UNIT-4.pptx

TrADE SECRETES
PPT PREPARATION :
D. Siva Ranjani (s170608)
P. Satya Sri (s170497)
G . Ram Sunil Kumar (s170386)
M. Praveen Kumar (s170632)
PPT PRESENTATION :
B. Teja Nagendra Kumar (s170280)
M. Srinivasa Rao (s170425)
G. Ram Sunil Kumar(s170386)
M. Praveen Kumar(s170632)
G. Jeswaanth (s170313)
B. Dayana(s170880)
P. Pavani (s170377)
A. Heamalatha (s170815)
M. Sravani Charitha(s170230)

Outline of Presentation
 What is a Trade Secret
 Why Trade Secrets
 How to protect Trade Secrets
 Types of trade secrets
 How can Trade secrets Affect Business
 Copy Right VS Patents VS Trade Marks VS Trade Secret
 Trade Secret protection may be based on
 What are not Protected under TS

What is a Trade Secret?
 Trade Secrets are Intellectual Property(IP) rights on confidential
information which may be sold or licensed.
 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.

Trade secrets may include:
• sales methods
• distribution methods
• consumer profiles
• advertising strategies
• lists of suppliers and clients
• manufacturing processes

 Example :
 One of the most famous examples of a trade secret is the formula for
Coca-Cola. The formula, also referred to by the code name
"Merchandise 7X" is known to only by two employees at any
particular instance and kept in the vault of a bank in Atlanta,
Georgia. The individuals who know the secret formula have signed
non-disclosure agreements, and it is rumored that they are not
allowed to travel together. In the past, you could not buy Coca-Cola
in India because Indian law required that trade-secret information be
disclosed. In 1991, India changed its laws regarding trademarks, and
Coca-Cola can now be our in that country.

Trade Secret Law: Determination of trade
secret status
There are several factors to be considered in determining whether
information qualifies as a trade secret.
1. The extent to which the information is known outside the company.
2. The extent to which the information is known within the company.
3. The Extent of the measures taken by the company to maintain the
secrecy of the information.
4. The extent of the value of the information to the company and its
competitors.
5. The extent of the expenditure of time, effort, and money by the
company in developing the information.
6. The extent of the ease or difficulty with which the information could
be acquired or duplicated by others.

1. The extent to which the information is known outside
the company.
 Although information may be known to others outside the company
and still qualify as a trade secret.
 Secrecy need not be absolute.
 The owner of a trade secret may, without losing protection, disclose it
to a licensee or a stranger if the disclosure is made in confidence.
 In sum, if information is publicly known or known within a
specialized industry, it does not qualify for trade secret protection.
 Publication of information on the Internet will cause a loss of trade
secret status .

2. The extent to which the information is known within
the company.
 Although an employer or company is permitted to disclose confidential
information to those with a demonstrated "need to know" the
information, if the information is widely known within the company,
especially among those who have no business need to know the
information, it may not qualify as a trade secret.
 Companies should implement policies to prevent the inadvertent
disclosure of trade secret information and limit dissemination of the
material to those who need it to do their work.

3. The Extent of the Measures taken by the
Company to Maintain the Secrecy of the
Information
 One claiming trade secret protection must take reasonable precautions
to protect the information.
 Courts are unlikely to protect information a company has not bothered
to protect.
 A company is not obligated to undertake extreme efforts to protect
information, but reasonable precautions are required.
 Thus, companies that require employees to sign nondisclosure
agreements, keep confidential information in locked desks or rooms,
restrict access to the information, and mark information with legends
relating to its confidentiality are more likely to demonstrate
successfully that information is a trade secret than those that fail to
take such ordinary and reasonable precautions against inadvertent
disclosure.

4. The Extent of the value of the Information to
the Company and its Competitors.
 If information has little value either to its owner or to the owner's
competitors, it is less likely to qualify as a trade secret.
 Conversely, information that is valuable to a company, such as the
recipe for its key menu product, and that would be of great value to the
company's competitors is more likely to be a protectable trade secret.
 Non profit entities can also claim trade secret protection for their
economically valuable information (eg, their lists of donors).

5. The Extent of the Expenditure of Time, Effort, and Money
by the Company in Developing the Information.
The greater the amount of time, effort, and money the
company has expended in developing or acquiring the
information, the more likely it is to be held to be a protectable
trade secret.

6. The Extent of the Ease or Difficulty with which the
Information could be Acquired or Duplicated by Others
 If information is easy to acquire or duplicate, it is less likely to qualify
as a trade secret.
 Similarly, if the information is readily discover from observation or
can be easily reproduced, it is less likely to be a trade secret.
 If it would be a straightforward matter to reverse engineer the product,
it may not qualify for trade secret protection.
 Not all information qualifies for trade secret protection.
 In Buffets, Inc. v. Klinke, 75 Esd 965 (9th Cir. 1996), the court held
that a restaurant's recipes for such American staples as barbequed
chicken and macaroni and cheese were not trade secrets because they
were so basic and obvious that they could be easily duplicated or
discovered by others

Liability for Misappropriation of
Trade Secrets
Misappropriation of a trade secret occurs when a person possesses, discloses,
or uses a trade secret owned by another without express or implied consent
and when the person:
Used improper means to gain knowledge of the trade secret.
Knew or should have known that the trade secret was acquired by improper
means.
Knew or should have known that the trade secret was acquired under
circumstances giving rise to a duty to maintain its secrecy.

Absence of Written Agreement
While a written agreement prohibiting misappropriation of trade secrets
can be enforced through an action for breach of contract.
A company's trade secrets can be protected against misappropriation even
in the absence of any written agreement between the parties.
A party owning trade secrets can bring an action in tort for
misappropriation or for breach of the duty of confidentiality, which duty
can arise even without an express agreement.
Courts will impose a duty of confidentiality when parties stand in a special
relationship with each other, such as an agent-principal relationship
(which includes employer-employee relationships) or other fiduciary or
good faith relationships (such as relationships among partners, or between
corporations and their officers and directors, or between attorneys and
clients).

Misappropriation by Third Parties
A number of other parties may also have liability for misappropriation of
trade secrets if they knew or should have known they were the recipients
of protected information.
For example, assume Lee is employed by XYZ Company. In the course of
his employment with XYZ Company, Lee learns valuable trade secret
information.
If Lee leaves his employment with XYZ Company and begins working for
New Company, Lee and New Company may be prohibited from using the
information.
Lee may not misappropriate the information because he was in an
employee - employer relationship with XYZ Company, and New
Company may be prohibited from using the information if it knows or
should know that the information was acquired by Lee under
circumstances giving rise to a duty to maintain its secrecy or limit its use.
In such cases, XYZ Company would generally prefer to sue New
Company inasmuch as it is far likelier to have deep pockets, meaning it is
more able to pay money damages than is an individual such as Lee

Employer-Employee Relationships
Ownership of Trade Secrets in the Absence of Written Agreement.
Use or disclosure of trade secrets by employees and former employees is a
frequently litigated area.
While employers should require employees who will have access to trade
secrets to sign agreements promising not to disclose the information, even
employees who may not be subject to written nondisclosure agreements
have an implied duty not to use an employer's trade secrets learned by the
employee within the scope of employment.
Thus, senior executives, engineers, and scientists are typically subject to a
higher duty of trust and confidence this more junior employees, such as file
room clerks
In no event, however, may an employee steal an employer's trade secret.
If confidential information is learned by or disclosed to an employee in the
course and scope of employment, the employee is subject to an implied
agreement to maintain the information in secret

Written Agreements
Employers are generally free to require employees, independent
contractors, and consultants to sign express agreements relating to the
confidentiality of information.
These agreements are usually enforced by courts as long as they are
reasonable.
The agreements usually include four specific topics:
(1) Ownership of inventions
(2) Nondisclosure provisions
(3) Non solicitation provisions
(4) Noncompetition provisions

1. Ownership of Inventions
Most agreements expressly state that any information, inventions, or
materials created by the employee in the course of employment are owned
by the employer.
• Better agreements go one step further and state that if for some reason
such a clause is not sufficient to vest ownership in the employer, by the
terms of the agreement, the employee irrevocably assigns the information
or invention to the employer.
Some states have statutes that restrict an employer's ability to require an
assignment of inventions
Under the Leahy-Smith America Invents Act, and effective September 16,
2012, an assignee may file a patent application directly.
This provision helps large employers streamline the patent application
process

2. Nondisclosure Provisions
The agreement should prohibit the employee from using or disclosing the
employer's trade secrets information whether during or after employment.
or confidential
The agreement should describe with specificity the information that is to
be protected.

3. Non-solicitation Provisions
Most agreement prohibit employees from soliciting or encouraging other
employees from leaving the employer's business and from soliciting or
attempting to "poach" clients or customers of the employer.
Non solicitation clauses must be reasonable and should be limited in time.
In the absence of an agreement otherwise, departing employees may
solicit their co-employees to join them at their new place of employment

4. Noncompetition Provisions
Most agreements include provisions prohibiting employees from
competing against the employer both during and after the term of
employment.
Noncompetition clauses are also referred to as restrictive covenants, and
they are enforceable in most states if they are reasonable.
Because a covenant precluding an employee from exercising his or her
only trade and earning a livelihood can be so detrimental to an employee,
restrictive covenants are strictly construed by courts.
In California, noncompetition agreements are automatically void as a
restraint against trade because they preclude people from changing jobs
and engaging in their lawful profesons.
In fact, in one California case, Aetna Inc. was ordered to pay a former
employee $1.2 million after the employee was fired because she refused to
sign Aetna's non compete agreement that it used in all states

Continuation…..
A variety of factors are taken into account in determining whether such
covenants are enforceable:
Purpose:
Courts often consider whether the restriction is related to a legitimate
business purpose of the employer.
Reasonableness:
The restriction must be reasonable in regard to scope, duration, and
geographic area.
Consideration:
Many states require that a covenant not to compete be supported by
adequate consideration.

Economic Espionage Act of 1996, 18 U.S.C. § 1839
(3)- definition of a trade secret
 “All forms and types of financial, business, scientific, technical,
economic, or engineering information, including patterns, plans,
compilations, programmed devices, formulas, designs, prototypes,
methods, techniques, processes, procedures, programs, or codes,
whether tangible or intangible, and whether or how stored,
compiled, or memorialized physically, electronically, graphically,
photographically, or in writing.”

Why Trade Secrets?
 Trade Secrets are a key component of IP
portfolios helping businesses protect their
secret formulas , know-how and other key
information that gives them a competitive
edge. Read our real-world trade secret
cases for examples of how companies
have used trade secrets to protect their
intellectual property.

How to protect Trade Secrets
Five strategies for protecting the trade Secrets:
 Written agreements with employees who have access to trade secrets.
 Written policies governing employee conduct.
 Limiting employee access to trade secrets.
 Limiting outsider’s access.
 Controls on public dissemination.

Types of trade secrets:
companies need to show reasonable efforts to protect confidential
information in trade secrets litigation. Below are some examples of
trade secrets
 Process
 Formulas
 Databases
 Programs
 Business operations

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

How can Trade secrets Affect Business?
As intellectual property becomes more valuable, there is an increase in international trade
and competition overall. Some ways trade secrets can affect business include:
 International reach: Increased lobbying by corporate powers has led to greater
international, federal, and state laws for the protection of trade secrets, trademarks,
patents, and copyrights. These often feature in international trade agreements, wherein
sovereign federal courts will include hefty fines or other penalties to dissuade former
employees from disclosing trade secret information (sometimes called a “breach of
confidence”) or companies to engage in theft of trade secrets. The United States
International Trade Commission is an example of this kind of arrangement.
 Innovation: Trade secrets form an integral part of tort law and unfair competition. By
protecting a company’s reasonable measures to control its trade secrets, the
investment in new ideas and processes can produce profits, thus incentivizing
innovation.
 Reverse engineering: Trade secrets also lead to increased efforts to circumvent
regulations, gaining an advantage while avoiding improper means. In the case of
reverse engineering, competing companies will try to determine how a product is made
by analyzing it and thereby gaining valuable information without violating trade secret
laws.

Copy Right vs Patents vs Trade Marks vs Trade Secret
Copyright Patents Trademark Trade Secret
What’s
Protected?
Original works of
authorship, such as
books, articles, songs,
photographs,
sculptures,
choreography, sound
recordings, motion
pictures, and other
works.
Inventions, such as
processes, machines,
manufactures,
compositions of
matter as well as
improvements to
these.
Any word, phrase,
symbol, and/or design
that identifies and
distinguishes the
source of the goods of
one party from those
of others.
A formula, practice,
process, design,
instrument, pattern,
commercial method,
or compilation of
information that is not
generally known.
Requirements
to be Protected
A work must be
original, creative, and
fixed in a tangible
medium.
An invention must be
new, useful, and
nonobvious.
A mark must be
distinctive (i.e., that is,
it must be capable of
identifying the source
of a particular good)
A trade secret must
have an economic
benefit due to its
secret nature, have
value to others who
cannot legitimately
obtain the information,
and be subject to
reasonable efforts to
maintain its secrecy.
Term of
Protection
Author’s life plus 70
more years.
20 years.
For as long as the
mark is used in
commerce.
For as long as it
remains secret.

Trade Secret protection may be based on..
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

Trade Secret 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, ect .
• Circumvention of technical protection systems.
4. Specific trade Secret laws
• US : Uniform Trade Secret Act; Economic Espionage Act

What are not Protected under TS
The Clean Room:
The clean room refers to a room in which a team of engineering ,designers,
researches or Scientist 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

What are not Protected under TS
Reverse Engineering:
Any information which is obtained through reverse engineering of a product , will
also be un protectable 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”

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