Previously, I discussed the Computer Fraud and Abuse Act (“CFAA”). As reported in the Legal Intelligencer, a law firm recently utilized CFAA against one of its former partners and associates who abruptly departed and allegedly used the “Dropbox” software to continue accessing the plaintiff law firm’s computer systems for the benefit of the law firm departing defendants joined. As reported in the Legal Intelligencer, Elliott Greenleaf & Siedzikowski sued former partner Harrisburg office managing shareholder, two former associates, and others for not only barring plaintiff’s access to files located in the former attorneys’ locked offices, but for also for accessing, modifying, and deleting those files, in violation of the CFAA. In its complaint filed in the U.S. District Court for the Eastern District of Pennsylvania, plaintiff estimated that defendants deleted approximately five percent of plaintiff’s backup tapes and misappropriated approximately 78,000 proprietary files. While this case is illustrative of ownership of trade secrets, it also demonstrates how CFAA can be applied to matters involving computers and former business associates and employees.
Business Commercial and Corporate
What Is A Trade Name?
A trade name is a name that is commonly used by a business that does not use the full legal name of the business. Although it is usually registered with a state government agency and is commonly referred to as a “doing business as” or “DBA,” it is a “shorthand” business name used for commercial purposes. The state government does not give companies a trade name with a prospective right as granted for a trademark. A trade name is protected only if it is functioning as a trademark to identify and distinguish the company’s goods from those of others.
Trade Name Registration
Although the procedures to register a trade name vary from state to state, registration of a trade name does not involve any complicated process to be approved by a state government. Applicants simply list the name they want to register on the application and pay for the processing fee and the registration fee. There is generally no “clearance” performed by the state agency other than to deny registration for a trade name already registered.
What Is The Difference Between A Trade Name And Trademark?
A trade name is a “shorthanded” name to identify a business other than by its legal name, such as “ABC” (trade name) instead of “ABC Inc.” (legal name). A trade name may also be used to identify a company’s products or services just like a trademark but in order to receive trademark protection, the trade name that is used as a trademark must be protected as a trademark. As mentioned in an earlier trademark article, trademark law gives the most protection to distinctive names, logos, and other marketing devices. In decreasing order of distinctiveness are marks that are: (1) arbitrary and fanciful; (2) suggestive; (3) descriptive; and (4) generic. A business should not assume that its registered trade name gives the company the right to use the trade name for any business purpose and is legally fully protected.
Trade Name Infringement
The test used to determine whether one company’s trade name infringes that of another is whether the use is likely to cause confusion, mistake, or deception among the relevant consuming public just as the test used for trademark infringement. Therefore, if a company’s trade name is sufficiently similar to another’s registered trademark, the test of “likelihood of confusion” is applied to such confusing trade name and a trade name may infringe on a trademark. Misuse of a trade name could also expose a company to liability under federal and state unfair competition laws and consumer protection acts.
Although trade name registration is not a complicated process, companies should be careful about selecting a trade name. If the trade name is infringing another’s trademark, the company using the infringing name might ultimately have to change it and spend extra costs on reparative advertising in addition to defending and paying damages from a trademark infringement lawsuit by the trademark owner. In other words, the business should approach trade name adoption with similar care as it would create trademarks.
What Is A Trade Secret?
A trade secret is any information that derives economic value from not being generally known, has been maintained in confidence, and is not known by competitors. A company that owns trade secret may petition a court for a relief against those who have obtained or used its trade secret through improper means. The trade secret owner can also institute an action against those who wrongfully publicly disclose the trade secret in violation of legal obligations such as conditions set out under a non-disclosure agreement (“NDA”).
Trade Secret Law
Each state has its own statute or regulations that govern trade secrets. Most states, however, have enacted a form of the Uniform Trade Secret Act (UTSA). Although the majority of states have adopted the UTSA, the enacted versions and judicial interpretations of the UTSA may also differ from state to state. In Washington State, Uniform Trade Secret Act is set out in Chapter 19.108 of the Revised Code of Washington (RCW).
Trade Secret Protection
Trade secret law requires maintenance of secrecy, and it is a type of intellectual property law. Whereas patent law protects inventions, processes or useful business methods for a number of years in return for the owner’s full disclosure of the information to U.S. Patent and Trademark Office (USPTO). On the contrary, a trade secret can be protected permanently so long as it is not disclosed to the public and reasonable steps are undertaken to preserve secrecy.
Companies need to consider whether hey seek protection under trade secret law or another type of intellectual property law such as copyright or patent law. A typical example for this choice is the Coke® recipe. The Coca-Cola Company protects the Coke® formula as a trade secret, which allows for indefinite protection so long as the company takes reasonable efforts under the circumstances to maintain secrecy.
Compare protection under patent law, which gives the owner the exclusive rights to make, use and sell the protected item for a limited period of time. Patent rights are more comprehensive for a finite period, but require patent filings with the USPTO. Patents can also be very expensive to prosecute. On the other hand, the trade secret owner does not have to file a trade secret application or registration with any government office.
The fact that no registration is needed does not mean that obtaining trade secret protection is easy. Trade secret protection requires significant efforts by setting up a program to create and administer reasonable measures to keep the information secret. Moreover, a trade secret owner does not command exclusive use of the trade secret. Any competitor may lawfully use the subject of the trade secret so long as it is independently developed and implemented.
Trade Secret Protection Methods
Since the key in determining whether information is deemed to be a trade secret is the confidentiality of the information, it is essential to institute a preventive program to protect the company’s confidential information.
- Physical Measures. Companies need to develop a variety of physical measures to protect their proprietary information. Reasonable security measures are required for trade secret protection. Reasonableness may require that areas in which the information was being used or store were made physically inaccessible to others (for example, one is personally escorted to another floor where all the doors are locked and monitored). For trade secrets stored electronically, reasonable efforts may require adequate IT security measures such as commercially reasonable firewalling, access control and use of encryption technologies.
- Contractual Measures. Under many circumstances, someone receiving a company’s trade secret takes it subject to an implied obligation not to disclose. However, having a written agreement has several benefits for the trade secret owner. The existence of a NDA provides evidence that the owner of the trade secret is taking confidentiality measures. The formality of an agreement also ensures that the recipient of the trade secret is expected to protect the information and it warns of possible consequences if it is not implemented. A written agreement also makes available a remedy for breach of the agreement as well as trade secret liability.
Trade Secret Protection Limitations
While a patent, for example, gives the patent owner the exclusive use of the patent, trade secret protection does not protect against independent development of a product or process that is the subject of the trade secret. Moreover, trade secret law does not protect information that is in the public domain.
Trade Secret Litigation
The owner of the trade secret harmed by trade secret theft can commence by filing of a complaint describing the defendant’s wrongful conduct. Such action should be done as soon as the leakage of the trade secret is discovered.
Litigation between a company and its former employee is the most common trade secret case. This situation typically arises where an employee departs from the former employer and starts their own business or joins another company, either of which is a competitor of the former employer. Employers often file a trade secret action, claiming that the former employee is using the employer’s trade secret. Memorization of trade secrets is typically is not a defense. A successful plaintiff can obtain injunctive relief to prevent further leakage of the information and monetary damages to compensate the owner of the trade secret.