Trade Secret Practice Notes Published

Donal O’Connell and I are very pleased to announce that Practical Law of Westlaw/Thomson Reuters has published two notes of ours on trade secrets.  One note relates to Trade Secret audits and another relates to Trade Secret valuations.

 

Failure to Take “Reasonable Measures” to Protect Secrecy Precludes Trade Secret Protection

A few days ago, in a federal court in Chicago gave a manufacturer some tough love about trade secret law.  In the case, the long time president of a the plaintiff left to start a competing business and took a flash drive with him that included information about his former company’s pricing, customers, and suppliers.   The former president later hired another former employee to join him, and she too brought with her information from her former employer.  Some of this information was used “as a general reference point and a benchmark when determining” the new company’s needs and some of it was shared with the new company’s sales representatives, who were “instructed” to “target key” distributors of the plaintiff.

Sounds like a compelling trade secret claim for misappropriation likely to receive injunctive relief?

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Outsourced Manufacturing and Trade Secrets: Due Diligence (Part 5)

Outsourced Manufacturing and Trade Secrets: Due Diligence by David L. CohenPerhaps the single most important part of outsourced manufacturing is to select a trustworthy partner. A company should not enter into any transaction unless it has a good basis to believe that the manufacturer will be an acceptable partner. This requires rigorous due diligence, including:

  • Background checks of the manufacturer’s principal officers, directors, and key personnel.
  • Audits of the manufacturer’s financial statements.
  • Inspections of the manufacturer’s facilities.
  • Investigations of the manufacturer’s supply chain and trading partners.

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Outsourced Manufacturing and Trade Secrets: Internal Controls (Part 4)

Outsourced Manufacturing and Trade Secrets: Internal Controls by David L. CohenWhen a company, for the soundest of business reasons, is exploring placing its crown jewels, its intellectual assets, in the hands of a third party, proper internal controls are vital.

A company’s internal controls may help to ensure proper:

  • Vetting and selection of the prospective manufacturer during the due diligence process.
  • Negotiation of the outsourced manufacturing relationship.
  • Management of the outsourced manufacturing transaction and relationship with the manufacturer.

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Outsourced Manufacturing and Trade Secrets: Risks & Benefits (Part 3)

Outsourced Manufacturing and Trade Secrets: Risks & Benefits by David L. CohenNearly all manufacturing processes involve a significant number of intellectual assets. These assets may include registered intellectual property (designs, patents, copyrights, or trademarks) or unregistered trade secrets, know-how, confidential information, or other intangibles. Read more

Outsourced Manufacturing and Trade Secrets: Outsourced Manufacturing (Part 2)

Outsourced Manufacturing and Trade Secrets: Outsourced Manufacturing by David L. Cohen

There are two common categories of outsourced manufacturing: toll manufacturing and contract manufacturing. While both these manufacturing options have distinct and clear characteristics, their strategic advantage is their ability to provide customers with valuable ways to save both time and capital on their product line development. Read more

Outsourced Manufacturing and Trade Secrets: An Economic Overview (Part 1)

Since the beginning of the industrial age, companies have outsourced part of the manufacturing process to third-party providers. In the twentieth century, as manufacturing processes became more complex and distribution more global, this trend accelerated.

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Trade Secret Theft in China

trade-secret-theft-in-china

By David Cohen & Donal O’Connell

The headlines:

“China national charged with stealing trade secrets” – U.S. Justice Department

“Chinese battery expert is charged with stealing trade secrets from US employer, as he prepared to join mainland firm” – South China Morning Post

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Using IP to Access Funding

Very interesting study from the UK Intellectual Property Office and the British Business Bank about using IPR (at least in part) as collateral for business loans.

Very odd, however, is that there is NO mention of trade secrets at all.  Which is quite surprising actually.  While analyzing trade secrets usage as collateral is (understandably) more challenging that for registered IPR, not to even mention it seems like a major flaw in the study.

Regardless, the conclusion seems promising and there is a lot of data included in the annexes to review.

Although there remain significant challenges to the
development of a sustainable commercial IP-backed loan
product, the lower rates of default and loss amongst
IP-rich firms suggests lenders could at least lower the
cost of lending to IP-rich firms, stimulating demand for
debt in this segment. Likewise there are opportunities to
stimulate the supply of finance by supporting the use of
intangible assets as collateral

https://www.british-business-bank.co.uk/wp-content/uploads/2018/10/502-IP-Report_singles.pdf

More on trade secret and company director liability

Donal O’Connell and I recently posted an article on trade secrets and director liability.   https://kidonip.com/news/company-directors-duties/

A great piece published by Columbia University Law School earlier this year http://clsbluesky.law.columbia.edu/2018/04/04/wachtell-lipton-discusses-risk-management-and-the-board-of-directors/  provides a good summary of the many issues related to risk management and the board of directors.

Another piece  https://pomerantzlawfirm.com/publications/2018/2/8/recent-derivative-actions-highlight-directors-obligation-to-monitor-and-prevent-employee-misconduct discusses a recent case In re Wells Fargo & Company Shareholder Derivative Litigation where the court refused to dismiss a shareholder derivative action against the board of directors holding that the numerous allegations of “red flags” of which the board was aware regarding the practices of the company bolstered the conclusion that the director defendants consciously disregarded their fiduciary duties to the company. http://www.wlrk.com/docs/InreWellFargoOrderonMotiontoDismissenteredMay42017.pdf

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