Trade Secret
Introduction
The trade law emphasize mostly on the protection of commercial and technological information that are kept secret by entities against unauthorized commercial access and use by other individuals or groups (Dreyfuss and Katherine). The policy behind this policy aims at encouraging research and innovation by protecting the original idea creators and ensuring that business ethics is maintained as required.
The law protects the owner of the trade secret from the unlawful use or acquisition but does not guarantee him exclusivity of the information contained in the trade secret. Other people are therefore allowed by law to discover the trade secrets by using fair means.
Trade secret is mainly governed by the state law in the United States of America. All the American states, with the exception of New York and Massachusetts have all introduced their own trade secrets, which although vary but still retain some form of uniformity.
Legislation
The trade secret protection Act of 2014-(California Civil Code Section 3426
sec.2) amended the federal criminal code and gave authority to owner of the protected product or service to take appropriate measure when someone misappropriate or uses his ideas without permission. The federal government has not made significant steps towards an enactment of a comprehensive legislation of the trade secrets, but has some statutes that cover activities related to the trade secrets. The United States of America has two main federal laws that touch on the issues of trade secrets. The computer and abuse act is one of the federal statutes that have been put in place to touch on the areas of trade secrets and mainly govern aspects of computer hacking. This law provides for civil and criminal actions against individuals who knowingly access computers without authority, or even go past their authorization limits with the intention of obtaining sensitive information.
Another statute under the federal law is the economic espionage act that targets industrial spying. The economic espionage act qualifies misappropriation or theft of trade secrets as federal crime. The act has gone through congress amendment twice and the amendments led to the theft of trade secrets clarification act of 2012, which widened the scope of economic espionage act to include services and products used or even intended to be used in commerce besides trade secrets that are in the products placed or produced in commerce (Yu).
The second amendment led to the foreign and economic espionage penalty enhancement act of 2012 led to increased penalties on the businesses or individuals who are involved in the stealing of any trade secret from the United States of America to benefit a foreign company or country. The act increased the fine from $ 500,000-$5million any individual and above $ 10 million for business entities or organizations.
Rationale
Economical
Trade secret places economic value on the information and the right gives certain aspects of societal wealth to the owner of the trade secret. Trade secret is therefore more relevant in the way the rights associated with it promotes cohesiveness in the society more than it enhances the costs or benefits to the owner (Dreyfuss and Katherine). The main economic justification for the trade would therefore be that it helps save time that would have been used hiding and protecting secrets and time spent in trying to acquire them by other quotas.
This law also acts as incentives to motivate other people to be innovative because they would be sure that their original ideas would be protected .This enables the creator of the idea to enjoy a period of exclusive use and recover the costs incurred during the creation of the idea. By allowing him to have exclusive use of his creation, he would be able to appreciate innovation since he would recoup the money used and make profit from his original creation or idea. Trade secrets do not provide that the owner of the secret should charge higher prices than other similar products in the market. The reduced competition should mean that production cost is low and so the prices should be down.
Trade secret must also have competitive value. A list of customers may be regarded as a trade secret, but the fact that the company has the contacts and names of the people to call would not help much when the pricing and quality of their products are not competitive.
Philosophical
The main braches of philosophical justification for trade secrets are veil of ignorance and labor value. The labor value theory is the most quoted and it statuses that the person who has used his or her labor to create something should be allowed to enjoy the fruits of that labor. Thetheory is sometimes referred to as the Lockean theory, named after John Locke who came up with the theory of property.
Locke had mentioned that whoever is involved in the improvement of a land through his labor should be allowed to have that land (Bouchoux). The theory points out that even the information that is open and known to everyone could still be considered a property. His theory was criticized for being too concerned with the physical property at the expense of the intellectual property which can be owned by more than one person.
The trade secret does not derive its value from its originality or novelty like copyright and patents do, but its value comes from its secrecy (Stim). The labor used to discover the new creation or idea belongs to the owner only when it is something that is not generally known by others. Even when two people have an idea that nobody else knows about then they might become the owners of the secret.
There is a reasonable assumption that people should gain some extent of utility from the rights and security of knowing that they there is a law that would stop other people from taking what they have labored for and spent time on (Dreyfuss and Katherine). The utility goes beyond just the mere reduction of expenditure to protecting the information, and reducing stress and worry on the possibility of others taking what belongs to you without your authority.
Transaction costs in the real world are usually high and are common; this makes the person who incurred the highest costs to have the right to the idea created. The labor value theory is therefore more rational as it motivate people to strive more in order to come up with information that could be termed as trade secret and enjoy the benefit of being the owner.
The economic justification, unlike the labor value goes beyond the limited exclusivity accorded to the owner of the information. It looks at all the rights that the owner has and whether they maximize or even increases the social wealth. The person who gets the ownership of the land may exclude others from using the land under the labor value, but economic justification looks at the benefits that the land ownership would bring.
Protectable Subject
Washington statutory and the common law define trade secret as any information or knowledge related to as persons business (Yu). This information may include things like the industrial processes, chemical formulas; know-how related to technical processes, building blueprints, computer software, supply sources, vendors’ identity, customers and information about pricing. Trade secret covers more aspects than just the technical know-how, items and other related matters. It can also include financial projection, statement and information on the employee benefits. Washington statute declares that trade secret could also Include information of commercial value to the competitor and not to the business.
Trade Secret Is Not Generally Known
The protection of trade secret is only applicable to the information that is not known to everyone. The information should not be a common knowledge and must not be easy to ascertain through proper means (Dreyfuss and Katherine). The information made available on reference books, trade journals and other published materials are not protected under the trade secret law because the information has become readily ascertainable. The secrecy of the information is never lost when the owner of the information discloses it to another person of his choice.
This means that owner of the information can disclose it to other people like the prospective buyers of the trade secret. It can also be revealed to the employees who are involved in the manufacturing process that requires the utilization of the secret information without destruction of the trade (Stim). Such revelations of the trade secret are in line with commercial reality of the business.
The Washington statute also states that trade secret should be novel and must not ascertainable by others through other sources. Some cases involving issues of trade secrets have failed because they lacked economic value and requisite novelty (Yu). Another aspect that stands out from the Washington statute is that one is not allowed to memorize information that are considered secret such as the customers’ list because this amounts to trade secret misappropriation
Independent Economic Value
In order to be protected, the secret information must have a competitive advantage above those who are not aware of the information. It was required that for an information to have value, it must be used regularly by the business. Some entities have rejected this requirement because it leads to problems with the development and research regarding trade secret
Efforts to maintain secrecy must be reasonable
The processors of the trade secret must ensure that he maintains reason effort to keep the information secret or else the law would not have any reason to protect the information. The information is considered reasonable when its establishment must foster clear policies on the safeguarded in formation (Dreyfuss and Katherine). It must identify technical information that is considered trade secret. There must be confidentiality and non-disclosure agreements with the workers.
Trade secret must limit and control access to the company location and secret files. The company must also ensure that there is a central con troll to engineering drawings and blueprints. The company must have security guard and systems in place and provide locked safekeeping of the valued and sensitive company information. The company could implement policies that are aimed at document retention and protection. Lastly, the company should ensure that it uses firewalls and passwords throughout the company information technology system.
Misappropriation of the trade secrets includes the acquisition of the trade secret by a person who recognizes that the trade secret was acquired by unlawful means. The improper means could be through bribery, theft, breach, inducement or misrepresentation or even through the electronic espionage. It also involved the failure to maintain standards of commercial ethics, for example, it is unlawful to use the plane over a company to get a glimpse of the company’s layout of the plant during construction stage.
Case Study
Barclay’s capital Inc. v the fly on the wall.com Inc., 650F.3d876 (2d Cir.2011); Montz v Pilgrim Films & television, Inc. 649 F.3d 97599th Cir.2011)
The case brought before the court was to determine if the law prohibited copying of some types of in formation while allowing for the copying of others. The case therefore could establish the extent t to which the state law allowed copying of information. The defendant of the case was the Flyonthewall.com, which had collected some valuable information regarding recommendations on the best investment opportunities from various financial institutions.
Facts
Flyonthewall.comhad published the information before the institutions did and the published information was not protected by the law. The plaintiff in this case, the financial institutions had gone to court protesting the premature publishing of the information by the flyonthewall.com.
Issue
Barclays bank spends resources and hires professionals to gathers the information that flyonthewall published prematurely. Flyonthe wall.com on the other survives on the publication of such hot news. The financial institution felt that Flyonthewall had a joy-ride on by publishing information that had cost it both money and time, as well as resources.
Law
Flyonthewall was not involved in the trade secret misappropriation as stated in the California Civil Code Section 3426. The two companies were not competing and the premature publishing of the financial tips was not going to affect the business of the financial institution. Fly was however involved in the hot news misappropriation which requires that they publish the information at least two hours after the bank had published information on their website.
Case Analysis
Flyonthewall.com was on the business of providing financial investment tips to public while the plaintiffs were not directly involved in the business of providing financial investment tips, but were in the business of providing financial services. The court had therefore ruled that Flyonthewall.com was not directly involved in the misappropriation of the trade secret as they were not direct competitors and had not been involved in the breach of any contract requiring them not to disclose the information.
Case Conclusion
Trade misappropriation only applies in a case where it involves two parties that operate in the same line of business or where the use of the protected information leads to confusion among the customers of the plaintiff. The court therefore ruled in the favor of the flyonthewall.com because the premature publication of the information did not cause any harm to the business of the financial institutions
Conclusion
Social Impact
The trade secret has a social impact as its main point of emphasis. It does not stress only on the benefits that the owner of the information enjoys but looks at how the innovation spirit helps to develop the society. People would be interested in getting innovating because of the peace of mind that the law has brought to protect owners of ideas and innovators. The society is able to remain peaceful since the law has closed avenues that might cause tensions and war among members of the society.
Personal Opinion
The trade secret laws are here to protect entrepreneurs and ensure that business maintain peace by remain ethical in their efforts to remain competitive in the market. The law has achieved it obligation and I would support efforts aimed at ensuring that the law is applied at all times.
Business owners have the peace they need and this would motivate them to continue being innovative and in turn, improve the lives of members of the society through job creation and supply of appropriate goods and services. I think that the business has attained its main objectives of promoting innovation, maintaining level of peace in the society and has led to improved lives among the members of the society.
Works Cited
Bouchoux, Deborah E. Intellectual Property for Paralegals: The Law of Trademarks, Copyrights, Patents, and Trade Secrets. Clifton Park, NY: Delmar Cenage Learning, 2009. Print.
Dreyfuss, Rochelle C, and Katherine J. Strandburg. The Law and Theory of Trade Secrecy: A Handbook of Contemporary Research. Cheltenham: Edward Elgar, 2011. Internet resource.
Stim, Richard. Profit from Your Idea: How to Make Smart Licensing Deals. , 2014. Print.
Yu, Peter K. Patents and Trade Secrets. Westport, CO. [u.a.: Praeger, 2007. Print.