Trade secrets -- An important category of intellectual property

By: Brian Lefort Tuesday July 8, 2014 0 comments


By Brian Lefort

There have been a couple of recent developments in the past few months that serve as a reminder that trade secret law is a viable option of intellectual property protection.

Unlike patent law, which requires novelty and non-obviousness, trade secret law does not.  Although trade secret law may protect a potentially patentable idea, product or process, such subject matter does not have to satisfy the novelty and non-obviousness requirements to be a trade secret. Rather, the key to protecting an idea, product or process as a trade secret is to maintain its secrecy.

Although there are challenges and risks associated with maintaining secrecy, this form of legal protection should be considered as a viable component of an overall intellectual property strategy.

Trade secret protection is currently governed by state law.  Although most states' trade secret laws are based upon the Uniform Trade Secrets Act (UTSA), each state has adopted its own version. That is, the UTSA is not a federal law. Rather, the UTSA is recommended legislation published by the Uniform Law Commission, which provides the states with non-partisan legislation with the goal of bringing clarity to certain areas of the law, such as trade secrets.

In April of this year, the Defend Trade Secrets Act (DTSA) was introduced into the Senate.  On May 13, the Senate Judiciary Subcommittee on Crime and Terrorism held a hearing entitled "Economic Espionage and Trade Secret Theft: Are Our Laws Adequate for Today's Threats?" and the DTSA was a subject of such hearing.

Recently, the Subcommittee on Courts, Intellectual Property and the Internet within the House of Representatives also had a hearing regarding trade secrets. The sponsors of the DTSA estimate that $160 billion to $480 billion is lost each year to the theft of corporate trade secrets.

If enacted, the DTSA would be a federal law, which would co-exist with the states' currently existing trade secret laws. This federal law would provide a plaintiff instant access to federal court to enforce its rights against trade secret violators.

While the DTSA continues to navigate its way through Congress, state laws currently provide companies a certain degree of trade secret protection.

This is clearly evident by the recent decision in the Altavion, Inc. v. Konica Minolta Systems Laboratory Inc. case, which was decided by the California Court of Appeals on May 8, 2014. Altavion alleged that a research-and-development subsidiary of Konica Minolta Business Technologies (KMBT) obtained Altavion's digital stamping technology (DST) during confidential discussions relating to a potential partnership between the two companies.

Altavion further asserted that, after the discussions ended and KMBT decided not to pursue the partnership, KMBT misappropriated Altavion's DST technology by pursuing its own DST program using Altavion's confidential information.

The California courts agreed with Altavion and awarded it over $4.5 million in total damages because "if a patentable idea is kept secret, the idea itself can constitute information protectable by trade secret law."

Companies developing an intellectual property strategy should consider whether certain technological assets are best protected as patents or trade secrets.

Not all information is protectable as a trade secret. To be a trade secret, the information must derive economic value for not being known to the public and the owner of the information must take reasonable steps to maintain its secrecy.

If the owner of the information can satisfy these conditions, then trade secret protection may serve as a nice complement to patent protection as a key ingredient to an overall intellectual property strategy. This may be particularly relevant for certain technologies, such as in the area of software and manufacturing technology, particularly in view of recent case law pertaining to the protection of software.

Accordingly, companies in these and other areas of technology may wish to consider performing an intellectual property audit and evaluate which type(s) of intellectual property protection are best suited to protect the company's technological assets.
Brian Lefort

About the Author: Brian Lefort

Brian Lefort is a Boulder-based intellectual property attorney who specializes in helping innovative startup and emerging businesses identify and protect their valuable technology assets. Brian has more than 15 years of legal experience building and enforcing strategic patent and trademark portfolios for innovative products in the medical device, telecommunications, software and other high technology industries. He can be reached at [email protected] or 303-447-7723.