You’ve probably had this thought cross your mind at some point in your life. Perhaps it was when you were watching late night TV and found yourself subjected to an infomercial (probably one loudly pitched by Billy Mays). There on the small screen, larger than life, was your idea for the Fantabulous Thingamabob! Proof that your idea was a good one and a money maker, but now it’s too late for your dreams of grandeur to materialize.
When it comes to intellectual property law, ideas don’t count for much. Why? Because ideas and concepts are not protectable in and of themselves. Rather, legal protection extends to the tangible expression of ideas and concepts. For example, having the plot for The Great American Novel in your head is an idea. The written novel is the tangible expression of that idea. This tangible expression of creative human endeavor is known as intellectual property.
Intellectual property is protected by patents, trademarks, copyrights and trade secrets. In prior newsletters I’ve discussed patents, trademarks and copyrights. What’s a trade secret? A trade secret consists of business information that: (1) has commercial value; (2) provides an actual or potential economic advantage over others, and (3) is maintained in confidence. Confidentiality is the key element. The trade secret owner must take appropriate measures to protect and maintain his proprietary information in confidence.
Unless your idea has been reduced to tangible expression and afforded legal protection under patent, trademark, copyright or trade secret law, as may be applicable, then your idea is up for grabs and may be used freely by others. Loose lips sink ships, so if you have a valuable idea, then you’d better keep mum and protect it.
Unlike patents, trademarks and copyrights, trade secrets are not protectable by a registration. Trade secrets are protected by contract and will endure so long as the information is kept confidential or the contract ends, whichever comes first. The terms “non-disclosure agreement” or “confidentiality agreement” are commonly used to refer to contracts that govern trade secrets, or proprietary or confidential information. Once the beans are spilled, whether or not due to the fault of the trade secret owner, the trade secret may be dead and the confidentiality of the information may not be recoverable depending on the severity of the spill. The remedy for the owner is to sue the bean spiller for breach of contract and damages. A lawsuit also may be brought against a potential bean spiller if the owner has good cause to fear an unauthorized release of the confidential information.
Although one’s word may have been one’s bond in the Old West, these days reliance on an oral promise of confidentiality is not only foolhardy, but also extremely unlikely to hold up in court. If you have important, sensitive information to protect, then you must have written non-disclosure agreements in place with every recipient of that information, both within and without your company, including employees, suppliers, business partners, manufacturers and the like.
Trade secret protection can be very powerful if properly employed and maintained. The Coca-Cola formula is the quintessential trade secret and it is zealously guarded and enforced. You may recall the news story of two Coca-Cola employees who offered to sell trade secrets to Pepsi Cola. Pepsi knew better than to go down that path and reported them to the FBI. Both of these people are serving time in federal prison and had to pay $40,000 each in restitution to Coca-Cola. See article at CNN Money.com.
As illustrated by the Coca-Cola incident, misappropriation of a trade secret is egregious and can subject an unauthorized discloser or an unauthorized recipient to state and federal penalties both civil (monetary damages, attorney fees and costs, an injunction) and criminal (prison).
It is a good idea to, and I strongly recommended that you do, protect your valuable brain children as trade secrets when appropriate. However, as those former Coca-Cola employees found out to their chagrin, trafficking in trade secrets is not a good idea!
In case you’re curious what the law says about trade secrets, the federal statutes (18 U.S.C. § 1832) provide:
(a) Whoever, with intent to convert a trade secret, that is related to or included in a product that is produced for or placed in interstate or foreign commerce, to the economic benefit of anyone other than the owner thereof, and intending or knowing that the offense will, injure any owner of that trade secret, knowingly
| (1) |
steals, or without authorization appropriates, takes, carries away, or conceals, or by fraud, artifice, or deception obtains such information; |
| (2) |
without authorization copies, duplicates, sketches, draws, photographs, downloads, uploads, alters, destroys, photocopies, replicates, transmits, delivers, sends, mails, communicates, or conveys such information; |
| (3) |
receives, buys, or possesses such information, knowing the same to have been stolen or appropriated, obtained, or converted without authorization; |
| (4) |
attempts to commit any offense described in paragraphs (1) through (3); or |
| (5) |
conspires with one or more other persons to commit any offense described in paragraphs (1) through (3), and one or more of such persons do any act to effect the object of the conspiracy, shall, except as provided in subsection (b), be fined under this title or imprisoned not more than 10 years, or both. |
(b) Any organization that commits any offense described in subsection (a) shall be fined not more than $5,000,000.
The Colorado statutes (C.R.S. § 7-74-102) are comparable to the federal law and provide:
(2) “Misappropriation” means: |
| (a) |
Acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or |
| (b) |
Disclosure or use of a trade secret of another without express or implied consent by a person who: |
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(I) Used improper means to acquire knowledge of the trade secret; or |
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(II) At the time of disclosure or use, knew or had reason to know that such person's knowledge of the trade secret was: |
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| (A) |
Derived from or through a person who had utilized improper means to acquire it; |
| (B) |
Acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; or |
| (C) |
Derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use; or |
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(III) Before a material change of such person's position, knew or had reason to know that it was a trade secret and that knowledge of it had been acquired by accident or mistake. |
© 2009 Brenda L. Speer, LLC
