October 2007 Archives

Jorda on: Trade Secrets Have a Long History

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Trade secret law is the oldest form of IP protection, and already in Roman times the law afforded relief against a person who induced another’s employee (slave) to divulge secrets relating to the master’s commercial affairs. Trade secrecy was practiced extensively in the European guilds in the Middle Ages and beyond. Modern trade secret law evolved in England in the early 19th century — in response to the growing accumulation of technology and know-how and the increased mobility of employees. Recognized in U.S. by the middle of the 19th century, Peabody v. Norfolk (98 Mass. 452 (Mass. 1868)) held that a secret manufacturing process is property, protectable against misappropriation; secrecy obligation for an employee outlasts the term of employment; a trade secret can be disclosed confidentially to others who need to practice it and a recipient can be enjoined from using a misappropriated trade secret. This decision anticipates the characteristics of our present trade secret system and by the end of the 19th century the principal features of contemporary trade secret law were well established. It is interesting to note that Henry Perritt believes that indeed trade secrets are “the oldest form of IP protection” and that “patent law was developed as a way of protecting trade secrets without requiring them to be kept secret and thereby discouraging wider use of useful information.” (Henry H. Perritt Jr., Trade Secrets 1-1, 3-7 (Practising Law Institute 2d ed. 2006)) That makes patents supplements to trade secrets and not trade secrets supplements to patents as is commonly assumed.

Jorda on: Trade Secrets are Not Secrets

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It is a serious misconception that it is reprehensible to keep inventions secret, inasmuch as this supposedly flies in the face of the patent system, the essence of which is disclosure of inventions for the benefit of the public. However, in light of the decision in Dunlop Holdings v. Ram Golf (7th Cir. 1975), it is clear that the public does receive benefits from trade secrets, as there is no suppression in an economic sense.

Jorda on : Terminology Misconceptions

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After reciting the trade secret definitions, a word about nomenclature and terminology associated with the usage of the terms “know-how” and “trade secret” is quite germane to clear up semantic confusion. While the key requirement of a trade secret is secrecy, definitions of “know-how” are completely silent on secrecy as can be seen from the following definitions:

  • Know-how. The knowledge and skill required to do something correctly. (The American Heritage Dictionary, p.705)
  • Know-how. Information that enables one to accomplish a particular task or to operate a particular device or process. (J. Thomas McCarthy et al., McCarthy’s Desk Encyclopedia of Intellectual Property, p. 330 (3rd ed. 2004)).
  • Know-how is knowledge and experience of a technical, commercial, administrative, financial or other nature, which is practically applicable in the operation of an enterprise or the practice of a profession. (International Association for the Protection of Intellectual Property, Mexican Congress Resolution (1973)).

Jorda on : What is and What is not a Trade Secret

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From the definitions recited before, it is possible to glean what is a trade secret and what is not a trade secret. On a primal level a trade secret is simply information and knowledge. More specifically, it is any proprietary technical or business information, often embodied in inventions, know-how and show-how.

The three basic requisites, mentioned before, are critical limitations on trade secrets and frequent pitfalls in trade secret enforcement and litigation and this is especially true of the need to maintain secrecy. There is a further significant restriction on the scope of trade secret protection: any information that is readily ascertainable as well as personal skills of employees cannot embody protectable trade secrets.

Jorda on : Definition of a Trade Secret

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There are three common threads in all trade secret definitions. They are three requirements that must be met for enforceable trade secrets to exist. The information must be
  1. a secret in the sense that it is not generally known in the trade,
  2. valuable vis-à-vis the competition that does not possess it and
  3. the subject of reasonable efforts to safeguard and maintain secrecy.

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