Trade secrets

IPR about Trade secrets

1. Intellectual Property Intellectual Property
RightsRights
Chapter – 5Chapter – 5
B.Tech , Mech. 3/1B.Tech , Mech. 3/1
Professor & Lawyer Puttu. Guru Prasad
M.B.A., M.Com., M.Phil., PGDFTM., APSET., PhD at JNTUK

2. Professor & Lawyer Puttu. Guru Prasad
M.B.A., M.Com., M.Phil., PGDFTM., APSET., PhD at JNTUK
Trade secretes Trade secretes

3. Financial
information
Technical &
scientific
information
Commercial
information
Negative
information

4. 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.

5. 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

6. Secrecy

7. 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

8. 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

9. Formula for Coca-Cola
The Big Mac Special Sauce
KFC Chicken Recipe
WD-40 Formula

10. Secret Recipes
Kentucky 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

11. Secret !
Initially Later stage
Not patentable patentable
patent
TS
Strategic
business
decision
TS
•Part of the idea
TS
©
ID

12. n o r e g i s t r a t i o n
- l e s s c o s t s ( b u t : c o s t s t o k e e p s e c r e t )
- i m m e d i a t e l y a v a i l a b l e
c a n l a s t l o n g e r
- b u t : l i m i t e d t o e c o n o m i c l i f e
- u n c e r t a i n l i f e s p a n : l e a k o u t i s i r r e m e d i a b l e
n o p u b l i c d i s c l o s u r e
- b u t : p r a c t i c a l n e e d t o d i s c l o s e
- i f l e a k o u t : T S l o s t
T r a d e S e c r e t s
r e g i s t r a t i o n
- f e e s ( r e g i s t r a t i o n + m a i n t e n a n c e )
- t a k e s t i m e t o g e t p a t e n t
l i m i t e d i n t i m e
- g e n e r a l l y : m a x 2 0 y
- b u t : c a n b e i n v a l i d e d
p u b l i c d i s c l o s u r e
- p u b l i c a t i o n 1 8 m a f t e r f i l i n g
- i f P n o t a l l o w e d : n o T S
P a t e n t s
What is difference between TS and Patent

13. 1 Court Order to stop the misuse
2.Monetary damages
•Actual damages caused as a result of the misuse (lost
profits)
•Amount by which defendant unjustly benefited from
the misappropriation (unjust enrichment)
3.Seizure order
•Can be obtained in civil actions to search the
defendant's premises in order to obtain the evidence
to establish the theft of TS at trial
4.Precautionary impoundment
•Of the articles that include misused TS, or the products
that resulted of misusing
Remedies to Misappropriation

14. 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.

15. 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...

16. 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...

17. Trade secret litigation comprises of two
aspects.
1. violation of trade secret law takes
place, when the confidential information
is obtained through misappropriation.
2. violation of nondisclosure agreement
takes place when a party in the contract
breached the agreement.

18. The law of unfair competition is to safeguard the
interest of the customers from unfair or
misleading trade practices.
Types of Unfair Competition:
Passing off
Misappropriation
Right of Publicity
False Advertising
Product Disparagement
Dilution
Infringement of Trade Dress

19. 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.

20. Dilution: Basically , Tarnishment and Blurring
are the two important aspects which are
responsible for dilution of a product.
The unauthorized use of a mark on a dissimilar
product which damages the distinctiveness of
the that mark is known as ‘Blurring’.
‘Tarnishment’ refers to the unauthorized use of
mark for a poor quality product which effects
the products of mark owner.

21. Product Disparagement: when a false statement
is made with an intention to harm a company or
its products or its services, then it is known as
“product disparagement”.
It is also known as ‘Trade Libel’ or “Commercial
Disparagement”.
Right of Publicity: Allows individuals to protect
their identities from being used for commercial
purpose by other parties. Many companies
misuse the celebrities name in fake to sell their
products

22. Passing off occurs when one party sells his
goods and services by affixing another
company’s trade mark on them.
Passing off is confined to registered and
unregistered trademarks , symbols , signs and
devices etc.,
Passing off is an offence which is done by
misrepresenting the goods and services for
creating confusion in customers mind which
effects the image or good will of the original
manufacturer.

23. Misappropriation exists when one party uses
the property of other party without informing
them.
Misappropriation means unauthorized use of
person's name or likeness for advertising
purpose, which effects the image of other
persons.
The plaintiff does not possess any copy right
for it and he cannot claim any damages; ex-
stock market rumors , new paper report etc.,

24. The Clean Room:- The clean room refers to a
room in which a team of engineers, designers,
researchers or scientists work together for a
specific purpose. Each and every activity is
documented .
The clean room act as an evidence to prove that
the information which is identical to some other’s
trade secret has derived through team efforts.
It also ensures that the information was not
copied , theft or gained through any other
improper means

25. 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 formula
for making Gel used in pens. If a person
purchases the pen and analyze the Gel
chemically and come to knew about the secret
formula, then it is called “Reverse
Engineering”

26. HOW ARE TRADE SECRETS LOST
OR STOLEN ?

27. –departing or disgruntled employees
–intentional (malicious)
–inevitable (knowledge acquired)
–by ignorance
80% of trade secret loss
< employees, contractors, trusted insiders!
A Growing Problem. A Growing Problem.
Why Does It Occur?Why Does It Occur?

28. A Growing ProblemA Growing Problem. .
Why Does It Occur?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

29. Trade secrets may be legally discovered by the
following proper means:
Independent invention
Reverse engineering:-
that is, starting with the known product and working
backward to find the method by which it was developed
(assuming the reverse engineering is not prohibited by
contract)
Observing the item in public use or on public display
Obtaining the trade secret from published
literature
29

30. What is lawful?
® Discovery of the secret by fair and
honest means
1. Independent creation
–without using illegal means or violating agreements
or law
g¹ patent
TS protection
provides
no exclusivity !

31. 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

32. 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

33. A partial list of improper means
includes theft, bribery,
misrepresentation, breach, or
inducement of a breach of a duty to
maintain secrecy or espionage
through electronic or other means
33

34. A springboard injunction is a type of injunction designed
to remove or limit the advantage or head-start that an
employee has gained through unlawful activities,
typically through the misuse of the employer’s
confidential information.
The individual is placed “under a special disability” by
the injunction in order to “ensure that he does not get an
unfair start”
A springboard injunction is unlike any other kind of
injunction, because it is not targeted at preventing future
unlawful activity but rather its purpose is to restore a
level playing field between the parties.

35. Mr Ellis, Bullivant’s Managing Director, left to set up a competing
business, taking confidential information with him including a card
index with the contact details of Bullivant’s contacts, which he used
to contact those clients in direct competition.
 The High Court granted an injunction prohibiting Ellis from entering
into or fulfilling any contract made with or through any of the
contacts in the card index until judgment or further order.
Ellis appealed to the Court of Appeal, arguing that the injunction
should not apply to any customers that he was able to make contact
with without using the card index.
 His appeal failed on this point, the court concluding that “having
made deliberate and unlawful use of Bullivant’s property, he cannot
complain if he finds that the eye of the law is unable to distinguish
between those whom, had he so chosen, he could have contacted
lawfully and those whom he could not”.

36. 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

37. Complaint is a first document which is
brought into the notice of the court by the
plaintiff and asks for the corrective measures.
The defendant is required to give response to
such complaint after receiving the summons
from the court with in stipulated time period
mentioned by the relevant court .
All the case data will be kept in Civil Cover
Sheet.

38. The trail note book has to be maintained
by paralegal for future assistance.
The trail note book is a binder used to
index and provide reference to the
necessary information required to handle
the case.
It contains all the relevant and important
and legal information regarding the
lawsuit.

39. Breach of contract takes place when a party
fails to fulfill the promise made in an
agreement.
For example the employee fails to fulfill the
promise and discloses the trade secret to other
parties, then it is known as breach of contract.
This is also treated as Breach of Fiduciary duty
that employee is failed in maintaining the
secrecy

40. Contract is nothing but An Agreement
Enforceable by Law.
The Ten Essential Conditions for a Contract:
1. Offer, 2. Acceptance, 3.Concensus-Ad-Idam,
4. Lawful Consideration, 5. Capacity to
Contract, 6. Free consent, 7.Legal object,
8. Possibility of Performance, 9. Intention to
create a legal relation ship 10. Writing and
Registration.

41. In India , violation of trade secrets will be covered under
Sec 27 of the Indian Contract act. It restricts parties in
contract from Disclosing any kind of Information.
The Special Contract Acts like , Agency law
clearly defines the Duties and Responsibilities of
the Employer and Employee.
And it provides the eligible Remedies for the
possible Damages occurred to the Owner from
the agent .
The Agent is Liable to the Owner for the loss
occurred due to him.

42. Always read an NDA before signing. Some
agreements are titled Nondisclosure or
Confidentiality agreements, yet their terms
have the opposite effect.
People who sign nondisclosure agreements
promising not to disclose trade secrets without
authorization from the owner.
All the employees are bound under an Implied
duty not to disclose sensitive information and
should be kept it confidential from Stake
Holders.

43. 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.

44. For further Questions or Doubts- Call me or Mail
Prof. Puttu Guru Prasad , VVIT.Prof. Puttu Guru Prasad , VVIT.
Cell : 93 94 96 98 98. 767 40 60 336, 90 59 457 336
Mail: [email protected].
Reference :
BS Publication ; Fundamentals of Intellectual
Property for Engineers.
Cengage Learning: Intellectual Property by
Deborah.