by Steve McDaniel & Jon Hurt
Technology Litigators
If you find yourself inadvertently in pos- session of someone else’s trade secret hat you are accused of misappropriating, what are your options to defend yourself? As always, it is circumstance specific.
Your first defense against trade secret
misappropriation includes showing that
the trade secret was not a trade secret due
to failure to take reasonable efforts to
maintain the secrecy of the information.
For example, someone losing a briefcase
or laptop containing trade secrets that lack
sufficient security protections in a public
place generally is not taking reasonable efforts to protect the information’s secrecy,
and thus disqualify it for trade secret protection. Additionally, use of the trade secret by the finder of the lost documents or
computer information may be argued as
occurring innocently rather than improperly if the information is readily viewable
/ displayed (i.e., the 1st files and programs
visible) to the finder. In other words, if you
find someone else’s (now no longer) secret
formula lying in the street due to their
carelessness, and you capitalize on it, you
probably just won the lottery. Go you!
The internet is the biggest “public
street” in the world. And generally, anything posted there is available for your
use, sans other types of intellectual property protection, as it is no longer a trade
secret but now is publically available.
Injunctions to stop dissemination of the
trade secret are pretty much moot in this
scenario. However, the person who originally posts the trade secret on the internet, if they misappropriated it, typically
wind up paying damages if sued.
People like to brag, and the newbie
trade secret creator will try to market or
license his idea to a known company, typ-
ically in the same field. So now someone
sends you an unsolicited copy of his trade
secret. And if you wind up marketing a
similar product, such as one you indepen-
dently created, this guy will naturally say
you stole his idea. To avoid getting sued
or have a strong pre-position prior to be-
ing sued by this guy, first have a designat-
ed receiver of such correspondence (e.g.,
your legal department) to quarantine
the idea from contaminating your R&D
department that could develop a similar
product. Then send a response back to
the newbie trade secret creator that the
information was received unsolicited and
as such the company has no confidenti-
ality duty to the creator, that it will not
enter into one with the creator, nor does it
accept unsolicited ideas. If the idea seems
related to a product being developed by
your company, make sure the product’s
independent development process is
well-documented. Also consider having
a policy statement that restates the posi-
tion of the response letter, and that such
a submission is considered the receiver’s
property that can be used without any
obligation of compensation to the sender.
This all sounds a bit of a tough stance,
but you really can’t get bogged down
with lawsuit after lawsuit if you have a
high profile and people are continuingly
sending you their ideas.
But what if someone discloses to you,
under a confidentiality agreement, a third
party’s trade secret? With the infinite
spider’s web of non-disclosure agree-
ments between various companies, there
will be times when a company that has
a trade secret disclosed to them in con-
fidence from a third party may blab it
to you. But you very likely don’t know
that the confidential information belongs
to the third player! How liable are you
for trade secret misappropriation? Well,
you can defend yourself as innocently
receiving, rather than misappropriating,
the trade secret information. And gener-
ally, in that circumstance, you will often
wind up having to abide by an injunction
placed against you for future use of the
trade secret, but not have to pay damages
for misappropriation. The company that
disclosed the third party’s trade secret
will be the one in trouble though.
You may take proactive steps to insulate yourself from such fire-fights, such as
having your confidentiality agreements
stipulate that the company you are sharing information with will not disclose to
you other party’s confidential information.
Consider seeking a clause providing that
you be indemnified against claims by a
third party. Looking at it from the third
party’s perspective, you probably want to
have a clause in your non-disclosure agree-
ments that the information being disclosed
may contain trade secrets, and state that
the information should not be disclosed
to other parties. Additionally, mark such
disclosed materials as “trade secrets” and
“not for forwarding” as appropriate.
Other circumstance where you may
find yourself in possession of or using
The Hot Potato –
Handling Someone Else’s Trade Secret
