Here are several questions that will test your understanding of fundamental aspects of trade secrets. After you have drafted a paragraph or two responding to a question, open the Answer link to see whether your response identifies the same issues as those in the proposed answer.
For many men the most unpleasant aspect of an EKG test occurs when the technician tears off hair along with the plastic patches he or she has stuck to a patient’s chest. You are a primary care physician and discover that swabbing the EKG plastic patches with Purell allows one to remove the patches without tearing hair, and does not impair the efficacy of the electrodes attached to the patches. You ask your EKG technician to use this technique on all male patients over 18. One of your patients changes his primary care physician and asks his new physician’s EKG technician to use Purell on the EKG patches, which becomes a standard practice at your new physician’s practice. You learn of this and, still a bit resentful of the patient who defected from your practice, sue your colleague for trade secret misappropriation. Does your Purell technique satisfy the three basic requirements for a trade secret and, if so, is it likely you would prevail in this dispute?
Although the economic benefit resulting from your discovery about a new use for Purell may not be immediately obvious, one can reasonably assume there is, or will be, some commercial advantage that will accrue to you from this discovery. Your male patients may be so unexpectedly pleased to leave their annual physicals without raw-feeling skin that they tell their friends, which may entice them to become your patients.
It is generally known that when EKG patches are removed from the chest, they painfully tear away any hair on the skin to which the patches are affixed, and you were the first to discover this “off label” use for Purell to remedy this discomfort. Initially this information was secret because only you knew it. If you had then disclosed it to your EKG technicians, but with the proviso that it was proprietary information that they were legally bound not to disseminate further as a provision of employment, the information would still be considered secret. It appears, however, that you simply informed them of the technique, without first establishing the information was confidential. At that point your discovery could no longer be considered a secret.
Likewise, it appears you took no reasonable measures (in fact, no measures at all!) to preserve the confidentiality of your discovery. If you had sworn your technicians to secrecy and had them apply Purell to the EKG apparatus behind closed doors while alone, these would be considered reasonable measures to prevent your secret from becoming known to your patients. In fact, you may have unwittingly wanted your patients to learn of your new technique, as it could only boost their estimation of you. Trade secrets often involve such tension on the part of the owner of whether to garner the psychic benefits of being known as the creator or discoverer of valuable information, or to garner the commercial benefits from information kept secret.
DUSA is an American pharmaceutical company specializing in therapeutics for skin diseases. In 2019 DUSA sued German competitor Biofrontera, claiming this company had infringed upon DUSA’s patents and trade secrets associated with its “Illuminator for Photodynamic Therapy” which is used to treat skin cancer and pre-cancerous conditions.
Some months prior to DUSA’s lawsuit a handful of professionals from DUSA’s marketing department left DUSA to join the marketing efforts at Biofrontera. DUSA claims these former employees took with them information about DUSA’s marketing strategies, potential customer lists, and market metrics they had worked on while at DUSA.
What would DUSA need to establish that the information DUSA’s former employees misappropriated and used trade secrets? And what measures would DUSA need to demonstrate having taken to maintain the secrecy of this allegedly proprietary information?
Many, if not most, trade secret misappropriation disputes are based on allegations involving the conduct of a former employee who has been hired by a competing company. Employees who are privy to valuable proprietary information may be contractually prohibited, at least temporarily, from working for a competitor. But much useful information that an employee acquires working for one company will naturally remain with him while working for the competitor. Whether his sharing of valuable information with his new employer constitutes misappropriation depends on whether the shared information legally qualifies as trade secret.
DUSA will need to establish that its customer lists and sales metrics were, in fact, secrets. Particularly for a large operation like DUSA, more than a few employees would need to be privy to this information to establish production goals, new marketing strategies, etc. Even the fact that the entire marketing staff may have been privy to this information, however, does not mean it cannot be considered trade secret. If DUSA can establish that this proprietary information was commercially valuable, and that it took reasonable measures to ensure it remained accessible only to employees who needed it to work effectively, DUSA’s lists and metrics should satisfy the legal standard of trade secret.
You are working with a friend to develop an improved trans-dermal patch that remains efficacious even after its wearer swims vigorously in seawater. You are close to producing a working model of the patch when your friend decides to work independently of you on the invention. Within several months, capitalizing on the proprietary method you both earlier worked on, you both begin to manufacture and sell the improved trans-dermal patches.
You decide to maintain the proprietary method as a trade secret, reasoning that since only two of you are privy to the method, it still qualifies as a trade secret. Your [ex]friend, however, is concerned that the invention may be reverse-engineered and no longer qualify as a trade secret, and therefore obtains a patent registration in his name for the invention.
Does his patent registration affect the status of the trade secret you are carefully protecting? If so, what rights might you claim with respect to the invention?
By independently obtaining a patent registration, your duplicitous [ex]friend has irrevocably publicized the proprietary information and it can no longer be a legally protected trade secret. For 20 years your friend’s patent provides him a monopoly over the invention allowing him to prevent anyone else (including you) from using it.
Although you cannot recover the trade secret status of the invention, you could challenge the patent, and be named as a co-inventor and owner, of it. You might also assert an unfair competition claim against your former partner. The success of such a claim will likely depend significantly on documentation of the terms of your business arrangements with your partner, especially as to ownership of the intellectual property assets you both worked on.