Protecting The Crown Jewels: Trade Secrets and Non-Disclosure Agreements Part I

Protecting the Crown Jewels: Trade Secrets and

Non-Disclosure Agreements

ByJohn L. Watkins

AndThomas L. McLain

Contact: jwatkins@ctflegal.com or tmclain@ctflegal.com

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Disclaimer This presentation is for informational purposes only. The

presentation is based on general principles of Georgia law as of the date the of preparation (March 20, 2009). Georgia law is subject to change, and the law may differ in other jurisdictions. Reviewing or downloading this presentation does not create an attorney/client relationship with the authors or their law firm, Chorey, Taylor & Feil, A Professional Corporation. The authors and their firm provide legal services only pursuant to written engagements. Legal advice must be tailored to the particular circumstances and the applicable law. Those seeking legal advice should consult an experienced attorney licensed in their jurisdiction.

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Part I: Introduction

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The Crown Jewels• For many businesses,

trade secrets are the crown jewels– Manufacturing techniques– Customer lists– Business plans– Computer programs– Secret formulae or recipes– Many others

• Provide the key competitive edge

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The Risk

• 59 percent of ex-employees admitted stealing confidential company information in 2008

– Source: Atlanta Business Chronicle, 2/23/09, http://atlanta.bizjournals.com/atlanta/stories/2009/02/23/daily17.html?surround=etf (reporting on survey conducted by Ponemon Institute and Symantec Corp.)

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The Risk

• Cheap mainstream devices facilitate taking massive quantities of data

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The Risk: Competitors

• Economic espionage does exist

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The Risk: Business Partners

• There is greater interaction, or “partnering” among businesses than ever

• Sometimes this requires sharing confidential information

• The other company may be careless with the information

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The Risk: Employees

• Many employees need to know trade secrets and confidential information

• Statistics demonstrate risk of misappropriation

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The Solutions

• Trade secret protection – Statutory

• Non-Disclosure agreements (also called confidentiality agreements)– Contractual

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What is a Trade Secret?

• Definition under Georgia Trade Secrets Act is broad

• Examples of possible trade secrets– Customer lists or databases– Business plans– Secret formulae– Computer programs– But many others may qualify

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Trade Secrets: Key Elements

• The item must be secret

• The item must derive actual or potential economic value from:– not being generally known or readily

ascertainable by proper means

• Must be subject to reasonable efforts to maintain its secrecy

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Trade Secrets: Relationship to NDAs

• In Georgia, proprietary information that does not qualify as a trade secret may still be protected by contract– Typically known as a non-disclosure

agreement or “NDA”

• NDAs may also be important in protecting trade secrets – Showing reasonable efforts were made to

protect secrecy

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Other Forms of IP Protection

• Patents are a very important form of IP– Patents grant a statutory monopoly (currently

20 years) for inventions that meet federal statutory requirements

– Require public disclosure– Usually expensive to prosecute and maintain– Become part of the public domain after the

statutory period

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Other Forms of IP Protection

• Copyrights are also an important form of IP:– Protect writings and other forms of fixed

expression (i.e., software)– Greater protection if material is registered

(again, public disclosure)– Do not protect ideas

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Trade Secrets Are Important

• The protection is broadly applicable

• Trade secrets have no time limit

• Many companies do not have the resources to prosecute patents or manage a patent portfolio

• Substantial remedies exist for misappropriation

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In the Next Modules

• We will cover protecting trade secrets and other proprietary information under NDAs

• We will then cover trade secret litigation and remedies available in litigation