APHRDI

Residential Training

Program

Professor & Lawyer Puttu. Guru PrasadM.B.A., M.Com., M.Phil., PGDFTM., APSET., PhD at JNTUK,

Senior faculty for Management Sciences,

Department of S&H,

Vasireddy Venkatadri Institute of Technology, Nambur.

Professor & Lawyer Puttu. Guru PrasadM.B.A., M.Com., M.Phil., PGDFTM., APSET., PhD at JNTUK

Trade secretes

Financial

information

Technical &

scientific

information

Commercial

information

Negative

information

A trade secret is a formula, pattern,

physical device, idea, process, or

compilation of information which is

not generally known or reasonably

ascertainable, by which a business

can obtain an economic advantage

over competitors or customers.

A formula for a sports drink

Survey methods used by professional pollsters, and Recipes (food)

A new invention for which a patent application has not yet been filed

Marketing strategies

Manufacturing techniques

Computer algorithms

Secrecy

Restrict access to the information (lock it away in a secure place, such as a bank vault)

Limit the number of people who know the information

Have the people who know the trade secret agree in writing not to disclose the information (sign non-disclosure agreements)

Have anyone that comes in contact with the trade secret, directly or indirectly, sign non-disclosure agreements

Mark any written material pertaining to the trade secret as proprietary

Unlimited duration -trade secrets could

potentially last longer than patents (20 years)

and copyrights

Your protection is theoretically worldwide

No application required

No registration costs

No public disclosure or registration with

government agency

Effective immediately

Formula for Coca-Cola

The Big Mac Special Sauce

KFC Chicken Recipe

WD-40 Formula

Secret RecipesKentucky fried chicken

The secret recipe of “11 herbs and spices” lies in a bank

vault. Few people know it, and they are contractually

obligated to secrecy.

The ingredients are mixed by two different companies in

two different locations and then combined elsewhere in a

third, separate location.

To mix the final formula, a computer processing system is

used to blend the mixtures together and ensure that no

one outside KFC has the complete recipe

Secret !

Initially Later stage

Not patentable patentable

patent

TS

Strategic

business

decision

TS•Part of the idea

TS

© ID

no registration- less costs (but: costs to keep secret)

- immediately available

can last longer- but: limited to economic life

- uncertain lifespan: leak out is irremediable

no public disclosure- but: practical need to disclose

- if leak out: TS lost

Trade Secrets

registration- fees (registration + maintenance)

- takes time to get patent

limited in time- generally: max 20y

- but: can be invalided

public disclosure- publication 18m after filing

- if P not allowed: no TS

Patents

What is difference between TS and Patent

1 Court Order to stop the misuse

2. Monetary damages

•Actual damages caused as a result of the misuse (lostprofits)

•Amount by which defendant unjustly benefited from

the misappropriation (unjust enrichment)3. Seizure order

•Can be obtained in civil actions to search thedefendant's premises in order to obtain the evidenceto establish the theft of TS at trial

4. Precautionary impoundment

•Of the articles that include misused TS, or the productsthat resulted of misusing

Remedies to Misappropriation

1. Independent Creation- similar formula created with his own knowledge.

2.Unclean hands – The owners behavior is morally wrong.

3.Laches- unreasonable delay in asserting a claim, which may result in its dismissal.

4.Absence of secrecy protection measures-failed in protecting its trade secret, sharing it through publication.

5.Privileges- sharing the information before media at court trail.

1. Contract law

• When there is an agreement to protect the TS

NDA/CA

anti-reverse engineering clause

• Where a confidential relationship exists

attorney, employee, independent contractors

2. Principle of tort / unfair competition

• Misappropriation by competitors who have no

contractual relationship

theft, espionage, subversion of employees

TS protection may be based on...

3. Criminal laws

• e.g. for an employee to steal trade secrets from a

company

• e.g. unauthorized access to computers

• theft, electronic espionage, invasion of privacy, etc.

• circumvention of technical protection systems

4. Specific trade secret laws

• US: Uniform Trade Secrets Act; Economic

Espionage Act

TS protection may be based on...

Trade secret litigation comprises of twoaspects.

1. violation of trade secret law takesplace, when the confidential informationis obtained through misappropriation.

2. violation of nondisclosure agreementtakes place when a party in the contractbreached the agreement.

The law of unfair competition is to safeguardthe interest of the customers from unfair ormisleading trade practices.

Types of Unfair Competition:

Passing off

Misappropriation

Right of Publicity

False Advertising

Product Disparagement

Dilution

Infringement of Trade Dress

Infringement of Trade Dress:- the unique and distinctive feature of a product , service, or business which differentiates it from others is known as “Trade Dress”.

Trade Dress protection is needed to restrict others from duplicating a product.

Dilution: Basically , Tarnishment and Blurringare the two important aspects which areresponsible for dilution of a product.

The unauthorized use of a mark on a dissimilarproduct which damages the distinctiveness ofthe that mark is known as ‘Blurring’.

‘Tarnishment’ refers to the unauthorized use ofmark for a poor quality product which effectsthe products of mark owner.

Product Disparagement: when a falsestatement is made with an intention to harm acompany or its products or its services, then itis known as “product disparagement”.

It is also known as ‘Trade Libel’ or“Commercial Disparagement”.

Right of Publicity: Allows individuals toprotect their identities from being used forcommercial purpose by other parties. Manycompanies misuse the celebrities name in faketo sell their products

Passing off occurs when one party sells hisgoods and services by affixing anothercompany’s trade mark on them.

Passing off is confined to registered andunregistered trademarks , symbols , signs anddevices etc.,

Passing off is an offence which is done bymisrepresenting the goods and services forcreating confusion in customers mind whicheffects the image or good will of the originalmanufacturer.

Misappropriation exists when one party uses the property of other party without informing them.

Misappropriation means unauthorized use ofperson's name or likeness for advertisingpurpose, which effects the image of otherpersons.

The plaintiff does not possess any copy right for it and he cannot claim any damages; ex-stock market rumors , news paper report etc.,

The Clean Room:- The clean room refers to aroom in which a team of engineers, designers,researchers or scientists work together for aspecific purpose. Each and every activity isdocumented .

The clean room act as an evidence to prove thatthe information which is identical to someother’s trade secret has derived through teamefforts.

It also ensures that the information was notcopied , theft or gained through any otherimproper means

Reverse Engineering: Any information which is obtained through reverse engineering of a product, will also be unprotectable under TS.

Ex:- A Gel Pen company has a secret formulafor making Gel used in pens. If a personpurchases the pen and analyze the Gelchemically and come to knew about the secretformula, then it is called “ReverseEngineering”

HOW ARE TRADE SECRETS LOST

OR STOLEN ?

– Departing or Disgruntled employees

– Intentional (malicious)

– Inevitable (knowledge acquired)

– by Ignorance

80% of trade secret loss

< Employees, Contractors, Trusted

Insiders!

A Growing Problem. Why Does It Occur?

A Growing Problem. Why Does It Occur?

– The Way we do business today (increased use of contractors, temporary workers, out-sourcing)

– Declining employee loyalty: more job changes

– Organized crime : discovered the money to be made in stealing high tech IP

– Storage facilities (DVD, external memories, keys)

– Expanding use of wireless technology

Trade secrets may be legally discovered by the following proper means:

Independent invention

Reverse engineering:-that is, starting with the known product and workingbackward to find the method by which it was developed(assuming the reverse engineering is not prohibited bycontract)

Observing the item in public use or on public display

Obtaining the trade secret from published literature

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What is lawful? Discovery of the secret by fair and

honest means

1. Independent creation

– without using illegal means or violating agreements

or law

– patent

TS protection

provides

no exclusivity !

What is lawful?2. Reverse engineering

– Common practice among software companies: studying competitors' products

•to make software that can interoperate with the software being studied

•to make a product that will compete with it

– E.g. decompile object code to reveal its structure and figure out the interface specifications for interoperability purposes

– E.g. look at a program's input and outputs

2. Confidentiality agreement or NDA

e.g., employees, suppliers, consultants, financial advisors

What is typically considered

wrongful?

1. Duty of trust

– implied or imposed by law

– e.g., employees, directors, lawyers

3. Industrial espionage, theft, bribery, hacking

A partial list of improper meansincludes theft, bribery,misrepresentation, breach, orinducement of a breach of a duty tomaintain secrecy or espionagethrough electronic or other means

33

A springboard injunction is a type of injunction designedto remove or limit the advantage or head-start that anemployee has gained through unlawful activities,typically through the misuse of the employer’sconfidential information.

The individual is placed “under a special disability” bythe injunction in order to “ensure that he does not get anunfair start”

A springboard injunction is unlike any other kind ofinjunction, because it is not targeted at preventing futureunlawful activity but rather its purpose is to restore alevel playing field between the parties.

Mr Ellis, Bullivant’s Managing Director, left to set up a competingbusiness, taking confidential information with him including acard index with the contact details of Bullivant’s contacts, whichhe used to contact those clients in direct competition.

The High Court granted an injunction prohibiting Ellis fromentering into or fulfilling any contract made with or through anyof the contacts in the card index until judgment or further order.

Ellis appealed to the Court of Appeal, arguing that the injunctionshould not apply to any customers that he was able to makecontact with without using the card index.

His appeal failed on this point, the court concluding that “havingmade deliberate and unlawful use of Bullivant’s property, hecannot complain if he finds that the eye of the law is unable todistinguish between those whom, had he so chosen, he could havecontacted lawfully and those whom he could not”.

CDA= Confidentiality Agreement

NDA= Non Disclosure Agreement

The important elements included in the written agreement of CDA & NDA are:

1. Ownership of Inventions

2. Non Disclosure Provisions

3. Non Solicitation Provisions

4. Non Competition Provisions

Complaint is a first document which isbrought into the notice of the court by theplaintiff and asks for the corrective measures.

The defendant is required to give response tosuch complaint after receiving the summonsfrom the court with in stipulated time periodmentioned by the relevant court .

All the case data will be kept in Civil CoverSheet.

The trail note book has to be maintainedby paralegal for future assistance.

The trail note book is a binder used toindex and provide reference to thenecessary information required to handlethe case.

It contains all the relevant and importantand legal information regarding thelawsuit.

Breach of contract takes place when a partyfails to fulfill the promise made in anagreement.

For example the employee fails to fulfill thepromise and discloses the trade secret to otherparties, then it is known as breach of contract.

This is also treated as Breach of Fiduciary dutythat employee is failed in maintaining thesecrecy

Contract is nothing but An AgreementEnforceable by Law.

The Ten Essential Conditions for a Contract:

1. Offer, 2. Acceptance, 3.Concensus-Ad-Idam,4. Lawful Consideration, 5. Capacity toContract, 6. Free consent, 7.Legal object,8. Possibility of Performance, 9. Intention tocreate a legal relation ship 10. Writing andRegistration.

In India , violation of trade secrets will be covered underSec 27 of the Indian Contract act. It restricts parties incontract from Disclosing any kind of Information.

The Special Contract Acts like , Agency lawclearly defines the Duties and Responsibilities ofthe Employer and Employee.

And it provides the eligible Remedies for thepossible Damages occurred to the Owner fromthe agent .

The Agent is Liable to the Owner for the lossoccurred due to him.

Always read an NDA before signing. Someagreements are titled Nondisclosure orConfidentiality agreements, yet their termshave the opposite effect.

People who sign nondisclosure agreementspromising not to disclose trade secrets withoutauthorization from the owner.

All the employees are bound under an Impliedduty not to disclose sensitive information andshould be kept it confidential from StakeHolders.

The Diljeet Titus case,1997. The conflict: Illegal and unauthorized copying

of material and information belong to Titus and company by it’s four employees.

Advocate: Arun Jaitly

Page number – 195,

Annexure 1– Model Non disclosure or Confidentiality Agreement – 203 page.

Annexure 2-Trade Secret Bond – 210 page.

For further Questions or Doubts- Call me or Mail

Prof. Puttu Guru Prasad , VVIT.Cell : 93 94 96 98 98. 767 40 60 336, 90 59 457 336

Mail: puttuvvit@gamil.com.Reference :

BS Publication ; Fundamentals of Intellectual Property for Engineers.

Cengage Learning: Intellectual Property by Deborah.