase with the Contrast 23, 29 (D. Mass. 2004). Supp. 2d Co., 345 F. Eastman Kodak with Kodak to sell into negotiations entered TouchPoint There, kiosks. Before digital picture for use in Kodak’s software to its information about the disclosed TouchPoint a Confidential Disclosure and Kodak signed TouchPoint customer, labeled if TouchPoint to the CDA, (CDA). According Agreement it as such. Kodak was to treat information as confidential, that all agreement explicit also obtained Kodak’s TouchPoint be “confidential.” would software information concerning the information in of TouchPoint’s When Kodak tried to use some able to win a was TouchPoint developing its own software, using the information. Kodak from preventing preliminary that Kodak tried to use did not fit Even though the information in the CDA, the court within the information defined precisely had taken TouchPoint injunction because granted the preliminary the information. This included to protect precautions reasonable that all explicit agreement Kodak’s entering into a CDA; obtaining be “confidential;” would software information concerning the server; assigning a gatekeeper the software protecting password to monitor the flow of confidential information; and having were that their disclosures reiterate representatives TouchPoint TouchPoint won the preliminary made in confidence. After By thinking a settlement agreement. injunction, the parties reached was able to TouchPoint protection, ahead about trade secret its information. appropriating Kodak from prevent 15 TRADE SECRETS violating thenon-compete agreement. employer hassecured evidencethattheemployee is powerful plans forfuture employment orrecent computeractivity, the non-disclosure agreement. For example, iftheemployeeliesabout interview canalsolaythefoundationtolater prove aviolationofthe employee ofanyobligationsundertheagreement. Suchan company. toremind Attheleast,meetingisanopportunity the helpful toholdanexitinterviewwhen employeeleavesthe To ofanon-disclosure enhancetheeffectiveness agreement, itis such anagreement riskslosingitstradesecret status. the informationmustbemaintained.Informationdisclosedwithout confidentially, andthetimeperiodforwhich confidentialityof information, theobligationsofemployeetoholdinformation confidential information,theexclusionstowhatis non-disclosureAn effective agreement shoulddefinethe employer’s tradesecrets withothersduringorafteremployment. employee andwantstoensure thattheemployeewillnotshare the In onecommonsituation,thisoccurswhenanemployerhires an it toathird withoutrisking that itbedisclosedtoanyoneelse. party confidential information,suchasatradesecret, wantstodisclose Non-disclosure agreements are holding usefulwhenaparty remedy ifsuchinformationisimproperly disclosed. protecting anowner’s tradesecret informationandprovide alegal non-competition agreements. Theseagreements are usefulfor deserve specialattention:non-disclosure agreements and Two typesofagreements withemployeestoprotect tradesecrets Agreements Employee Agreements: Non-Disclosure and Non-Competition TRADE SECRETS 16 Non-disclosure agreements do not prevent an employee from from an employee not prevent do agreements Non-disclosure that, you need For however. for a competitor, or working becoming to agreement a non-compete For agreement. a non-competition should be good First, there hold up in court, it must be reasonable. Punishing an employee for agreement. for the business reasons for a as a valid reason will not pass muster leaving the company trade of protecting but having one for the purpose non-compete, - a consideration employee must receive will. Second, the secrets as an offerbenefit such exchange for employment or a raise - in of in reasonable also should be the restriction Third, the restriction. an it must not prohibit In other words, scope, time, and geography. in too wide a field of seeking other employment employee from of time, or for too wide a business, for too long a period is the agreement The key is making sure geographical area. not information, owner’s the trade secret for protecting reasonable such on the employee. Still, some jurisdictions, hardship to create except a non-competition agreement as California, will not enforce (e.g., the sale of a business). in limited circumstances 17 TRADE SECRETS Misappropriation? What IsTrade Secret Chapter 4 2) kneworhadreason toknowthathisorherknowledgeofthe 1) usedimproper meanstolearnthetradesecret; or by apersonwho: of someoneelse’s tradesecret withoutexpress orimpliedconsent acquired byimproper means.Italsoincludesthedisclosure oruse who knowsorhasreason toknowthatthetradesecret was to includetheacquisitionofatradesecret ofanotherbyaperson The UniformTrade Secrets Actdefinesmisappropriation broadly Misappropriation Defined misappropriation isthatan employeeleavesone companyto common scenarioin alawsuitinvolvingclaimsoftradesecret (such asanemployee, customer, orvendor)andstrangers.Avery those whoare in aspecialrelationship withthetrade secret owner Misappropriation usuallyoccursbytwodifferent typesofactors: 3) before amaterialchangeinposition,kneworhadreason to (b) derivedfrom apersonwhousedimproper means (a) acquired undercircumstances givingrisetoaduty trade secret was: knowledge ofithadbeenacquired byaccidentormistake. know thattheinformationwasatradesecret andthat (c) derivedfrom claiming apersonwhooweddutytotheparty maintain itssecrecy orlimititsuse; trade secret protection tomaintain itssecrecy; or to acquire it;or

TRADE SECRETS 18 competitors to the government without proper protection for protection without proper competitors to the government or trade secrets; developed. to learn how it was and working backwards product start or work for a competitor. The old employer may fear that may fear that employer The old startcompetitor. work for a or during work acquired will use information employee the former scenarios Other common in the new job. old employer for the either in a customer/ work together, when two companies are product and/or collaborators in research or as vendor relationship occur. Old fashion can also development. Misappropriation What Is Not means. by proper discovery of a trade secret The law allows means include: Proper • owner; or trade secret the from A license • by independent effort; Discovery or • or published literature; from the trade secret Learning • of the item in public use or on public display; or Observation • by for information provided Act requests of Information Freedom • engineering – that is starting Reverse with the competitor on whether the alleged litigation can focus Much of trade secret claimed trade discover the could have or did properly wrongdoer secret. 19 TRADE SECRETS Misappropriation Remedies forTrade Secret Chapter 5 acquiring knowledge orreason toknowofthemisappropriation. madeamaterial andprejudicialparty changeofposition priorto complete bartouse wouldbeinequitable,forexample,where a have beenprohibited. Exceptionalcircumstances includewhena royalty fornolongerthantheperiodoftimewhichusecould may issueaninjunctionconditionedonpayment ofareasonable The UTSAalsoprovides thatinexceptionalcircumstances, acourt Themisappropriator from disclosingthetradesecret toothers. • Themisappropriator from evenwhen gettinganunfairheadstart • Additionalharmtothetrade secret ownerortoprevent the • injunction to prevent: secret protection under certain circumstances. A court may issue an A court may order a party not to use information subject to trade Injunctive Relief the ownerorforce themisappropriator toreturn wrongful gains. misappropriator totheownereitherrepair thedamagedoneto maygrantmoneydamages–paymentsfromcourt the misappropriator from usingthesecret information.Inaddition,the order)court thatprotects thetradesecret ownerandprevents the secret misappropriation. maygrantaninjunction(i.e.,a Acourt Two kindsofrelief are availableforactualorthreatened trade the informationisnolongersecret; or misappropriator from continuingtobenefitfrom thetradesecret; TRADE SECRETS 20 layout. A court could prevent Company B from using the secret using the secret Company B from layout. A court could prevent layout. a similar Company B is developing the syrum it produces. time, but, to save the six-month development process, A court could trade secret. Company A’s misappropriates for six trade secret using Company A’s Company B from prevent months. he customer list by taking a copy with him after Company A’s the list (and Salesperson X to return quits. A court could order Salesperson X not to use the list at his any copies), and order new company. Another key issue with is the length. Courts is the length. injunctions key issue with Another enter a may accused party on the to seek with the burden injunction, permanent is no trade secret that the upon a showing to the injunction an end A court at the outset might also determine secret. longer a trade caused by the harm injunction should be to remedy how long the of example, someone accused For the misappropriation. last no longer the injunction should might argue misappropriation develop the it would have taken to independently than the time to determine, courts to tend is hard When that period trade secret. owner. of the trade secret err on the side Examples: • assembly-line secret Company A’s B misappropriates Company • impurities from of removing process A has a secret Company • X, an employee of Company A, misappropriates Salesperson 21 TRADE SECRETS and state law, compensation for attorneys’ fees may also be available. further punish the misappropriator. Depending on the circumstances In somestates,punitiveorexemplarydamagesmaybeavailableto Areasonable • Otherunjustenrichmentto themisappropriator, suchasthe • The • Thetradesecret owner’s lostprofits • . Damages can be measured in different ways, including by: mayawardInstead oforinadditiontoaninjunction,acourt money Money Damages rather thandevelopingitindependently money savedbymisappropriating thetradesecret information wrongdoing

profit

the

royalty misappropriator

for

the

trade

gained

secret

as

a

result

of

the

TRADE SECRETS 22 economic, or Although companies have less control over the criminal justice over the criminal have less control Although companies laws can private litigation, criminal than they do over process owners to help trade secret additional tools one or more provide trade secret to state laws providing their rights. In addition protect laws in penalties, two federal including criminal protection, owners: the Economic trade secret particular may help protect and the Computer Act, 18 U.S.C. § 1831 – 1839, and Abuse Act, 18 U.S.C. § 1030. Economic Espionage Act (EEA) makes it a federal crime to The Economic Espionage Act against both protection and provides trade secrets misappropriate criminalizes conduct. The EEA domestic and foreign based upon in two main areas of trade secrets misappropriation 1831 criminalizes conduct the conduct. Section who benefits from or agent of entity, foreign government, that will benefit a foreign for misappropriation trade secret Section 1832 criminalizes either. the provided other than the owner, the economic benefit of anyone placed in interstate or to a product is related misappropriation international commerce. defined under the EEA as: “all forms and is broadly A trade secret types of financial, business, scientific, technical, Chapter 6 Chapter of Enforcement Criminal Secrets Trade engineering information, including patterns, plans, compilations, methods, devices, formulas, , prototypes, program 23 TRADE SECRETS criminal prosecution. PenaltiesforviolationoftheEEAinclude injunctive relief under theEEA.Theyare thevictimin agovernment or corporations,however, have noprivaterightofactiontoobtain relief through a civil action against a violation of the EEA. Individuals The U.S.AttorneyGeneralalsohastheauthority toobtaininjunctive 3) Receives,buys,orpossessesatrade secret, knowingthesame authorizationcopies,duplicates,sketches,draws, 2) Without 1) Steals,orwithoutauthorizationappropriates, takes,carries The EEAcriminalizesconductbyanyonewhoknowingly: or inwritingif: memorialized physically, electronically, graphically, photographically, tangible orintangible,andwhetherhow techniques, processes, procedures, programs, orcodes,whether (B) (A) offenses areoffenses alsocriminalized. without authorization.Attemptandconspiracy tocommitthese to havebeenstolenorappropriated, obtained,orconverted communicates, orconveysatradesecret; or photocopies, replicates, transmits,delivers,sends,mails, photographs, downloads,uploads,alters,destroys, trade secret; away, ordeceptionobtainsa orconceals,byfraud,artifice, public[.]” being readily through ascertainable proper meansby, the or potential,from notbeinggenerallyknownto,and the informationderivesindependenteconomicvalue,actual such informationsecret; and the ownerthereof hastakenreasonable measures tokeep stored, compiled,or

TRADE SECRETS 24 imprisonment, fines of up to $500,000 for an individual, and individual, and for an of up to $500,000 fines imprisonment, of property. forfeiture Abuse Act Fraud and Computer another provides Fraud and Abuse Act (CFAA) The Computer rights by criminalizing trade secret for protecting federal means is used. a computer certain where activity makes it CFAA information, the to trade secret As it can be applied without authorization or access a computer a crime to intentionally any and obtain information from exceed authorized access in interstate or foreign computer (a computer used protected if the conduct involved an interstate or communication) commerce also makes it a crime to communication. The CFAA or foreign without authorization computer intentionally access a protected used everywhere Since computers are and cause damage or loss. with a substantial portion connected to the in business today, covers most computers. Internet, the CFAA on what constitutes places no restriction the CFAA Notably, the sometimes difficult issue of proving “information.” Therefore, arise. Damage includes does not the existence of a trade secret of information, and this has been any impairment to the integrity nature secret the to include conduct that compromises interpreted of information. outsiders, such as Those acting without authorization typically are those exceeding authorized access whereas a computer hacker, have insiders, or employees, who may already typically addresses that some limited computer privileges but who exceeded authorization. 25 TRADE SECRETS action in federal court with certain restrictions. withcertain action infederalcourt suffered damageorloss,theCFAA topursueacivil allows aparty whether theviolationwasarepeat Where has offense. aparty depending onwhichprovision oftheCFAA wasviolatedand punishment canvarywidelyandreach ashigh20years, The CFAA provides forbothcriminalandcivilremedies. Criminal TRADE SECRETS 26 the former employer of a new employee the former employer of a new hiring before agreements and independent development to keep confidential agrees Savvy companies are aware that they could be on either side of an could be on either side of that they aware are Savvy companies addition in Therefore, misappropriation. secret trade of accusation implement should company a secrets, trade own its protecting to secret trade other to liability potential their minimize to policies policy elements can include: owners. Potential • employees for confidentiality obligations incoming Screening • (internally and externally) to cautionary letters from Responding • of non-compete state law concerning enforceability Researching • scientific knowledge documentation of the company’s Keeping • that the company information the amount of third-party Limiting is worth a an ounce of prevention trade secrets, As with protecting ahead about how they Companies should think pound of cure. and what duties information, who owns the information, acquire owners. they have to the information’s Chapter 7 Chapter Secrets: of Trade Flip Side The to Misappropriate How Not 27 TRADE SECRETS competitive advantagebykeepinginformationconfidential. companies canusetradesecret protection topreserve their formulating theirtradesecret proper policies.With foresight, identified severalareas thatcompaniesshouldconsiderin can protect someinformationindefinitely. Thispublicationhas information secure. Whenusedcorrectly, tradesecret protections significantly betterlikelihoodofkeepingtheirproprietary Companies thattakeadvantageoftradesecret protections havea Trade secrets ofacompany’s canformavaluablepart IPportfolio. Conclusion TRADE SECRETS 28 . Vickie L. Henry Vickie L. Henry intellectual on resolving Vickie 15-year litigation career Henry has focused her based on work in these areas liability disputes, with her and product property than has tried more litigation. She in general commercial a solid background or judgment. 20 trials to verdict that Vickie matters The intellectual property handles involve both patent She has represented of trade secrets. litigation and analysis and litigation as both plaintiffscorporate and individual clients and defendants in these of businesses and industries, a diverse range matters. Her clients come from devices, telecommunications and food including pharmaceuticals, medical liability work shows a similar wide product equipment. Vickie’s processing and medical device liability to pharmaceutical range of experience, from these matters She has tried liability. toxic tort product cases to consumer courts the country in state and federal at both the trial and throughout appellate levels. Click the image below for a full biography. About Foley Hoag LLP About resolution, dispute of areas the in firm law national leading a is LLP Hoag Foley middle-market, emerging, for transactions corporate and property, intellectual With companies. strategic of clients’ a deep understanding and large-cap the firm helps realities, imperatives, and marketplace priorities, operational financial technology, energy biopharma, high technology, companies in the advantage. The firm’s sectors gain competitive services and manufacturing Enterprise Emerging the and Washington, Boston, in located lawyers 225 firms law Mundi Lex of network a with join Massachusetts Waltham, in Center opportunities. and For challenges largest support global clients’ for provide to m information visit foleyhoag.co more 29 TRADE SECRETS Click theimagebelowforafullbiography. the U.S.Supreme andtheFederalCircuit ofAppeals. Court Court appellate work,bothinclientrepresentation andthefilingofamicusbriefswith Commission. Inadditiontohertrialpractice,Claire extensive undertakes she hasalsoprovided clientswithrepresentation before theInternationalTrade vision, andothersoftware. Claire’s but litigationfocusisinthefederalcourts, biotechnology, medicaldevices,pharmaceuticals,e-commerce, computer technology-related mattersinabroad rangeoftechnicalspecialtiesincluding property practice.Sherepresents clientsincomplexpatentlitigationand Massachusetts SuperLawyersforherextensiveandsuccessfulintellectual Claire hasreceived Laporte recognition inbothChambersUSAand Claire Laporte Claire Laporte TRADE SECRETS 30 You may also be You in our interested eBook series. Simply click on an image to download or visit foleyhoag.com for our library. Sign up for industry-specific alertsSign up for industry-specific updates and Visit our Web site VisitWeb our Foley Hoag eBook Library Hoag eBook Foley sign-up for library, Foley Hoag eBook the from titles other free Sample site. Web visit our Foley Hoag, or alertsindustry-specific from and updates 31

© 2009FoleyHoagLLP. Allrights reserved. PriorresultsAttorney advertising. donotguaranteeasimilaroutcome. TRADE SECRETS Driving Business Advantage BOSTON |WASHINGTONEMERGINGENTERPRISECENTER 617 8321000 tel 6173827000 |FOLEYHOAG.COM fax