26 | Coatings World www.coatingsworld.com December 2013
Protecting the P&C Industry’s Intellectual Assets
by Steve McDaniel, Beth McDaniel &
Jon Hurt, Technology Litigators
As we approach the New Year, we here at the law firm are wondering what you our readers would want
us to write about next year. We’d love to
hear your ideas as to what that might be,
and you can let Coatings World know by
contacting our Editor and letting her know
(Kerry Pianoforte, kpianoforte@rodmanmedia.com). Be nice, because she is a very nice
lady, and she works very hard while she
somehow puts up with us AND manages
being a brand new mom! We will collect
these ideas and return to iPaint-ing for you
sometime mid-year. Until then, we’re going
on break. But, before we do, we would like
to remind you about the topics and ideas we
have already discussed with you.
A “protective wall of paper”—a series
of documents including agreements and
restrictive covenants to protect your trade
secrets—is your first line of defense against
the techno-thief. The Wall will help you to
avoid theft by relatively honest people and
if litigation is inevitable it will serve as concrete evidence in court showing you took
reasonable and proper steps to protect your
trade secrets. A trade secret audit will have
you locked and loaded and the thief will be
staring down both barrels of a sawed-off
12-gauge shotgun poking out from behind
a wall of paper.
The paint and coatings industry is one
whose recipes tell only a part of the story.
We produce many high-solids suspensions,
with many ingredients, using many process
steps all of which are embodied in the prod-
uct on the shelf. Even with the product in
hand, and even with the publicly available
Materials Data Safety Sheet, a competitor
is sorely pressed to duplicate the coating in
many cases. So, we are often the target of
high-stakes trade secret theft. Many times,
it’s an inside job. http://sh
What is and isn’t a trade secret – not al-
ways a cut-and-dried proposition. We look
to several sources for those definitions. We
look at trade secret cases that have been or
are currently being litigated for suggestions
of how to determine what is or isn’t a trade
secret, and these collectively form the com-
mon law. Lawyers occasionally look at the
common law cases and summarize or “re-
state” the case law – generating what is called
the Restatement of Torts, or Restatement of
Unfair Competition. Sometimes, they will
suggest statutes to govern what is and isn’t
a protectable trade secret—for instance in
what’s called the Uniform Trade Secrets
Act. Sometimes states adopt these sugges-
tions from one or the other of these bod-
ies of law into their own state laws—that’s
called statutory state law. The Feds do the
same thing, ergo, federal statutory trade
secret laws like the Economic Espionage
Act. It gets really mind-numbing when you
cross back and forth over national borders
to protect your company’s crown jewels. If
in doubt, ask a litigator.
Remember, it is not uncommon that
a trade secret heist is an inside job. Secret
formulas, manufacturing processes, financial
information, future product plans, customer
lists…what are your trade secrets and what
are you doing to protect them from inadvertent or intentional misuse or misappropria-tion by your own employees? Trade secret
protection is afforded to you as employer,
but only if you the employer take reasonable
steps to treat this information as confidential and you provide notice to employees of
the status of the secrets. Protect, inform, get
consent, maintain and remind employees of
your trade secret policies. Employees need
to know the boundaries of their access to
trade secrets, how to treat trade secrets and
the consequences if breached. It is important
that these policies are set forth in clear and
unambiguous language.
Patent versus trade secret protection?
In many cases, a patent is not the best way
to approach this. A patent is in essence
Plaintiff’s Exhibit No. One, i.e., you’re go-
ing to have to sue someone. You may have
to repeat the process and spend gobs more
money in Japan, Europe, etc. to cover those
markets. Getting a patent in the U.S. these
days is an expensive crap-shoot with the
dice moving in super-slow motion. Your
company’s internal “know-how” can be
protected immediately by binding contracts
and concrete actions. Patent protection has
its own intrinsic value, but trade secrecy is
like love—it’s yours to cherish forever and it
shouldn’t cost you as dearly.
If you have to resort to the courts to pro-
tect your trade secrets, all of the work you
have done to batten-down your trade secret
assets will be scrutinized and examined un-
der the microscope and harsh light of 20/20
hindsight. Therefore, the creation of a pro-
gram and its routine and rigorous enforce-
ment is essential because every element of
your program will be attacked as a defense
to enforcement. If you fail to show that you
have trade secrets or that you have not ad-
equately protected them, even if the defen-
dant wrongly accessed them, you will likely
lose your case. Not only will you be unable
to enforce it against the present defendant,
it is likely that you will be unable to enforce
them against any subsequent violator. So, in
setting up your trade secret protection pro-
gram, think “lawsuit.”
Doing It Yourself – even if you are setting
up your trade secret protection protocols
yourself, there is one and only way to orga-
nize your DIY trade secret audit and, that
is by preparing yourself for a trade secret
lawsuit. There are really only a few possible
legal theories and chiefly there are two upon
which you should focus your audit. Namely,
either the bums broke a contract with you
under which they promised NOT to steal
them, or they committed the civil equivalent
of criminal theft. In many cases, a well-de-
signed process can prevent trade secret theft
in the first place. In the instance that mis-
appropriation takes place, this same well-
honed system can quickly and summarily
prevent actual damaging use or more widely
disclosed knowledge of your competitive in-
formation. And, in the fairly rare event that
the suit goes the distance, your system will
All Good Things... Must Come to An End...Unless They’re
Really Good, Like You Know, Chocolate or Something!
