Wednesday, June 16, 2010
Monday, June 14, 2010
Occasionally I find myself laughing with delight at the foibles of trade secret law, where quite often it is actually the case that a serious, dour, pale attorney stalks raging down the halls in Brooks Brothers’ finest screaming imprecations about someone who has had the gall — the actual gall! — to attempt to misappropriate his client’s most treasured secret, be it the formula to Coca Cola (guarded under lock and key since 1894), KFC’s 11- herbs-and-spices recipe (handwritten by Col. Sanders some 70 years ago), or the seemingly mundane client list for a real estate brokerage. The latest case to hit the headlines reads like a bad mystery —Thomas’ English Muffins Claims Rival Baker Stole Secret To “Nooks-and-Crannies” Formula!!!
A trade secret, of course, is loosely defined as any formula, pattern, device or compilation of information used by a company that is unknown to others andgives the company a competitive advantage. Examples come in many shapes and sizes, and include such things as unpatented inventions; future product designs and research; non-public company documents such as blueprints, laboratory notebooks and training manuals; marketing, purchasing, planning and customer information; and financial, accounting, recruiting and legal information. Basically, any information that a company finds exceptionally useful and deems “Top Secret” may qualify for trade secret status — with certain caveats. If someone outside the coterie of top level employees with access already knows your secret, of course, it’s not really a secret at all, and (as you might expect) you cannot retroactively go back and make it one. Once the cat’s out of the bag, the horse is out of the barn, the bird has flown the coop, etcetera . . . it’s bye-bye trade secret. Similarly, if you fail to take adequate measures to protect the secret, or are so boastful and clumsy as to actually tell someone else the secret, then you lose all trade secret protection. Given that some secrets are worth billions, one can see the attraction of those espionage thrillers where the secret agent seduces a corporate employee and pumps them for information or spontaneously befriends the loner lab geek and then gets them so intoxicated they blurt out every secret they ever knew. While real life may not mimic fiction quite at the level suggested by Clive Owens’ secret agent romp inDuplicity, rest assured that there are plenty of industrial spies lurking in corporate hallways, going through the rubbish at 5:00 a.m. hoping to find a scrap worth millions.
Although I mention the Thomas’ English Muffin case partially in jest, as it seems somewhat ludicrous that the internal consistency of a muffin could, in fact, constitute a trade secret, it does raise the question of just what you can take with you as a departing employee. Say you’ve been there for ten years and know the operation inside and out, know how to mix a muffin in your sleep, know what temperature the muffins need to be baked at, and for how long, and how long they need to cool before being bagged. You know it so well you don’t even have to think about it anymore. But now you’ve been offered a great job down the street at an independent bakery that wants to bring muffins to the masses — what do you do? Do you pretend you don’t know how to make a muffin? Just what information is an ex-employee allowed to use? The answer, as eloquently expressed by Judge Shadur in Fleming Sales Co. v. Bailey, 611 F. Supp. 507, 514-15 (N.D. Ill. 1985) is this:
Such information [as] comprises general skills and knowledge acquired in the course of employment. Those are things an employee is free to take and to use in later pursuits, especially if they do not take the form of written records, compilations or analyses. Any other rule would force a departing employee to perform a prefrontal lobotomy on himself or herself. It would disserve the free market goal of maximizing available resources to foster competition…. [I]t would not strike a proper balance between the purposes of trade secret laws and the strong policy in favor of fair and vigorous business competition.
So, no frontal lobotomy required. I hope that puts your minds at ease as much as it did mine. You can still bake a muffin, though if you land at a competitor you should know that — even if you refrain from using the magic mixing machine and never even think about the almost-mystical nook-and-cranny formula — you are still likely to be sued. No matter how innocent your muffins might be, in the end, it’s all about the dough.
Friday, June 4, 2010
I am an lawyer primarily engaged in intellectual property and complex commercial litigation in California. My practice has evolved significantly since my graduation from Northwestern in 1995. While my initial focus was on bank fraud and tax fraud in federal court, over the years that has slowly evolved to focus on fraud in all its aspects, and led me to trade secret misappropriation and the inevitable disputes between companies and their former employees regarding copyright and patent ownership. By virtue of being in the right place at the right time — the Bay Area in 2000 — I became involved in a series of intellectual property cases involving theft of trade secrets, parody as a defense to copyright infringement, and a novel application of the the unfair competition laws to internet search engine optimization. As I have became more exposed to various aspects of intellectual property law over the last decade, my practice has come to have a high-tech slant; even where the issues bear something in common with my original practice, it is now fraud tied to the question of whether software has been developed independently or not, and theft of ideas rather than of money.
My practice is not limited to intellectual property, however, and involves a number of different areas of law. For example, ten years ago I offered to lend a hand in an environmental case, which I have now had the pleasure of trying twice, and which is still active (and currently up on appeal). Another example — I recently defended a hedge fund and its principal in a self-dealing case brought by the Commodity Futures Trading Commission. So while this particular blog is dedicated to intellectual property, and the subject is dear to me, other unrelated topics may appear on these pages from time to time, since in law — as in life — variety provides the spice that relieves us from monotony.