Coatings World - June 2012

cover both scenarios.

To this point in setting up your DIY audit, we have focused on things you more or less have control over in a trade secret lawsuit. Now, it gets a bit dicier— namely, predicting how the bad guy is going to act—and catching him at it. For one thing, you have to show that the thief either used or disclosed (and/or illegally acquired, under the Restatement Third of Competition) the ill-gotten trade secrets he swiped from you in order to trigger any relief from the courts. And, in many cases you have only a short period of time after you know or should have known about the heist to sue the curmudgeon.

See no evil, hear no evil, speak no evil may work for the three wise monkeys of the Tōshō-g shrine, but it does not work for the trade secret owner. To the contrary, your DIY trade secret audit should have a very strong component making sure you have an effective ears-to-the-wall gathering of competitive corporate intelligence, watchful employee monitoring and reasonable security.

Your DIY audit needs to set in place a system that kicks in when there is sufficient reason to suspect someone else has illegally disclosed, acquired or is illegally using your trade secrets. Illegal acquisition certainly would be established by burglary, but wiretapping and fraud also qualify. Other improper means can include unauthorized interception of communications, or inducement or knowing participation in a breach of confidence by another.

Illegal use or disclosure can arise as a result of a breach of a confidential relationship, improper means outside a confidential relationship, obtaining the trade secrets from another that illegally acquired them, and even acquisition by accident or mistake. Similarly, “use” is not limited to traditional concepts of manufacturing and sale. Even if a competitor does not “use” its knowledge of your newest formulation improvements from a technical perspective, but accelerates its own competitive product in view of its ill-gotten knowledge of your own new product launch date, theft may be shown. Use in a foreign jurisdiction can

trigger liability, and be prevented in a US-based proceeding.

So, cast your DIY audit net widely. And, do not be put off by claims of independent development or reverse engineer-

“[Y]our DIY trade secret audit should have a very strong component making sure you have an effective ears-to-the-wall gathering of competitive corporate intelligence, watchful employee monitoring and reasonable security.

ing of your publicly available coatings that is miraculously accomplished after you file suit—the initial conduct was still wrongful and actionable.

Your DIY protection system claxons start ringing having detected a possible illegal disclosure, use or acquisition of your trade secrets, and all hands are called onto the deck. What do you deliver to your attorney to initiate the suit?

Generally, he will need you to gather that facts that show (1) the protected matter is not generally known or readily ascertainable; (2) it provides your company a demonstrable competitive edge; ( 3) you spent plenty to develop it; and ( 4) you intended to and did in fact take steps to keep it protected.

If you’ve set up your DIY system properly, this evidence should basically spill out of your computers onto a flash drive that you can hand to the paralegal at your first litigation meeting—saving your com-

pany valuable time and lots of money— all the while impressing the heck out of your litigation attorney. Your system will regurgitate all the steps you have taken as a condition precedent to assure relative secrecy and it’s not just what you DO but what you DON’T do that will loom large. You DO have restricted access to offices, labs, computers, data, etc. You DON’T allow publication of important company information unless it has been subjected to a review process. You DO conduct exit interviews of your own employees, but you DON’T allow new employees to bring potentially confidential information of a competitor into your own facility and remind them of same at entrance interviews. You DO discuss confidential information with clients and vendors, but you DON’T do so absent a contractual duty of confidence.

A DIY approach to this task may seem daunting at first. And certainly the process can be eased considerably with skilled trade secret experts, but the effort will pay off in the end. Even if you decide to begin a revamp of your trade secret protection processes using a pro, you will want to routinely make DIY sweeps of your systems to make sure all parts are up-to-date and fully operational.

In many cases, a well-designed process can prevent trade secret theft in the first place. In the instance that misappropriation takes place, this same well-honed system can quickly and summarily prevent actual damaging use or more widely disclosed knowledge of your competitive information. And, in the fairly rare event that the suit goes the distance, your system will place your case in the best possible position to prevail. And, just like any DIY project that you undertake— be it hanging wallpaper, changing spark plugs or painting your den—practice makes perfect. CW

Technology Litigators (McDaniel & Assoc. P.C.) was founded in 1999 by Steve McDaniel, Ph.D., J.D. in Austin, Texas. The firm is a full-service intellectual property law firm with a particular focus on trade secret protection. For more information visit them online at www.technologylitigators.com.