Posts Tagged: "nondisclosure agreements"

Trade secret theft is often an inside job. Employees who know they’re about to leave for a competitor or start their own competing business will sometimes try and get an unfair head start by taking their employer’s confidential information—customer lists, strategic plans, etc.—as they head out the door. A necessary tool for preventing the misappropriation and use of a company’s valuable trade secrets is a well-crafted employee restrictive covenant agreement. Having employees under at least some form of such an agreement is important for two reasons. First, both state and federal trade secret statutes require employers to take reasonable steps to protect the secrecy of information sought to be protected under those statutes. Second, restrictive covenant agreements provide employers contractual remedies, over and above the statutory trade secret protections, that can be used to prevent theft and use of a company’s confidential information.

The spectacular failure of blood-testing firm Theranos is the subject of a riveting book, Bad Blood by investigative reporter John Carreyrou, and an engaging documentary, “The Inventor” on HBO, focusing on Elizabeth Holmes, the once-celebrated wunderkind who dropped out of Stanford at age 19 to “change the world” with a device that would perform hundreds of diagnostic tests with a few drops of blood from a finger stick. It’s a story made for Hollywood (Jennifer Lawrence will play Holmes in the forthcoming movie), filled with lies, deception, threats and sex, set in a Silicon Valley startup. But even the Theranos story doesn’t mean that trade secret law is inherently dangerous. Consider Apple, one of the world’s most secretive companies. (Holmes famously modeled her clothing and business habits after Steve Jobs.) Apple has consistently used NDAs and secrecy management to protect products under development, to great effect when they are ultimately unveiled, all without touting non-existent technology. And it’s easy to imagine how Theranos might never have happened if investors and business partners had been less credulous and more insistent to understand the technology.

We all talk about the importance of data as business assets, but when it comes to buying and selling the companies that own them, we seem not to pay much attention. My anecdotal survey reveals that colleagues who focus on mergers and acquisitions  confess to a lack of focus on trade secrets. This may seem odd, even crazy, given the increasing percentage of industrial property represented by intangible assets—up from 17% in 1975 to 84% in 2015. The problem appears to start with the fact that secret information, no matter how central to the success of the business, is mysterious. Unlike the “registered rights” of patent, copyright and trademark, there are no government certificates defining secrets; and valuing them is hard. Add to that the imperative to get deals done faster and cheaper, and it’s easy to see how secrecy may have become the blind spot of transactional IP.

When relying on scientific guidelines to support an obviousness rationale, practitioners should offer evidence for why contradictory guidelines should be discounted. A claimed constituent is not “necessarily present” if the prior art reference lists several alternative constituents and a skilled artisan could not reasonably deduce that the authors of the prior art reference used the claimed constituent.

A Confidentiality Agreement, which is also known as non-disclosure agreement or simply as an NDA, is simply a contract between two or more parties where the subject of the agreement is a promise that information conveyed will be maintained in secrecy… These types of agreements are particularly useful when one is disclosing information that is valuable so long as secrecy is maintained (i.e., a trade secret), which can include both invention related information and business related information.

ZeniMax offers useful insights for enterprises seeking to maximize the benefits of NDAs while minimizing the time and effort needed to negotiate them… Most technology enterprises are well-acquainted with NDAs. On the positive side, they recognize the importance of entering into NDAs with outside parties before disclosing confidential information, whether in the context of discussions related to potential commercial transactions, funding, or joint R&D projects, or for other purposes, such as to support product-related investigations or certification activities. On the negative side, enterprises commonly associate the negotiation of NDAs with cumbersome paperwork, obstacles, and delay.

There is often a tension between the needs of law enforcement and the companies that collect and store the electronic data of individuals. Law enforcement may seek this data from the companies through subpoenas, search warrants, and other court orders as part of its investigation and request that the companies did not disclose their interaction with authorities to maintain the confidentiality of the investigation. In contrast, companies may wish, or be obligated under the terms of their agreements or privacy policies, to disclose to their customers that they have produced the customers’ electronic data to law enforcement pursuant to legal process. To prevent the companies from doing so, federal law enforcement typically obtains a non-disclosure order pursuant to 18 U.S.C. § 2705(b) from a federal magistrate court. These orders have generally not had a definite expiration date. However, companies have recently begun to challenge the limits and scope of such orders. The recent case of Microsoft Corp. v. United States Dep’t of Justice, No. C16-0538 JLR, represents the most serious challenge to date.

On Wednesday, February 1st, a jury in the U.S. District Court for the Northern District of Texas (N.D. Tex.) entered a case verdict which orders virtual reality developer Oculus VR to pay $500 million to Rockville, MD-based interactive computing firm ZeniMax Media Inc. The verdict is the latest activity in a case involving allegations of copyright infringement and trade secret misappropriation levied against Oculus, now a subsidiary of social media giant Facebook Inc. (NASDAQ:FB) of Menlo Park, CA.

During the recruiting process and job interviews, open dialogues and an exchange of ideas take place between the job applicant and the company. However, when intellectual property is involved, both employers and applicants must walk a fine line between building trust versus over-disclosure. Here are some guidelines every prospective employee and employer should know about intellectual property and the interviewing process.

In the field of Intellectual Property (IP) attorneys have options when counseling clients on how to protect their IP. However, these options remain subject to constant forces of change. For example, IPWatchdog readers will remember the latest version of the PATENT Act that the U.S. Senate worked on for months in 2015, which proponents say would strengthen enforceability of U.S. patents, but not as much as some would prefer. Then in 2016, the IP landscape changed again with the passage of the Defend Trade Secrets Act (DSTA) that President Barack Obama later signed into law, which federalizes civil actions in trade secret disputes.

A trade secret is defined as any valuable business information that is not generally known and is subject to reasonable efforts to preserve confidentiality. Generally speaking, a trade secret will be protected from exploitation by those who either obtain access through improper means, those who obtain the information from one who they know or should have known gained access through improper means, or those who breach a promise to keep the information confidential. While virtually every business has at least some trade secrets, they are quite fragile because they protect information and resources that are secret, which necessarily means that protection is lost if and when the secret becomes publicly known. For that reason, when other forms of intellectual property protection are available, such as copyright or patent protection, one should carefully consider the wisdom of relying only on trade secret protection.

A very troublesome flaw in Talent Wants to be Free is that the author frequently conflates non-compete agreements with two other very common forms of employee restraints: confidentiality (or nondisclosure) agreements and invention assignments. As most practitioners can readily appreciate, there is a world of difference between the first one and the other two, and they typically are not joined in a single document. Non-competes stop someone from taking a job with a competitor, and their use is restricted in many places and illegal in a few, like California.