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Thieves in the workplace ▪ Estimate: U.S. businesses lose $334 billion per year to trade secret thefts and cyber breaches (NSA) ▪ 85% of the time, the trade secret thief was known by the company, such as a partner or employee (Gonzaga Law Review) ▪ Trade secret cases in U.S. federal courts doubled between 1988 and 1995, doubled again from 1995 to 2004, and is projected to double again by 2017 (O’Melveny & Myers)

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Every business has trade secrets ▪ Know what they are ▪ Implement policies to protect them ▪ Without documented security measures, it could be found that your “proprietary” information was never a trade secret

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What is a trade secret? ▪ Trade Secret = information that can be legally protected – Does not have to be patentable – Does not have to be copyright (e.g., art, music, etc.) – Can be purely factual business information – Must be a secret

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Factors used to determine trade secret status ▪ Measures taken to guard secrecy; ▪ Value to competitors; ▪ Amount expended to develop; ▪ Ease with which information can be properly acquired by others; and ▪ Whether information is known outside of the business

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Oklahoma definition of ‘trade secret’ ▪ “information, including a formula, pattern, compilation, program, device, method, technique or process” ▪ “that derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use” and ▪ “is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.”

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What does that mean? ▪ Confidential commercially valuable information that is the subject of “reasonable precautions” to maintain secrecy ▪ Doesn’t have to be complex, could be a compilation of simple information ▪ May be lost through proper creation/discovery 
 by others (e.g., reverse engineering)

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Why does it matter? ▪ Unpermitted use or disclosure = misappropriation ▪ Remedies for misappropriation 1. Injunctions 2. Damages 3. Defendants’ profits 4. Royalties 5. Attorneys’ fees

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“Is” Examples • • • • • • • • • • • • • •

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Customer lists Supplier lists Personnel information Computer programs Data compilations Inventions Designs Blueprints Formulas Machine processes Manufacturing techniques & methods Manufacturing methods Repair techniques Repair methods

“Is NOT” Examples ▪ Business plans provided in public filings ▪ Customer information available online ▪ Product information that can be determined by taking the product apart ▪ Processes that are open to the public ▪ Internal company documents, the secrecy of which do not create a competitive advantage ▪ Any other unprotected business information, whether or not valuable to the business

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Case study #1 ▪ While employed by Cellular Accessories, David Oaks developed an extensive LinkedIn account to promote his employer’s business ▪ When Oaks left Cellular Accessories to create a rival company, Trinitas, Oaks used information from that LinkedIn account to contact prospective customers ▪ Cellular Accessories claimed the LinkedIn account developed by Oaks had contact information that was a trade secret

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Ownership issues ▪ Trade secrets likely to be “owned” by the inventor – Employee may own a company trade secret unless there is a written agreement with employer or the employee is “employed to invent”

▪ Other commercial arrangements (e.g., joint venture) – Unclear when two companies engage in a commercial arrangement – Without a contract, could be co-owned by both companies, or owned by just one

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Confidential information and new employees ▪ Incorporate into pre-hire and 
 new-hire processes: – Conduct interviews carefully – Require disclosure of previous non-competition and non-disclosure agreements – Require acknowledgement that new employment does not violate previous agreements or require disclosure of confidential information, trade secrets

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Confidential information and current employees ▪ Implement written policies: – Assignments of inventions – Confidentiality agreements – Electronic communications and/or social media policies – Working remotely or via personal devices

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Confidential information and current employees ▪ Implement certain practices: – Maintain information on a “need-to-know” basis – Utilize locked storage when possible – Advise employees regarding the identity of trade secrets, confidential information, etc. – Train/remind employees of their continuing obligations regarding trade secrets, confidential information, etc.

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Case study #2 ▪ Heather Gallagher was operations manager for Pocahontas Aerial Spray Service ▪ September 2012: Began soliciting business from Pocahontas Aerial customers ▪ November 2012: Incorporated Blue Sky Spray Service ▪ December – January: Accessed Pocahontas Aerial’s computer and downloaded proprietary information to a USB device ▪ January 15, 2013: Left Pocahontas Aerial and began working full time for Blue Sky

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Confidential information
 and third parties ▪ Sharing of confidential information and trade secrets with third parties (i.e., customers, contractors, vendors): – ”Reasonable measures” of security – Third-party agreements: • Control/restrict access and disclosure • Control/restrict use

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Case study #3 ▪ Jason Kuan was president of a division of Cargill, Inc., and JBS was a Cargill competitor ▪ June 2014: Kuan and JBS discussed his possible employment ▪ July 2014: Kuan sends all his personal and business contacts from his Cargill laptop to his personal email address. He also downloads folders containing information about Cargill’s business plans to a personal, external hard drive. ▪ August 2014: Kuan accepts a position with JBS and gives Cargill two weeks notice

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Case study #4 ▪ PharMerica and Absolute Pharmacy competed selling pharmacy products and services to skilled nursing facilities ▪ Mary Jo McElyea was a PharMerica executive who went to work for Absolute Pharmacy ▪ Before leaving PharMerica, McElyea copied files, including client lists, pricing information and contacts from her PharMerica computer, to a thumb drive device

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Confidential information and departing employees ▪ At separation: – Return property, information – Remind of continuing, post-employment obligations – Provide copy of applicable agreements

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Confidential information and departing employees ▪ (Preemptive) enforcement: – Communicate with former employee upon receipt of information indicating improper conduct – Communicate with former employee’s subsequent employer regarding post-employment obligations, inconsistent conduct

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Conducting an audit:
 Who are your auditors? ▪ Company employees or outside help? ▪ Specific expertise required (e.g., do they need to be engineers?) ▪ Who handles and/or is exposed to that information? ▪ Timing constraints

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Conducting an audit:
 What info do you want to protect? ▪ What is critical to the value of your business? ▪ What is critical to the success and operation of your business? ▪ What would you not want in your competitor’s hands? ▪ Is that information a secret? ▪ Who handles and/or is exposed to that information?

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Conducting an audit:
 What policies are in place? ▪ Written employee policies – Require confidentiality and designate ownership – Specific policies for specific types of employees is recommended

▪ Written third-party agreements – Require confidentiality and designate ownership for customers, vendors, suppliers and business partners

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Conducting an audit:
 What policies are in place? ▪ Implement appropriate security policies – Consider physical and database controls – Restrict access to a need-to-know basis (whether employees, customers, vendors, suppliers or business partners)

▪ Educate your workforce – Continually train employees on what the business considers its protected information – Continually train employees on business policies to protect that information

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