Sunday, October 10, 2010

Trade Secrets, Green Technology and Protecting What You Think You Own

By John L. Watkins

According to a press release from the FBI last month, green technology is an increasingly attractive target for "would-be information thieves looking to make a fast buck." The Economic Espionage Act is a federal law that makes trade secret theft a federal crime. The language of the Act is very similar to the Uniform Trade Secrets Act, variants of which have been adopted by most states. The state acts provide for civil remedies (damages and injunctions), and sometimes criminal penalties.

Many companies -- large and small -- seek to protect important information as trade secrets. It is often impractical, for example, to maintain a large patent portfolio. The Copyright Act can provide some protection, but is limited in its scope. A trade secret, in contrast, can potentially be almost any information that has economic value and that is subject to reasonable efforts to maintain its secrecy. Examples can include customer lists, supplier lists, business plans, computer programs, formulas, and financial information, all depending on the particular circumstances.

The Need for Protection

A key element for protection under virtually any trade secret law is that the owner took reasonable steps to protect the information. Companies or individuals with trade secrets -- from start-ups to the largest companies -- need to make sure they have acted to maintain the secrecy of their information. This requires legal help, preferably from the beginning.

The vision of recent college graduates (or dropouts) writing software or developing other technology in a storefront office or a garage is a modern variant of the American Dream of rising from rags to riches. Such efforts are not necessarily mere pipe dreams. In fact, modern technology and decreasing barriers to entry probably make it more possible than ever for an entrepreneur to become successful, if not becoming the next billionaire.

This same technology -- thumb drives that hold gigabytes of information and portable hard drives that hold terabytes -- make it easy for anyone with access to the information to copy it. More and more trade secret cases are being brought against former employees who used such technology to take company information.

The start-up is particularly vulnerable. In many instances, friends will work together in developing technology or another invention. Sometimes, entrepreneurs will “partner” with another company for a particular purpose. In some instances, an investor will come into the mix. In each instance, if intellectual property rights are not documented properly, the possibility of a future dispute becomes very real.

Further, the possibility of a future dispute or lawsuit increases in direct proportion to the success of the venture. Put more bluntly, it is not likely that anyone will fight over worthless technology. It is very likely, however, that disputes will develop over valuable technology.

When inventors or entrepreneurs believe they have developed, invented or written something valuable, it is critically important to consult with an experienced attorney. All employees should sign a written non-disclosure agreement. It is also important to enter into a non-disclosure agreement before entering into any relationship with a third-party business “partner” or an investor. It is equally important that persons working together document their respective rights and obligations regarding the technology, writing or invention. (In addition to trade secret protection, it is also important to consider whether to seek additional protection, such as a patent application or copyright registration).

This is definitely not a situation where inventors, entrepreneurs or investors should try to go it alone or use Internet forms. Prospective clients should also not assume that every lawyer has the necessary experience or expertise to prepare proper documentation or to provide the proper advice.

Having proper non-disclosure agreements and other contracts in place is only the beginning. Adopting procedures and practical measures to maintain the secrecy of the information is also very important. This includes limiting access to the information to those who really need to have such access, monitoring usage, and being diligent in reinforcing the need to keep the information secret. Experienced legal counsel can offer practical advice on this subject.

This is an area in which experienced counsel can provide substantial value at a low cost. Management looking to cut a few corners by avoiding legal fees or who think they can go it alone (frankly, a common attitude among entrepreneurs and engineers) often find that failing to invest a little in initial legal advice later leads to costly legal bills, a loss of any protection for their technology, or both.

Trade Secret Litigation

If a company expects that there has been an information breach, it is extremely important to consult immediately with counsel. It may be necessary to engage forensic experts to determine whether there has actually been a breach and the likely extent of the breach. Ideally, forensic experts should be engaged with the assistance of counsel. The failure to act promptly may compromise potential legal and equitable remedies.

Given the FBI's stated interest, it may be tempting to turn the investigation over to the criminal authorities. This should be done only after consultation with company counsel.

First, and most importantly, the authorities are probably not going to be able to secure any direct relief for the company. Damages and injunctive relief will need to be sought directly by the company. Second, involving the government also involves a loss of control. The authorities, not the company, decide whether to proceed and how aggressively to pursue the matter. In contrast, the company can decide how it wishes to pursue possible civil remedies. Third, if the government is to be involved, their involvement is typically best handled through company counsel.


Trade secret statutes provide substantial civil and criminal remedies for the misuse of proprietary information. Not surprisingly, green technology and other cutting edge technology provide attractive targets for those seeking to profit from the work of others. It is critically important to involve counsel as early as possible in protecting confidential and proprietary information. If there is a breach, the early involvement of counsel will help achieve the best possible outcome.

If you do not know how to find a business attorney and need a resource, my book, An Insider's Guide on Hiring a Business Attorney, provides a step-by-step guide for finding, evaluating, hiring, and working with a business attorney. It is available on for $15.99.

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