Do You Have Trade Secrets?

Do you have trade secrets in your business?  If these trade secrets went to a competitor would it hurt your business?

A trade secret gives a business an advantage over its competition.  The secret could be a method, device, business intelligence, or formula that gives a business an advantage over its competition.  By definition a trade secret includes information, including a formula, pattern, compilation, program device, method, technique or process that derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable, by other persons who can obtain economic value from its disclosure or use.

Do you really have a trade secret?  Prove it.

Do you actively protect the trade secret?  Do you use non-competition , non-solicitation, and confidentiality agreements?  Do your employees execute such agreements with you?  How about third parties that may have access to the information?

If you don’t, good luck getting a court to see your side of things.  Federal and state laws can help you protect your secrets and help you stop others from using the secrets, but you have to take reasonable efforts to maintain secrecy.  If you don’t treat a “trade secrete” like trade secrets you will not get paid.  Look up MP Medical Inc. v. Wegman.  If you treat “trade secrets” like trade secrets, you will get paid.  Look up H&R Block v. Paramount Tax Services.

Besides the agreements referred to above, a business must have company policies in place that are documented and are actually followed practices.  Practice, practice, practice.  I cannot say it enough.

Expired Patents

Updated:  June 28, 2010. See THIS.  Federal Circuit held that Solo Cup did not have the “intent to deceive the public” required for false marking liability.  The court created a high bar for plaintiffs to overcome and the decision will put a damper on the false-marking claims.  However, some defendants may not have the same advice-of-counsel excuse that Solo Cup was able to rely upon.  The case below is still highly pertinent to businesses with patents.

Recently, hundreds of companies have been sued for false patent marking.  Federal statute creates a cause of action against a manufacturer who, with intent to deceive the public, mark unpatented products as patented. Any person may sue to collect the damages, however, half of the award goes to the Federal Government.  Damage awards may be awarded up to $500 per falsely marked article.

One of the largest of such cases is Pequignot v. Solo Cup Co. where Solo Cup Co. is being sued by a patent attorney claiming the company is misleading consumers by marking its products with expired patent numbers.  To save money on retooling and other costs, Solo Cup had continued to mark its products with patent numbers even though those patents had expired.  Pequignot sought a damage total exceeding $10 trillion based on the $500 per falsely marked article standard.

The judge ruled in Solo Cup’s favor, but the case is on appeal.  What happens on appeal will likely have great ramifications for other manufacturers.  This case is one in a series of recent cases raising false marking claims, and it highlights the potentially high stakes from falsely marking products — the maximum potential damage award against Solo was enormous. However, the court’s decision creates a high bar for plaintiffs seeking to obtain a favorable decision in such cases, at least when the defendant has acted in good faith.

This unusual case raises the question of how businesses can protect themselves from patent-marking bounty hunters.  Since federal law allows individuals to sue for false marking and reap monetary benefits, it is imperative that companies learn how to avoid false-marking liability.

First: Pay attention to the details of your patent.  When does it expire?  Stop marking the product once it does expire.

Second: Take steps to build your market base by developing a strong trademark while you have patent protection.  This will help your market dominance even after your competitors can enter your market and produce “copies” of your product.

Third: Patent your ongoing innovations.  Patent your new and improved changes to your product.  This will give you protections that will extend beyond the length of your original patent protection.