Posts in Trade Secrets

Not long after it was reported that a Chinese military unit might be responsible for a number of cyber attacks that have taken place on US infrastructure and businesses, the Obama Administration unveiled its strategy to put an end to the theft of US trade secrets by foreign governments and foreign competitors.

During the last six days of a session the Speaker of the House of Representatives is allowed to suspend Rules in order to expeditiously dispose of non-controversial matters quickly before the end of a session. This year there will be several intellectual property bills that will move under suspension of House Rules on Tuesday afternoon, December 18, 2012. One is a substitute version of HR 6621, the America Invents Act (AIA) technical corrections bill. Another is a bill to undo a recent decision of the Second Circuit relative to trade secrets and the Economic Espionage Act.

Yesterday, Kolon Industries Inc. and several of its executives and employees were indicted for allegedly engaging in a multi-year campaign to steal trade secrets related to DuPont’s Kevlar para-aramid fiber and Teijin Limited’s Twaron para-aramid fiber. The conspiracy and theft of trade secrets counts each carry a maximum penalty of 10 years in prison and a fine of $250,000 or twice the gross gain or loss for individual defendants and a fine of $5 million or twice the gross gain or loss for the corporate defendant. The obstruction of justice count carries a maximum penalty of 20 years in prison and a fine of $250,000 or twice the gross gain or loss for individual defendants and a fine of $500,000 or twice the gross gain or loss for the corporate defendant.

Protecting trade secrets is critically important if for no other reason than making sure that the time, money and energy you spend building your business is not wasted. If your employees could simply leave without having any contractual obligations that would prevent them from taking information, stealing employees away and/or soliciting your existing customers then they would be able to set up a business and compete with you for a fraction of what it cost you to do the same. After all, you were the one who spent the time and money for marketing to attract customers in the first place, and you were the one who spent the time and money necessary to train your employees. Without the cost of acquiring new customers and the costs associated with training employees that new business set up by your former employee would compete with you and have only a fraction of the start-up and overhead costs you faced. That can make it difficult for any business to keep the doors open.

Can you imagine the security employed in transferring the trade secret from the SunTrust Bank vault to the vault at the World of Coca-Cola? The Coca-Cola formula has been notorious with rampant rumors, creating its own urban mythology with respect to both the formula and efforts to protect the secret formula. All you have to do is Google “coke formula urban myth” and you will find all kinds of claims. Thus, it seems almost a virtual certainty that a new mythology will now be created and grow. It has always seemed to me that Coca-Cola is very comfortable with the urban myths, relishing them and even using them by some accounts to feed into the power of the trade secret, not to mention using them to misdirect the public into thinking, rightly or wrongly, that Fort Knox like security has always been employed to protect the formula.

When copying has occurred, much of the code may have changed by the time it’s examined due to the normal development process or to disguise the copying. For example identifiers may have been renamed, code reordered, instructions replaced with similar instructions, and so forth. However, perhaps one comment remains the same and it’s an unusual comment. Or a small sequence of critical instructions is identical. Correlation is designed to produce a relatively high value based on that comment or that sequence, to direct the detective toward that similarity. If correlation were simply a percentage of copied lines, the number could be small and thus missed entirely among the noise of normal similarities that occur in all programs.

What is startling about Wellman is how the patentee put the ‘863 and ‘317 patents squarely in the path of the “best mode” Patent-Raptor by deliberately keeping the Ti818 recipe a trade secret. As I’ve instructed numerous clients, you have a clear choice on “best mode” issue: (1) disclose the “best mode” and file the patent; or (2) don’t file the patent if you want to keep the “best mode” as a trade secret. There is simply no “in between” on this issue. The only question now is whether the Tyrannosaurus Rex of patent law (inequitable conduct) will devour what is left of the Wellman patents.

The demographics on users of social media can be surprising – a large percentage are over 35, and have six-figure incomes. These users have a lot of buying power and are often making the purchasing decisions for their households. Once they know this, clients can grasp the importance of both using social media proactively. But what is the risk? In the trade secret arena you could lose everything through inappropriate use by you or your employees, and the same is true in the trademark context as well.

Trade secrets are a very important part of any intellectual property portfolio. It is not at all an overstatement to say that virtually every business has trade secrets worth protection, regardless of whether the business is run as a sole proprietorship, a small business or Fortune 500 company. This is true because any business information that is valuable as a result of being kept secret qualifies for treatment as a trade secret. Nevertheless, it may be better to say that every business has assets that could and should be protected as trade secrets, but the truth is that many companies, even large companies, fail to do so properly.

The fact that the outsourcing of patent searches and the preparation of patent applications violates U.S. law only makes perfect sense, particularly when you factor into consideration the requirements of 35 U.S.C. 181 (re: national security) and 35 U.S.C. 184 (re: foreign filing licenses). By openly and willingly tolerating the outsourcing of preparation work of patent applications the clear intention of 35 U.S.C. 181 is subverted. What good does a secrecy order make if the the information relative to the invention has already been sent overseas?

But looking back, what strikes me is the surprisingly-variable role that patents played in the growth and success of the half-dozen trailblazing startup companies that I helped lead. For these startups, which collectively created more than 2,500 jobs, I raised approximately $1 billion from strategic and venture investors (who ended up with $3 billion in returns). And in the majority of cases, owning patents proved to be crucial to the funding and commercial success of my startup. But this wasn’t always the case. In several startups, patents were almost completely irrelevant to either the financing or the ultimate fate of the company. Understanding why this was so may offer some insights into both the value and the limitations of patenting.

Earlier today Dale Halling, of Halling IP and State of Innovation Blog, brought to my attention an article on the IAM Magazine Blog from a few weeks ago. Joff Wild of IAM blogged about a study conducted by IPVision, Inc., which focused on analyzing the intellectual property positions of over 9,000 US venture capital backed technology companies. The study was…

As you review the statements below, all of which were publicly available on the Internet when I found them, I think what you will find is that those companies you would most like to review your ideas and inventions are the companies that are not going to do so on a confidential basis. Many companies require an issued patent, or at least a pending patent application. Over and over again they recommend that you at least file a patent application prior to submitting in order to preserve your rights, and recommend that you contact a patent attorney.

Intellectual property is probably best thought of (at least in general terms) as creations of the mind that are given the legal rights often associated with real or personal property. The rights that are given are a function of statutory law (i.e., law created by the legislature). These statutes may be federal or state laws, or in some instance both…

Increasingly on the Internet invention advertising is taking an odd and seemingly inexplicable turn toward advising independent inventors to not seek patent protection, which is undeniably bad advice that will undoubtedly cause much disappointment and heart break for those who actually follow it.  But why is it that you are starting to see more and more advertisements that say it is…