Trade Secrets

Successful defense of trade secrets in litigation begins with evaluating valuable confidential information and steps taken to safeguard it before any disputes arise. Trade secret asset management allows companies to effectively frame misappropriation or theft claims and advance arguments at every stage of a trade secrets dispute.

We previously discussed which portions of an artificial intelligence/machine-learning (“AI/ML”) platform can be patented.  Under what circumstances, however, is it best to keep at least a portion of the platform a trade secret? And what are some best practices for protecting trade secrets? In this post, we explore important considerations and essential business practices to keep in mind when working to protect the value of trade secrets specific to AI/ML platforms, as well as the pros and cons of trade secret versus patent protection.

Last year, the U.S. District Court for the Southern District of New York addressed an issue of first impression concerning what constitutes “misappropriation” under the Defend Trade Secrets Act (DTSA) in a decision potentially relevant to cases involving allegations of trade secret misappropriation under the DTSA against a former employee. This case is worthy of note for any trade secret practitioner and is an important reminder that when pleading alleged trade secret misappropriation, it is not only important to describe the trade secret with sufficient particularity, but also to sufficiently describe the alleged misappropriation so as to illustrate the alleged acquisition of the trade secret by improper means or disclosure of the trade secret without consent.

Amid the continuing threat to U.S. intellectual property rights posed by foreign actors, the International Trade Commission (ITC) is poised to become the latest federal agency to bolster protections for U.S. IP owners. The ITC’s broad power to exclude the importation into the U.S. of products that infringe American intellectual property now has the potential to be made even more robust through a new bill introduced by Senators John Cornyn (R-Tex.), Christopher Coons (D-Del.), and Todd Young (R-Ind.) on June 15, 2021, that would provide expedited relief for trade secret theft victims.

Innovations that are eligible for patent protection are often vital to a company’s revenue stream and profitability, but in some cases, opting for trade secret protection is a better strategic choice.

An ethical corporate culture and clear expectations during the hiring process can help companies curtail trade secret disputes when hiring employees from rival companies.

Companies can minimize trade secret theft by business partners by instituting non-disclosure agreements before sharing trade secrets and establishing general confidentiality agreements with business partners.

By proactively protecting trade secrets and using litigation strategically, companies can minimize trade secret misappropriation by former employees.

Companies can quickly detect trade secret theft by planting an unneeded feature or part that would be included in a copycat item and continually monitoring competitors’ new products.

Companies can lower the risk of trade secret theft amid a reduction in force by limiting and auditing the use of trade secrets and including confidentiality provisions in severance agreements.

Companies across the United States quickly rolled out remote work arrangements in response to the COVID-19 health crisis, and as virus caseloads continue to climb, the trend is likely to continue. As working off-site becomes “the new normal,” companies can institute systems and policies to protect their valuable trade secrets.

The sharp upswing in trade secret litigation triggered by the global financial crisis of the late 2000s taught companies some hard lessons about trade secret theft and disputes.

An economic downturn usually leads to a rise in trade secret theft and litigation, and the current slump is likely to generate a major surge in cases due in part to the prevalence of remote work.

The coronavirus pandemic has created profound changes to how many Americans do their work, with an outsized number now working from home. This arrangement, while necessary given social distancing requirements and the stay-at-home advisories in many states, has created a marked increase to the threat of trade secret misappropriation.

Earlier this month, a Northern District of Illinois jury returned a verdict in favor of Motorola for over $700 million after a trial in which Motorola alleged that Hytera hired three engineers away from Motorola’s Malaysian office, and that those engineers stole and brought with them thousands of Motorola’s trade secret technical documents that Hytera used to develop a state-of-the-art digital radio that was functionally indistinguishable from Motorola’s.

The DTSA standing alone provides significant recourse for trade secret owners who have fallen victim to trade secret theft. Apart from the protection provided by the DTSA itself, however, the statute also allows trade secret owners to leverage the Racketeer Influence and Corrupt Organizations Act (RICO), a statute passed to address organized crime, to combat trade secret misappropriation. The DTSA does this by making trade secret theft qualify as a predicate act sufficient to show racketeering activity under RICO. This fairly new tool gives trade secret owners another potent option when confronting trade secret theft.