More on Protecting Trade Secrets | DCR Workforce Blog

More on Protecting Trade Secrets

Wikileaks has grabbed eyeballs and enormous public interest with its promise of enabling people to reveal suppressed and censored injustices of ethical, political and historical significance from independent anonymous sources. Wikileaks’ operations brought home to all business managers the ease with which highly important and possibly crucial information can be transferred out of what were considered as high security offices – without the need to mount a ‘mission impossible’! With one click of a mouse, one can transfer sensitive data to a storage device or email – or post it on the Net for the whole wide world on the web! MBs and GBs are passé; we now have TBs of data and transferring it does not require any wiring either – with Wi-Fi, 3G and Bluetooth out there.

It is no wonder then, that when HP found that its former President and CEO was set to join Oracle, it could enforce contractual obligations to ensure that its trade secrets are protected by bringing a lawsuit to press the point as did Pepsico when an executive tried to join Quaker Oats. Employee turnover being what it is, and the use of contingent workers rising phenomenally (and predicted to touch 50% of an organization’s total workforce, protecting trade secrets needs to be equated with survival tactics for any business today. Employers today are prepared to find their employee of today on their competitor’s team next month, if not next week. So, which part of their business information qualifies as a trade secret?

What qualifies as a Trade Secret?

 Broadly speaking, a company’s proprietary information is called a ‘trade secret’ and it is protected against misappropriation. Further definitions vary by jurisdiction, but it is basically the ownership of something which can be used in a business to provide an advantage to its owner which is not enjoyed by others who do not have it. To qualify any information as a trade secret, aspects like whether it is well known outside the business or not, if clear measures are put in place by the business to guard it, its value for the business, the effort and cost behind developing that information, and the ease/difficulty to acquire and replicate that information are taken into consideration. The secrecy is to protect its independent economic value from being exploited by other people, who may have copied it without a license. But, if the competitors arrived at the same information through independent research or reverse engineering, the protection as trade secret cannot be maintained.

Some examples of trade secrets are listed below:

  • Customer information (with billing information, payment history, client preferences and contacts.)
  • Manufacturing methods and processes, use of machines, devices, designs, blue prints, specifications, training material and scientific data.
  • Proprietary information, with regard to pricing, bidding practices and marketing plans.
  • Databases and source code of computer software which perform functions which are not common to programs of that type. Apple Computer, Inc. could get a court to protect its copyright over its operating system against Franklin Computer Corp. (1983)
  • Special knowledge and skills created under the ownership of the business.
  • Any information which provides a competitive advantage to its owner as ruled in Prince Mfg. vs. Automatic Partner Inc. (1976)

The owner of a trade secret gets a claim to protection based upon the extent to which the information is known to employees, people outside the business, the measures put in to protect it, its value in competitor’s hands, the expenditure incurred on developing it and whether others can easily arrive at the same. Companies with Global operations need protection for their trade secrets as in the case of GE with its ex-maintenance engineer Wang who started training people on maintaining GE’s machines using GE’s training material through his own venture, JiuXiang.

AFC Test

The Abstraction-Filtration-Comparison (AFC) test is devised to help determine the similarity between the non-literal elements of computer programs. The process identifies the program’s level of abstraction, to filter out material that does not require further examination for copyright violation. Then, only copyright protected material is compared. This approach was used first to determine the copyright infringement case brought by Computer Associates International Inc. (CA) against Altai Inc. over a job scheduling program developed for it by an ex-employee of the Plaintiff, clearly carrying similarities with CA’s  program, even after a clean room re-write.

Encroachment into and misappropriation of any entity’s trade secrets could result in punitive damages covering the actual losses to the entity as well as the competitor’s illegal enrichment along with legal fees if and only if the entity is able to protect its secrets through adopting all the necessary and appropriate measures, which we will discuss in our next post.

The content on this blog is for informational purposes only and cannot be construed as specific legal advice or as a substitute for competent legal advice. They reflect the opinions of DCR Workforce and may not reflect the opinions of any individual attorney. Do contact an attorney for advice specific to your issue or problem.
Lalita is a people/project manager with extensive experience in operations, HCM and training and development across industries like banking, education, business consulting, BPO and information technology. She believes in a dynamic approach to life and learning as change is the only constant.