Protecting the P&C Industry’s Intellectual Assets
start to fly. Good luck with that. You
will need to convince the court something
along the lines that “no reasonable alternative” exists to protect the trade secret
holder from the harm that would occur
due to disclosure in a public court setting.
It is not unheard of to get a closed court
proceeding, but the existence of trade secrets in the case does not get an automatic
grant to close the court. It may be wise
to sharpen your arguments as to the existence and value of your trade secrets far
in advance of any potential legal action to
convince the court to do what is needed
to protect your property. And, if you have
paid attention to our admonishments in
iPaint ( http://www.coatingsworld.com/is-
sues/2013-01/view_ipaint/how-much-is-
that-trade-secret-worth/), you will have
a ready list and valuation that you have
frequently updated (of course you have!).
If you are slow to parry your opponent’s slight of legal hand in keeping
court proceedings tightly under wraps,
then the bleeding out of your trade secrets
starts. In Littlejohn v. Bic Corp. (697
F.Supp. 192 (1988)), a product liability
case about Littlejohn accidentally getting
burned by a Bic lighter, a protective order
was in place to protect Bic Corp’s trade
secrets. Unfortunately, Bic Corp’s counsel
did not object to exhibits introduced at
trial that disclosed trade secrets covered
by the order. A post-trial attempt by Bic
to get the Court to seal the trial record
was not granted, and it was found that
failure to raise the issue of confidentiality regarding the exhibits and seeking an
order sealing the record during the trial
constituted a waiver of rights granted by
the protective order. Oops!
You can learn a lot on what you
should do based on the reasoning courts’
use to deny a request for sealing the case
record. In Carnegie Mellon University v.
Marvell Technology Group, Civ. Action
No. 09-290 (W.D. Pa. Mar. 29, 2013),
the court found that a party’s confidentiality interest in its trade secrets were
waived by failing to take the following
actions during trial: seek a protective
order, request a closed proceeding after
the court’s warning, make submissions
regarding confidential information in
the judge’s chambers before introduction
into the public record, and moving to seal
the records. The court also noted that
evidence of harm by public disclosure at
trial was not presented. The point being,
if you wind up in court, be prepared for
the eventuality that despite your good but
not perfect efforts, you still may wind up
having your trade secrets exposed.
Even if you succeed in having the court
records sealed, that does not mean they
can’t be unsealed during appeal. Apple
Inc. found this out as public sources were
cited as disclosing the trade secrets subject
to seal, leading the U.S. Court of Appeals in
San Francisco (9th Cir.) to state that Apple
“cannot have this court seal information
merely to avoid confirming that the publicly available sources got it right.” So, if
there was a question in the minds of your
competitors as to whether your trade secret
was even partly reversed engineered, you
can put that issue to rest to their advantage
by disclosing the trade secret in court, even
when you thought you were protected.
Well, what recourse do you have af-
ter loss of your trade secrets due to
litigation? Can you recover financial
losses from the state or Federal gov-
ernment? Probably not, but the idea is
something to keep an eye on as case law
progresses over time. The federal Takings
Clause states that “nor shall private prop-
erty be taken for public use, without just
compensation,” and as trade secrets have
been held to qualify for this protection
by the Supreme Court in Ruckelshaus
v. Monsanto Co. The Court’s position
was that a government agency’s disclo-
sure of a trade secret that interferes with
“reasonable investment-backed expecta-
tions” could qualify as a “taking,” and
thus make governmental compensation
possible. And it has been speculated in
legal circles that a court’s refusal to or-
der protective measures could amount to
a “taking” when trade secrets are lost by
disclosures at trial.
But given various courts’ view from
the decisions discussed above that the
burden is on you to take reasonable
measures to protect your trade secrets,
trying to switch that attitude 180° while
blazing new legal trails will likely be an
uphill battle.
Is there an alternative to the court
process that is any better? Well, there
is state-run arbitration, which was supposed to be a more confidential way
to resolve business disputes, but the
Supreme Court recently let stand a ruling that Delaware’s arbitration system
must be open to the public like civil
trials. Ok, what about private arbitration? The Supreme Court has described private arbitration as able to
be designed by the parties so “that proceedings be kept confidential to protect
trade secrets.” So, if you are on good
enough terms with the opposition to
reach a mutual agreement to a confidential arbitration proceeding, it is an
avenue to be considered.
Ok, let’s face it: this whole situation
is rife with peril! But, sometimes you
gotta do what you gotta do. Failure to
aggressively protect against theft of your
trade secrets is a death knell for their continued existence. Failure to keep up the
hard work of protecting them in a court
proceeding is just as much a requirement.
Hard spots and rocks. CW
