Coatings World - February 2015

Protecting the P&C Industry’s Intellectual Assets

by Steve McDaniel and Jon Hurt Technology Litigators

Civil court is a double-edged sword that can cut you pretty badly when trying to keep your trade secrets actually Secret. You can go to court specifically to stop use or disclosure of your proprietary information, or even for some reason not related to trade secret misappropriation. But, if you are not very careful, the generally noble-minded tendency of courts to be open forums can lead to the destructive release of your trade secrets into the public domain.

There are several legal maneuvers generally available to help protect you from unintentionally disemboweling yourself on the blade of justice.

The overall goal of your efforts is to establish that you took reasonable measures to maintain the secrecy of your trade secrets. This includes reasonable efforts to do so during court proceedings. It allows you the best chance of persuasively arguing that the court records should be sealed after trial is complete. And, subsequently, to show that you have not lost your trade secrets property rights during a court proceeding. Failure to do so may (assume will) result in the loss of your trade secrets.

The first thing you should seek is a protective order where any proprietary information is filed with the court under seal. Typically, you negotiate a confidentiality agreement with your adversary as early as possible during discovery stating that certain information should remain confidential, and then you ask the court to issue a protective order modeled on the agreement.

A protective order may stipulate, for
instance, that only the counsel (and pos-
sibly the parties and/or experts) may have
access to proprietary information in the
discovery process, what documents are
filed under seal, and how the documents
are to be handled after trial to maintain
confidentiality. This path avoids asking
the court for protection to keep under
seal each separate filing having propri-
etary information. But, it may be hard to
implement a protective order if both par-
ties and the court can’t achieve agreement
regarding the bounds of the order.
One party may want information to
be fully available to witnesses during
trial, or may just not want to make life
easy for the other guy by acknowledg-
ing information to be confidential (“Do
you really want to pursue this court case
and possibly exposure your trade secrets,
pal?”). And some courts may be less than
enthused by the extra work in segregating
unsealed and sealed records, in addition
to undermining the tradition of transpar-
ent court proceedings. Be prepared to
demonstrate the necessity of these actions,
including arguing that alternatives such
as redacting documents would not be ef-
fective in maintaining the necessary level
of secrecy. And, of course, follow all the
guidelines we have discussed concerning
reasonable efforts to maintain your trade
secrets OUTSIDE the courtroom (http://
www.coatingsworld.com/issues/2012-09/
view_ipaint/the-wall-of-your-trade-se-
cret-vault-is-made-of-paper/).
Even with a protective order in place
regarding public access to documents,
what about members of the public (i.e.,
competitors seeking the trade secrets)
simply attending the trial and paying
close attention? A lot can be said during
live oral testimony, and key information
can be displayed using giant flash cards
or other audio visual memory aids called
“exhibits.” What is heard cannot be un-
heard, what is seen cannot be unseen.
And your less than friendly opposition
will likely be keenly aware of this issue.
For example, in The Gates Rubber Co. v.
Bando Chemical Industries Ltd. ( 9 F.3d
823, 28 USPQ2d 1503), the defendant
argued that a permanent injunction was
inappropriate to protect the plaintiff’s
trade secrets as they were no longer trade
secrets after disclosure during the perma-
nent injunction hearing. Wow, talk about
a damned if you do damned if you don’t
argument! Fortunately, as the attorney
for the plaintiff monitored the presence
of observers in the courtroom during the
hearing, and sought that the record of the
hearing was subsequently placed under
seal, it was deemed to be “reasonable ef-
forts” to maintain the trade secrets’ secre-
cy. Do not forget that anywhere sworn
testimony is given (i.e., a deposition of
your CEO at your own lawyers’ fancy
Ming-vase bedecked conference room),
there is substantial risk of inadvertent
disclosure of your trade secrets.