I am very pleased that the white paper I wrote with Donal O’Connell on Trade Secret Audits from Practical Law of Westlaw was published in its Publication, “The Journal” – (so to be available on line at https://content.next.westlaw.com/Browse/Home/PracticalLaw/PracticalLawTheJournal?contextData=%28sc.Default%29&transitionType=DefaultTB_AugSept19_Feature (002)
I am delighted that a short paper of mine (co-authored with Donal O’Connell) on the subject of ‘Trade Secret Theft in China’ has been posted on the IP Strategy blog. The paper briefly explains trade secrets before then describing the various scenarios in which foreign companies may find themselves. We suggest that some of the scenarios described are clear examples of trade secret theft but others less so, if not at all. Any and all feedback is most welcome.
by David Cohen and Donal O’Connell
While the laws governing trade secrets differ slightly from country-to-country, common among nearly all these laws is that a trade secret is any information that is:
- Not generally known to the relevant business circles or to the public. The information should also not be readily accessible.
- Confers some sort of economic benefit on its owner. This benefit must derive specifically from the fact that it is not generally known, and not just from the value of the information itself. It must have commercial value because it is a secret. Commercial value encompasses potential as well as actual value.
- It must have been subject to reasonable steps by the rightful holder of the information to keep it secret. What is reasonable can vary depending on the specific circumstances.
A trade secret continues for as long as the information is maintained as a trade secret. However, information may no longer be considered a trade secret once it becomes easily accessible, is no longer properly protected or has no commercial value.
Trade Secrets Need People to Exist
At first blush an audit sounds expensive, distracting and unnecessary. Let’s face it, we live in the age of the long tail. Over the past few years, things people would have previously given only a remote chance of coming to pass seem to be happening on a regular basis. What’s more, the pace of change and disruption in business and in the personal world is so great, it is almost impossible to keep up. It seems that whatever you are doing today will have to be radically altered very soon. With all this change most of us are running just to stay in place — so any distraction from the daily chores of simply keeping up needs a powerful justification. I would argue however, that the frenetic pace of business life is precisely why audits are so important. Just as mindfulness is rightly understood as being key to a centered life, trade secret audits are essential to continued success as a business. Read more
As we have discussed elsewhere, a trade secret audit or assessment is vital if a company is to protect itself during the outsourced manufacturing process. [See these articles: Trade Secret Audits – Why Bother? ; You’ve Decided to Conduct a Trade Secret Audit. Now What?; You’ve Decided to Conduct a Trade Secret Audit. Now What? Part 2 ] Read more
Donal O’Connell and I are very pleased to announce that Practical Law of Westlaw / Thomson Reuters has published a Practice Note of ours related to trade secret valuation. Click below to view the Practice Note in its entirety.Trade Secret Valuation (W-019-2083)
Donal O’Connell and I are very pleased to announce that Practical Law of Westlaw / Thomson Reuters has published a Practice Note of ours related to trade secret audits. Click below to view the Practice Note in its entirety.Trade Secret Audits
A few days ago, in a federal court in Chicago gave a manufacturer some tough love about trade secret law. In the case, the long time president of a the plaintiff left to start a competing business and took a flash drive with him that included information about his former company’s pricing, customers, and suppliers. The former president later hired another former employee to join him, and she too brought with her information from her former employer. Some of this information was used “as a general reference point and a benchmark when determining” the new company’s needs and some of it was shared with the new company’s sales representatives, who were “instructed” to “target key” distributors of the plaintiff.
Sounds like a compelling trade secret claim for misappropriation likely to receive injunctive relief?
Perhaps the single most important part of outsourced manufacturing is to select a trustworthy partner. A company should not enter into any transaction unless it has a good basis to believe that the manufacturer will be an acceptable partner. This requires rigorous due diligence, including:
- Background checks of the manufacturer’s principal officers, directors, and key personnel.
- Audits of the manufacturer’s financial statements.
- Inspections of the manufacturer’s facilities.
- Investigations of the manufacturer’s supply chain and trading partners.