LEGL 4200 - Trade Secrets

Definition of a Trade Secret

A Trade Secret is information that:

1. Has economic value, actual or potential, due to its secrecy

2. Is subject to “reasonable” steps to maintain secrecy

What are the sources of applicable trade secret law? - Federal civil

DTSA - Defend Trade Secrets Act (2016) - Federal civil

• Damages and/or injunctions

What are the sources of applicable trade secret law? - Federal criminal

EEA - Economic Espionage Act (1996) - mostly criminal

• Misappropriate for a foreign entity - 15 years and/or $5M

• Misappropriate a trade secret - 10 years and/or fine

• Exception for whistleblowing

What are the sources of applicable trade secret law? - State Civil

UTSA - Uniform Trade Secret Act - Civil in 49 states

• What is a “uniform” act?

• Damages and/or injunctions

• Largely preempted common law

Has economic value, actual or potential, due to its secrecy

• Includes: processes, software, customer lists, strategy documents, etc. (very broad)

• Ask: could another replicate this information easily? If so, is there any value due to secrecy?

• Do we need absolute secrecy or can information have value even if a few other people know it (relative secrecy)

Learning Curve v. PlayWood Toys - Facts

• Playwood Toys – independent toy makers

• Learning Curve – license to Thomas the Tank Engine

• LC wanted Playwood to make their toys

• Parties orally agreed to confidential meeting

• Playwood quickly made a novel noise-making train track toy (“Clickety–Clack Track”) at meeting

• LC left with prototype

• No deal was ever reached

• LC sells “Clickety–Clack Track”

• Playwood sues for TS misappropriation

Learning Curve v. PlayWood Toys - Holding

• Learning Curve obtained a patent, naming one of its employees who attended the meeting as the inventor.

• Learning Curve had $20M in track sales by 2000

• Trial court found no trade secret because:

  • (1) PlayWood did not demonstrate that its concept was unknown in the industry;

  • (2) PlayWood's concept could have been easily acquired or duplicated through proper means;

  • (5) PlayWood expended no time, effort or money to develop the concept

Learning Curve v. PlayWood Toys - Explanation

• A TS has economic value due to its secrecy and is subject to “reasonable” steps to maintain secrecy

  • (1) PlayWood did not demonstrate that its concept was unknown in the industry;

    • Is this true? Does it have to be 100% unknown?

  • (2) PlayWood's concept could have been easily acquired or duplicated through proper means;

    • When was it a TS? When did it stop being a TS?

  • (5) PlayWood expended no time, effort or money to develop the concept.

    • Does this matter?

Sasqua Group, Inc. v. Courtney (E.D.N.Y. 2010) - Facts

• Lori Courtney was a recruiter at Sasqua Group, an executive search. It maintains a database of all information collected on all clients.

• Courtney had never signed an NDA or non-compete.

  • NDA – non-disclosure agreement

• When Courtney quit, Sasqua Group sought an injunction to stop her from misappropriating its client database.

• Is the database a TS – why or why not?

Sasqua Group, Inc. v. Courtney (E.D.N.Y. 2010)