Trade Secret Lawyer Chicago
Trade secrets often form the foundation of a company’s success. Some trade secrets are obvious, such as a special mix of spices that a restaurant uses to give a meal a signature flavor. Others are less apparent, such as a process used by the same restaurant to efficiently assign orders to different chefs in the kitchen.
What is a Trade Secret?
Illinois Statute and the Federal Code have similar definitions of just what a trade secret is.
The Illinois Trade Secrets Act (“ITSA”) protects information that:
(1) is sufficiently secret to derive economic value, actual or potential, from not being generally known to other persons who can obtain economic value from its disclosure or use; and (2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
The Federal Defend Trade Secrets Act (“DTSA”), on the other hand, protections information that:
(1) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by another person who can obtain economic value from the disclosure or use of the information; and (2) the owner has taken reasonable measures to keep such information secret.
While the protected material is largely the same, there are some differences between the protection afforded by these acts. To start, the DTSA expressly requires that the owner take reasonable steps to keep the protected information secret, while ITSA merely requires that the protected information is “the subject of reasonable efforts” to keep the information secret.
In addition, the DTSA expressly excludes information that is “readily ascertainable through proper means by another person…”. Proper means include such efforts as reverse-engineering the protected material by, for example, having a professional food taster sample a competing restaurant’s food, and from his experience, derive the particular spice mix. Similarly, independently deriving the protected material is proper, as is purchasing the protected information from a person that is not subject to a duty to keep the protected information private. The latter is largely how the entire profession of management consultants continues to exist.
What are Reasonable Measures to Protect a Trade Secret?
Reasonable measures to protect the secret information are required but not defined under both ITSA and the DTSA. Case law indicates that there are no bright-line rules that define what reasonable measures are. Rather, precedent is clear that whether reasonable measures to protect the secret information were taken is a fact-specific inquiry that largely depends on the circumstances of the particular company.
While there are no exact rules for what reasonable measures, precedent indicates that there are a few guidelines.
To start, if none or minimal measures, were taken to protect the secret information, a court will likely hold that reasonable measures were not taken.
Similarly, if protective measures are applied equally to all of a company’s information, that may not be sufficient. Rather, courts generally want to see additional measures taken; i.e., measures that differentiate from the measures taken to protect routine information.
One factor frequently cited by courts as important, although not always sufficient, is whether or not a confidentiality agreement was in place. This is known as an NDA, Non-Disclosure Agreement. In particular, certain courts have listed the existence of a confidentiality agreement as evidence that reasonable measures to protect the secret information were taken. However, a number of courts have expressly stated that the mere existence of a confidentiality agreement was not sufficient to qualify as a reasonable measure.
Similarly, it is generally important that a person that receives a trade secret has sufficient – even overwhelming – notice that she has received a trade secret. This can be accomplished by marking trade secret information as “confidential” or “trade secret.” Certain courts have found that the lack of such marking was dispositive. On the other hand, certain courts have found that marking is not necessary. In this vein, where the company has a policy to mark confidential materials as “confidential,” but the stolen information was not marked as “confidential,” certain courts have found that the failure to mark the information as confidential established that the stolen information was not a trade secret.
Also, courts have found that limiting access to departing employees is an important factor to look at. In particular, where employers failed to cut off access to a departing employee who ended up copying secret information, courts have found that reasonable measures were not taken.
If you have questions about what might constitute a trade secret, and whether your business is taking reasonable measures to protect your trade secrets, you should reach out to a trade secret lawyer Chicago trusts. You can reach us 24 hours a day, and setup a time to speak with an attorney at (630) 318-2606.
Trade Secret Misappropriation
What if you have been sued in a trade secret case? Or, what if you are considering filing suit against someone you believe has stolen your trade secrets? You will need to know what the elements of trade secret misappropriation are.
Both ITSA and the DTSA have similar requirements in establishing trade secret misappropriation.
Under ITSA, the following constitutes trade secret misappropriation:
Misappropriation” means: (1) acquisition of a trade secret of a person by another person who knows or has reason to know that the trade secret was acquired by improper means; or (2) disclosure or use of a trade secret of a person without express or implied consent by another person who: (A) used improper means to acquire knowledge of the trade secret; or (B) at the time of disclosure or use, knew or had reason to know that knowledge of the trade secret was: (I) derived from or through a person who utilized improper means to acquire it; (II) acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; or (III) derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use; or (C) before a material change of position, knew or had reason to know that it was a trade secret and that knowledge of it had been obtained by accident or mistake.
765 ILCS 1065/2
The DTSA requires the following for trade secret misappropriation: the term “misappropriation” means- (A) acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or (B) disclosure or use of a trade secret of another without express or implied consent by a person who- (i) used improper means to acquire knowledge of the trade secret; (ii) at the time of disclosure or use, knew or had reason to know that the knowledge of the trade secret was- (I) derived from or through a person who had used improper means to acquire the trade secret; (II) acquired under circumstances giving rise to a duty to maintain the secrecy of the trade secret or limit the use of the trade secret; or (III) derived from or through a person who owed a duty to the person seeking relief to maintain the secrecy of the trade secret or limit the use of the trade secret; or (iii) before a material change of the position of the person, knew or had reason to know that- (I) the trade secret was a trade secret; and (II) knowledge of the trade secret had been acquired by accident or mistake;
18 U.S.C. § 1839
Most legal analysis has indicated that the requirements for misappropriation under the DTSA and ITSA are identical. However, ITSA can be applied to all trade secret misappropriation. The DTSA, on the other hand, is statutorily limited as follows:
An owner of a trade secret that is misappropriated may bring a civil action under this subsection if the trade secret is related to a product or service used in, or intended for use in, interstate or foreign commerce.
1836 U.S.C. § 1836(b)(1)
Accordingly, the DTSA can only be invoked by the owner of the trade secret, and it can only be invoked where the trade secret involves a product or service used in, or intended for use in, interstate or foreign commerce. Therefore, in the example above dealing with a restaurants secret spice mix, ITSA would certainly be applicable, but the DTSA would only be applicable if the restaurant could show some connection to interstate or foreign commerce.
How to Know if You Should File a Case for Trade Secret Misappropriation?
Trade secret lawsuits tend to be expensive, and for this reason, should not be entered into lightly. If you contact us, we can help you determine if you have a likely case of trade secret misappropriation or not. In particular, one common way that trade secret cases arise is when a trusted employee leaves for a competitor. In and of itself, this may not raise suspicions. However, if the IT department indicates that a large amount of file copying to external devices and printing took place in the employees last few weeks, alarm bells should be raised. If this is followed by a competitor suddenly making a bid for a longtime customer or announcing a competing product similar to a successful product of the company’s, a lawsuit should be contemplated.
Many trade secret lawsuits are quickly resolved via consent, meaning that the defendant effectively admits the accusations and agrees to make appropriate remuneration. However, where trade secret lawsuits are contested, defendants actually a bit more than half of the time. This often involves the failure to actually identify a trade secret, or a failure to take reasonable measures to protect the trade secret.
Trade secret lawsuits in Illinois are often filed in the United States District Court for the Northern District of Illinois – one of the busiest federal courts in the United States. In certain cases, trade secret cases can also be litigated in various state courts. Our lawyers have litigated trade secret matters in the Northern District of Illinois, as well as in the Circuit Courts for Cook County, DuPage County, Kane County, and Will County. Often, when filing an action for trade secret misappropriation, the immediate goal is to obtain a temporary restraining order (“TRO”). Typically, a TRO will require the Defendant or Defendants to stop using the trade secret for a certain period of time – usually two weeks. When granted, a TRO can grant an enormous advantage to the plaintiff, as it can effectively shutdown the defendant’s business. Certain venues are far more likely to grant an immediate TRO than others, and in certain cases, Federal Court is not the best venue.
How Will a Lawsuit for Trade Secret Misappropriation Proceed?
Lawsuits for trade secret misappropriation all follow a similar path – at least generally.
The plaintiff will file a complaint, which will generally set forth the allegations that the plaintiff claims comprises trade secret misappropriation. There will generally be at least some factual allegations as well as a recitation of the elements of the claims they are bringing.
After the defendant is served with the complaint, the defendant will either answer the complaint or file a motion to dismiss. A motion to dismiss can cover many potential grounds, such a lack of personal jurisdiction, lack of venue, or a failure to plead a requirement element, such as an actual trade secret, or reasonable measures to protect the trade secret. Most trade secret lawsuits involve at least one motion to dismiss, and most will grant at least some relief. In certain jurisdictions, the filing of a motion to dismiss can hold off discovery, although in most jurisdictions, depending on the type of motion to dismiss, discovery will generally be allowed to proceed.
Discovery in a Trade Secret Lawsuit
Discovery in a trade secret lawsuit can be exceptionally trying. As trade secret lawsuits involve allegations involving highly confidential information, the parties are often required to reveal extremely sensitive and valuable information. However, using appropriate protective orders, the likelihood of such information being released generally can be minimized. In particular, the use of the Outside Attorneys Eyes Only designation, which courts will make available in appropriate cases, can prevent sensitive information from finding its way to employees of the opposing side. It should be noted that the negotiation and litigation of a proper protective order is critical to success in prosecuting or defending a trade secret claim and can often ensure a settlement.
In addition, discovery in a trade secret lawsuit is often very expensive. Tens and even hundreds of thousands of documents are often exchanged in this type of litigation, making automated document review a necessity. For example, software can read in all of the word content of a document production and catalog the contents of a database, which can be searched for certain phrases, such as “work order” or “invoice,” and the limited number of documents produced in response to such a search can then be manually reviewed.
Computer forensic information, including file and device metadata, is often vital. Such information is used to demonstrate, for example, when certain files were copied, where the files were copied to, etc. Computer forensic discovery always involves computer experts, which can be very expensive.
Also, given the acrimonious nature of trade secret litigation, discovery disputes can devolve into incredibly petty, but nonetheless expensive, exercises. For example, during the process of litigation, one party may be forced to reveal information that could cast it in a bad light with a customer; e.g., the customer in question is charged a higher rate for similar work than another customer. Even though such information will likely be designated confidential or highly confidential, on learning of this, the opposing party may contact the customer under the guise of third-party discovery, and reveal the damaging information to the customer. Lawyers can be incredibly creative with devising justifications for such conduct.
A trade secret lawsuit will often involve multiple depositions of employees of both the plaintiff and defendant companies, as well as third parties. As in other types of cases, depositions are vital to the success of a lawsuit, as they present the first opportunity to see how a particular witness will testify. In addition, depositions present attorneys with the all important opportunity to judge a witness’s demeanor, and whether a jury will like or dislike a particular witness.
Most trade secret lawsuits will also involve a number of expert witnesses. Computer forensic experts have become extremely important. In particular, almost all information is stored and shared electronically now, so computer forensic experts are vital both in establishing that a trade secret was taken, who the trade secret was shared with, when the disclosures occurred, and potential defenses to such claims.
In addition, subject matter experts often testify as to whether a particular document is a trade secret as well as to whether or not reasonable measures were taken to protect the secrecy of the trade secret. Often, a trade secret case will involve three or more subject matter experts, which can be quite expensive. However, experienced attorneys can often eliminate the need to retain an expert by finding ways to use the other side’s experts against them.
Finally, experts on damages, such as an economist, or potentially a subject matter expert, will often produce reports and be deposed.
Dispositive Motions and Trial in a Trade Secret Lawsuit
Like most lawsuits, the majority of trade secret lawsuits resolve by settlement rather than verdict. However, given the high stakes that many trade secret lawsuits have, a fair number of them go all the way to summary judgment and trial.
A summary judgment motion often provides a first look at what the primary issues in trial will be. The standard for summary judgment is extremely high, so the question of whether or not to file a summary judgment motion must be considered carefully, given that a summary judgment motion can easily involve fifty (50) hours or more of attorney time. However, even when a summary judgment motion is not successful, it does force the other side to Marshall their best evidence, which provides a preview of their trial strategy.
Most summary judgment motions that are failed are denied. Accordingly, most trade secret cases that are opposed will make it to trial. Trade secret cases range in complexity from trivial to highly complex, and the length of such trials varies widely as well. However, most trade secret trials involve multiple witnesses and experts, and accordingly, will exceed one week in length.
If you are a party in a trade secret trial, expect that multiple of your employees will be tied up for the entire length of the trial. In particular, your attorneys will need answers to unexpected questions immediately, so plan to have 2 or potentially more employees devoted to supporting them from voir dire through closing argument. Generally, one IT staff member with access to all documents, and one well-informed officer is sufficient. The officer will need to have settlement authority, as settlement offers are often exchanged every night during a trial.
The Law Offices of Konrad Sherinian, LLC Can Help you With Your Trade Secret Issues
Our firm specializes in intellectual property, and we have been involved in counseling numerous firms on trade secret protection. Our attorneys have also represented both plaintiffs and defendants in numerous trade secret lawsuits. If you are seeking a trade secret lawyer Chicago relies on, you can count on the Law Offices of Konrad Sherinian, LLC. Call to schedule an appointment with one of our attorneys in Naperville or Chicago. Call us today at (620)318-2606.