Property and Property law
Trade secrets are a type of intellectual property that includes formulas, practices, processes, designs, instruments, patterns, or compilations of information that have inherent economic value because they are not generally known or readily ascertainable by others, and which the owner takes reasonable measures to keep secret.Intellectual property law gives the owner of a trade secret the right to restrict others from disclosing it. In some jurisdictions, such secrets are referred to as confidential information.
The precise language by which a trade secret is defined varies by jurisdiction, as do the particular types of information that are subject to trade secret protection. Three factors are common to all such definitions:
A trade secret is information that
In international law, these three factors define a trade secret under article 39 of the Agreement on Trade-Related Aspects of Intellectual Property Rights, commonly referred to as the TRIPS Agreement.
Similarly, in the United States Economic Espionage Act of 1996, "A trade secret, as defined under 18 U.S.C. § 1839(3)(A),(B) (1996), has three parts: (1) information; (2) reasonable measures taken to protect the information; and (3) which derives independent economic value from not being publicly known."
Trade secrets are an important, but invisible component of a company's intellectual property (IP). Their contribution to a company's value, measured as its market capitalization, can be major.Being invisible, that contribution is hard to measure. Still, research shows that changes in trade secrets laws affect business spending on R&D and patents. This research provides indirect evidence of the value of trade secrecy.
In contrast to registered intellectual property, trade secrets are, by definition, not disclosed to the world at large. Instead, owners of trade secrets seek to protect trade secret information from competitors by instituting special procedures for handling it, as well as implementing both technological and legal security measures.The most common reason for trade secret disputes to arise is when former employees of trade secret-bearing companies leave to work for a competitor and are suspected of taking or using valuable confidential information belonging to their former employer. Legal protections include non-disclosure agreements (NDAs), and work-for-hire and non-compete clauses. In other words, in exchange for an opportunity to be employed by the holder of secrets, an employee may sign agreements to not reveal their prospective employer's proprietary information, to surrender or assign to their employer ownership rights to intellectual work and work-products produced during the course (or as a condition) of employment, and to not work for a competitor for a given period of time (sometimes within a given geographic region). Violation of the agreement generally carries the possibility of heavy financial penalties which operate as a disincentive to reveal trade secrets. Trade secret information can be protected through legal action including an injunction preventing breaches of confidentiality, monetary damages, and, in some instances, punitive damages and attorneys’ fees too. In extraordinary circumstances, an ex parte seizure under the Defend Trade Secrets Act (DTSA) also allows for the court to seize property to prevent the propagation or dissemination of the trade secret. However, proving a breach of an NDA by a former stakeholder who is legally working for a competitor or prevailing in a lawsuit for breaching a non-compete clause can be very difficult. A holder of a trade secret may also require similar agreements from other parties he or she deals with, such as vendors, licensees, and board members.
As a company can protect its confidential information through NDA, work-for-hire, and non-compete contracts with its stakeholders (within the constraints of employment law, including only restraint that is reasonable in geographic- and time-scope), these protective contractual measures effectively create a perpetual monopoly on secret information that does not expire as would a patent or copyright. The lack of formal protection associated with registered intellectual property rights, however, means that a third party not bound by a signed agreement is not prevented from independently duplicating and using the secret information once it is discovered, such as through reverse engineering.
Therefore, trade secrets such as secret formulae are often protected by restricting the key information to a few trusted individuals. Famous examples of products protected by trade secrets are Chartreuse liqueur and Coca-Cola.
Because protection of trade secrets can, in principle, extend indefinitely, it may provide an advantage over patent protection and other registered intellectual property rights, which last only for a specific duration. For example, the Coca-Cola company has no patent for the formula of Coca-Cola and has been effective in protecting it for many more years than the 20 years of protection that a patent would have provided. In fact, Coca-Cola refused to reveal its trade secret under at least two judges' orders.
Companies often try to discover one another's trade secrets through lawful methods of reverse engineering or employee poaching on one hand, and potentially unlawful methods including industrial espionage on the other. Acts of industrial espionage are generally illegal in their own right under the relevant governing laws, and penalties can be harsh. [ citation needed ]The importance of that illegality to trade secret law is: if a trade secret is acquired by improper means (a somewhat wider concept than "illegal means" but inclusive of such means), then the secret is generally deemed to have been misappropriated. Thus, if a trade secret has been acquired via industrial espionage, its acquirer will probably be subject to legal liability for having acquired it improperly—this notwithstanding, the holder of the trade secret is nevertheless obliged to protect against such espionage to some degree in order to safeguard the secret, as under most trade secret regimes, a trade secret is not deemed to exist unless its purported holder takes reasonable steps to maintain its secrecy.
Commentators starting with A. Arthur Schiller assert that trade secrets were protected under Roman law by a claim known as actio servi corrupti, interpreted as an "action for making a slave worse" (or an action for corrupting a servant). The Roman law is described as follows:
[T]he Roman owner of a mark or firm name was legally protected against unfair usage by a competitor through the actio servi corrupti ... which the Roman jurists used to grant commercial relief under the guise of private law actions. "If, as the writer believes [writes Schiller], various private cases of action were available in satisfying commercial needs, the state was acting in exactly the same fashion as it does at the present day."
The suggestion that trade secret law has its roots in Roman law was introduced in 1929 in a Columbia Law Review article called "Trade Secrets and the Roman Law: The Actio Servi Corrupti", which has been reproduced in Schiller's, An American Experience in Roman Law 1 (1971). See Trade Secrets and Roman Law: The Myth Exploded, at 19. However, the University of Georgia Law School professor Alan Watson argued in Trade Secrets and Roman Law: The Myth Exploded that the actio servi corrupti was not used to protect trade secrets. Rather, he explained:
Schiller is sadly mistaken as to what was going on. ... The actio servi corrupti presumably or possibly could be used to protect trade secrets and other similar commercial interests. That was not its purpose and was, at most, an incidental spin-off. But there is not the slightest evidence that the action was ever so used. In this regard the actio servi corrupti is not unique. Exactly the same can be said of many private law actions including those for theft, damage to property, deposit, and production of property. All of these could, I suppose, be used to protect trade secrets, etc., but there is no evidence they were. It is bizarre to see any degree the Roman actio servi corrupti as the counterpart of modern law for the protection of trade secrets and other such commercial interests.
Trade secret law as known today made its first appearance in England in 1817 in Newbery v. James , [ dubious ] and in the United States in 1837 in Vickery v. Welch . [ clarification needed ] While those cases involved the first known common law causes of action based on a modern concept of trade secret laws, neither involved injunctive relief; rather, they involved damages only. In England, the first case involving injunctive relief came in 1820 in Yovatt v Winyard, while in the United States, it took until the 1866 case Taylor v. Blanchard. [ clarification needed ]
Trade secrets law continued to evolve throughout the United States as a hodgepodge of state laws. In 1939, the American Law Institute issued the Restatement of Torts, containing a summary of trade secret laws across states, which served as the primary resource until the latter part of the century. As of 2013, however, only four states—Massachusetts, New Jersey, New York, and Texas—still rely on the Restatement as their primary source of guidance (other than their body of state case law).[ citation needed ] It has also been recently[ when? ] theorized that the doctrine of trade secrets should protect competitively valuable, personal information of company executives, in a concept known as "executive trade secrets".
In Commonwealth common law jurisdictions, confidentiality and trade secrets are regarded as an equitable right rather than a property right.
The Court of Appeal of England and Wales in the case of Saltman Engineering Co Ltd v. Campbell Engineering Ltdheld that the action for breach of confidence is based on a principle of preserving "good faith".
The test for a cause of action for breach of confidence in the common law world is set out in the case of Coco v. A.N. Clark (Engineers) Ltd:
The "quality of confidence" highlights that trade secrets are a legal concept. With sufficient effort or through illegal acts (such as breaking and entering), competitors can usually obtain trade secrets. However, so long as the owner of the trade secret can prove that reasonable efforts have been made to keep the information confidential, the information remains a trade secret and generally remains legally protected. Conversely, trade secret owners who cannot evidence reasonable efforts at protecting confidential information risk losing the trade secret, even if the information is obtained by competitors illegally. It is for this reason that trade secret owners shred documents and do not simply recycle them.[ citation needed ]
A successful plaintiff is entitled to various forms of judicial relief, including:
Hong Kong does not follow the traditional commonwealth approach, instead recognizing trade secrets where a judgment of the High Court indicates that confidential information may be a property right.
The EU adopted a Directive on the Protection of Trade Secrets on 27 May 2016.The goal of the directive is to harmonize the definition of trade secrets in accordance with existing international standards, and the means of obtaining protection of trade secrets within the EU.
Within the U.S., trade secrets generally encompass a company's proprietary information that is not generally known to its competitors, and which provides the company with a competitive advantage.
Although trade secrets law evolved under state common law, prior to 1974, the question of whether patent law preempted state trade secrets law had been unanswered. In 1974, the United States Supreme Court issued the landmark decision, Kewanee Oil Co. v. Bicron Corp., which resolved the question in favor of allowing the states to freely develop their own trade secret laws.
In 1979, several U.S. states adopted the Uniform Trade Secrets Act (UTSA), which was further amended in 1985, with approximately 47 states having adopted some variation of it as the basis for trade secret law. Another significant development is the Economic Espionage Act (EEA) of 1996 (18 U.S.C. §§ 1831 – 1839), which makes the theft or misappropriation of a trade secret a federal crime.
This law contains two provisions criminalizing two sorts of activity.
The statutory penalties are different for the two offenses. The EEA was extended in 2016 to allow companies to file civil suits in federal court.
On May 11, 2016, President Obama signed the Defend Trade Secrets Act (DTSA), 18 U.S.C. §§ 1839 et seq., which for the first time created a federal cause of action for misappropriating trade secrets.The DTSA provides for both a private right of action for damages and injunction and a civil action for injunction brought by the Attorney General.
The statute followed state laws on liability in significant part, defining trade secrets in the same way as the Uniform Trade Secrets Act as,
"all forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing if (A) the owner thereof has taken reasonable measures to keep such information secret; and (B) the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, another person who can obtain economic value from the disclosure or use of the information."
However, the law contains several important differences from prior law.
The DTSA also clarifies that a United States resident (including a company) can be liable for misappropriation that takes place outside the United States, and any person can be liable as long as an act in furtherance of the misappropriation takes place in the United States, 18 U.S.C. §1837. The DTSA provides the courts with broad injunctive powers. 18 U.S.C. §1836(b)(3).
The DTSA does not preempt or supplant state laws, but provides an additional cause of action. Because states vary significantly in their approach to the "inevitable disclosure" doctrine,its use has limited, if any, application under the DTSA, 18 U.S.C.§1836(b)(3)(A).
In the United States, trade secrets are not protected by law in the same manner as patents or trademarks. Historically, trademarks and patents are protected under federal statutes, the Lanham Act and Patent Act, respectively, while trade secrets are usually protected under state laws, and most states have enacted the Uniform Trade Secrets Act (UTSA), except for Massachusetts, New York, and North Carolina. However, since 2016 this situation changed with the enactment of the Defend Trade Secrets Act (DTSA), making trade secrets also protectable under a federal law. One of the differences between patents and trademarks, on the one hand, and trade secrets, on the other, is that a trade secret is protected only when the owner has taken reasonable measures to protect the information as a secret (see 18 U.S.C. § 1839(3)(A)).
Nations have different trademark policies. Assuming the mark in question meets certain other standards of protectibility, trademarks are generally protected from infringement on the grounds that other uses might confuse consumers as to the origin or nature of the goods once the mark has been associated with a particular supplier. Similar considerations apply to service marks and trade dress.
By definition, a trademark enjoys no protection (qua trademark) until and unless it is "disclosed" to consumers, for only then are consumers able to associate it with a supplier or source in the requisite manner. (That a company plans to use a certain trademark might itself be protectable as a trade secret, however, until the mark is actually made public.)
To acquire a trademark rights under U.S. law, one must simply use the mark "in commerce".It is possible to register a trademark in the United States, both at the federal and state levels. Registration of trademarks confers some advantages, including stronger protection in certain respects, but registration is not required in order to get protection. Registration may be required in order to file a lawsuit for trademark infringement.
To acquire a patent, full information about the method or product has to be supplied to the patent office and upon publication or issuance, will then be available to all. After expiration of the patent, competitors can copy the method or product legally. The temporary monopoly on the subject matter of the patent is regarded as a tradeoff for thus disclosing the information to the public.[ citation needed ]
It may be possible to obtain patent protection for a trade secret. In order to obtain a patent, the inventor must disclose the invention, so that others will be able to both make and use the invention. To obtain a patent in the United States, any preference for the mode of practicing the invention must be disclosed.Often, an invention will be improved after filing of the patent application, and additional information will be learned. None of that additional information must be disclosed through the patent application process, and it may thus be kept as a trade secret. That nondisclosed information will often increase the commercial viability of the patent. Most patent licenses include clauses that require the inventor to disclose any trade secrets they have, and patent licensors must be careful to maintain their trade secrets while licensing a patent through such means as the use of a non-disclosure agreement.
Compared to patents, the advantages of trade secrets are that a trade secret is not limited in time (it "continues indefinitely as long as the secret is not revealed to the public", whereas a patent is only in force for a specified time, after which others may freely copy the invention), a trade secret does not imply any registration costs,has an immediate effect, does not require compliance with any formalities, and does not imply any disclosure of the invention to the public. The disadvantages of trade secrets include that "others may be able to legally discover the secret and be thereafter entitled to use it", "others may obtain patent protection for legally discovered secrets", and a trade secret is more difficult to enforce than a patent.
Trade secret regulations that mask the composition of chemical agents in consumer products have been criticized for allowing the trade secret holders to hide the presence of potentially harmful and toxic substances. It has been argued that the public is being denied a clear picture of such products' safety, whereas competitors are well positioned to analyze its chemical composition.In 2004, the National Environmental Trust tested 40 common consumer products; in more than half of them they found toxic substances not listed on the product label.
Intellectual property (IP) is a category of property that includes intangible creations of the human intellect. There are many types of intellectual property, and some countries recognize more than others. The best-known types are patents, copyrights, trademarks, and trade secrets. The modern concept of intellectual property developed in England in the 17th and 18th centuries. The term "intellectual property" began to be used in the 19th century, though it was not until the late 20th century that intellectual property became commonplace in the majority of the world's legal systems.
A non-disclosure agreement (NDA) is a legal contract or part of a contract between at least two parties that outlines confidential material, knowledge, or information that the parties wish to share with one another for certain purposes, but wish to restrict access to. Doctor–patient confidentiality, attorney–client privilege, priest–penitent privilege and bank–client confidentiality agreements are examples of NDAs, which are often not enshrined in a written contract between the parties.
A patent is a type of intellectual property that gives its owner the legal right to exclude others from making, using, or selling an invention for a limited period of time in exchange for publishing an enabling disclosure of the invention. In most countries, patent rights fall under private law and the patent holder must sue someone infringing the patent in order to enforce their rights. In some industries patents are an essential form of competitive advantage; in others they are irrelevant.
An industrial design right is an intellectual property right that protects the visual design of objects that are purely utilitarian. An industrial design consists of the creation of a shape, configuration or composition of pattern or color, or combination of pattern and color in three-dimensional form containing aesthetic value. An industrial design can be a two- or three-dimensional pattern used to produce a product, industrial commodity or handicraft.
Intellectual property rights (IPRs) have been acknowledged and protected in China since the 1980s. China has acceded to the major international conventions on protection of rights to intellectual property. Domestically, protection of intellectual property law has also been established by government legislation, administrative regulations, and decrees in the areas of trademark, copyright, and patent. This has led to the creation of a comprehensive legal framework to protect both local and foreign intellectual property. Despite this, copyright violations are extremely common in the PRC. The American Chamber of Commerce in China surveyed over 500 of its members doing business in China regarding IPR for its 2016 China Business Climate Survey Report, and found that IPR enforcement is improving, but significant challenges still remain. The results show that the laws in place exceed their actual enforcement, with patent protection receiving the highest approval rate, while protection of trade secrets lags far behind. Many US companies have claimed that the Chinese government has stolen their intellectual property sometime in 2009–2019.
The Economic Espionage Act of 1996 was a 6 title Act of Congress dealing with a wide range of issues, including not only industrial espionage, but the insanity defense, matters regarding the Boys & Girls Clubs of America, requirements for presentence investigation reports, and the United States Sentencing Commission reports regarding encryption or scrambling technology, and other technical and minor amendments.
Sufficiency of disclosure or enablement is a patent law requirement that a patent application disclose a claimed invention in sufficient detail so that the person skilled in the art could carry out that claimed invention. The requirement is fundamental to patent law: a monopoly is granted for a given period of time in exchange for a disclosure to the public how to make or practice the invention.
The Patent Reform Act of 2005 was United States patent legislation proposed in the 109th United States Congress. Texas Republican Congressman Lamar S. Smith introduced the Act on 8 June 2005. Smith called the Act "the most comprehensive change to U.S. patent law since Congress passed the 1952 Patent Act." The Act proposed many of the recommendations made by a 2003 report by the Federal Trade Commission and a 2004 report by the National Academy of Sciences.
Intellectual rights to magic methods refers to the legal and ethical debate about the extent to which proprietary or exclusive rights may subsist in the methods or processes by which magic tricks or illusions are performed. It is a subject of some controversy.
The Uniform Trade Secrets Act (UTSA), published by the Uniform Law Commission (ULC) in 1979 and amended in 1985, is a Uniform Act promulgated for adoption by states in the United States. One goal of the UTSA is to make the state laws governing trade secrets uniform, which is especially important for companies that operate in more than one state. Historically, the law governing misappropriation of trade secrets developed separately in each state.
Canadian trademark law provides protection to marks by statute under the Trademarks Act and also at common law. Trademark law provides protection for distinctive marks, certification marks, distinguishing guises, and proposed marks against those who appropriate the goodwill of the mark or create confusion between different vendors' goods or services. A mark can be protected either as a registered trademark under the Act or can alternately be protected by a common law action in passing off.
Know-how is a term for practical knowledge on how to accomplish something, as opposed to "know-what" (facts), "know-why" (science), or "know-who" (communication). It is also often referred to as street smarts, and a person employing their street smarts as street wise. Know-how is often tacit knowledge, which means that it can be difficult to transfer to another person by means of writing it down or verbalising it. The opposite of tacit knowledge is explicit knowledge.
Information sensitivity is the control of access to information or knowledge that might result in loss of an advantage or level of security if disclosed to others.
The following outline is provided as an overview of and topical guide to intellectual property:
A trademark is a type of intellectual property consisting of a recognizable sign, design, or expression that identifies products or services from a particular source and distinguishes them from others. The trademark owner can be an individual, business organization, or any legal entity. A trademark may be located on a package, a label, a voucher, or on the product itself. Trademarks used to identify services are sometimes called service marks.
DVD Copy Control Association, Inc. v. Bunner was a lawsuit that was filed by the DVD Copy Control Association in California, accusing Andrew Bunner and several others of misappropriation of trade secrets under California's implementation of the Uniform Trade Secrets Act. The case went through several rounds of appeals and was last heard and decided in February 2004 by the California Court of Appeal for the Sixth District.
Canadian intellectual property law governs the regulation of the exploitation of intellectual property in Canada. Creators of intellectual property gain rights either by statute or by the common law. Intellectual property is governed both by provincial and federal jurisdiction, although most legislation and judicial activity occur at the federal level.
A patent holder in Canada has the exclusive right, privilege and liberty to making, constructing, using and selling the invention for the term of the patent, from the time the patent is granted. Any person who does any of these acts in relation to an invention without permission of the patent owner is liable for patent infringement.
In Canada, trade secrets are generally considered to include information set out, contained or embodied in, but not limited to, a formula, pattern, plan, compilation, computer program, method, technique, process, product, device or mechanism; it may be information of any sort; an idea of a scientific nature, or of a literary nature, as long as they grant an economical advantage to the business and improve its value. Additionally, there must be some element of secrecy. Matters of public knowledge or of general knowledge in an industry cannot be the subject-matter of a trade secret.
Eastman Kodak v Harold Worden is a case of industrial espionage involving the sale of information by Harold Worden, a former Kodak manager, to Kodak's competitors in 1995. Worden was caught selling details on the 401 process, a process designed to increase the speed and quality of film during development, during a sting operation conducted by Kodak after two of their competitors, Konica and Agfa-Gevaert, told Kodak that he had approached them selling trade secrets. After the sting operation, Worden was sentenced to 15 months in prison and a fine of $30,000 for interstate transportation of stolen property.