Perhaps the most valuable intellectual property that exists in most industries is the protection of confidential information or trade secrets. Whether a technological advance, a manufacturing process, the functionality underlying a software application, or a customer list, these non-registrable rubrics of intellectual property constitute an enormous value within our economy. Overlooking the opportunity for protection can be fatal. Thus, in respect of technology, our advice never ends at whether an innovation can be patented.
On a daily basis, our attorneys are keenly aware of scenarios in which valuable confidential information or trade secrets are at issue and work strategically in addressing them appropriately. These scenarios of course include litigation, but the issues are extant when conducting due diligence or preparing agreements in any transaction, including M&A transactions. Understanding the nature of intangible rights within intellectual property, we provide sophisticated advice on desirable policies and procedures to maximize protection, as well as how to mount a defense to an allegation of a violation. Our strategies in litigation have resulted in favorable and pre-trial dispositions on either side of the fight – assertion or defense.
Confidential information and trade secrets are most often protected contractually or by reason of relationships between parties. Independent contractors and employees are often subject to obligations in this manner, as are many parties subject to various commercial contracts such as research and development agreements or joint venture agreements. However, we are well aware that obligations may exist without writings and solely by the existence of circumstances underlying a relationship.
It is critical to recognize that many business folks and attorneys speak freely about “trade secrets.” Moreover, it is often overlooked that the term “trade secrets” can be viewed as a term of art because there are statutory schemes that define what constitutes a trade secret. It can be viewed as rising to a higher level than “confidential information.” This distinction can result in a lack of protection, particularly in the agreement area where protection may be provided only for “trade secrets.”
In this context, there are state and federal statutes that protect trade secrets, as well as restatements such as the Restatement of Torts and the Restatement of Unfair Competition. And, the definitions within these statutes, though mostly consistent, may differ at least slightly from one another. The Uniform Trade Secrets Act (UTSA), borrowing from the preeminent case law, defines a trade secret as meaning:
… information, including a formula, pattern, compilation, program, device, method, technique, or process, that:
(1) Derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and
(2) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
Uniform Trade Secrets Act (1979). The Economic Espionage Act (EEA) of 1996, 18 U.S.C. Sections 1831-1839 (1996) and the New Jersey Trade Secrets Act, N.J.S.A. 56:15-1 et. seq. (2012) both maintain definitions that are quite consistent with the Federal scheme.
Not surprisingly, an in-depth review of policies and procedures to protect technology, information and data in light of the statutory and case law often reveals previously unappreciated value that should be protected from competitors or which may increase value upon selling assets or equity.