<title>Trade Secret Law: Fair Use To Protect Proprietary Information/Unfair Use To Restrain Trade</title>

Abstract

TRADE SECRET LAW: FAIR USE TO PROTECT PROPRIETARYINFORMATION /UNFAIR USE TO RESTRAIN TRADEThomas E. SchatzelPatent AttorneySchatzel & HamrickSanta Clara, California 95051In order to foster the free enterprise system of the United States, laws regardingtrade secret rights are structured to encourage fair business competition and stimulatebusinesses to invest time, money and effort to improve their competitive positions inin the marketplace. These trade secret laws are intended to protect businesses againstthe misappropriation of valuable confidential information acquired as a result of suchinvestments. If the trade secrets of a business are misappropriated, the misappropri-ator faces potentially serious consequences. A court may enjoin the misappropriatorfrom further use or disclosure of the trade secrets, and order the misappropriator topay the trade secret owner money damages as compensation for their past use and /or dis-closure. Punitive money damages may also be awarded if the wrongful use and /or dis-closure was willful.The scope of subject matter entitled to trade secret protection is broad and coversboth technical and business information.* A commonly recognized definition of tradesecret subject matter is that included in paragraph 757b of the Restatement of Torts,which states that:A trade secret may consist of any formula, pattern, device or compilation of infor-mation which is used in one's business, and which gives him an opportunity to obtain anadvantage over competitors who do not know or use it. It may be a formula for a chemicalcompound, a process of manufacturing, treating or preserving materials, a pattern for amachine, or device or a list of customers.This is at best a very general definition which is construed by courts in light of a vastbody of case law.It is a simple procedure to commence court proceedings alleging misappropriation oftrade secrets. There are no preliminary governmental procedures or regulations to becomplied with prior to claiming something as a trade secret. To bring a suit for mis-appropriation of trade secrets, the complaining party (plaintiff) need only allege in itscomplaint that it has a trade secret; that the trade secret was disclosed in confidenceto the defendant; that the defendant is using or disclosing, or threatening to use ordisclose the trade secret; and that such use or /and disclosure is, or would be, to theinjury of plaintiff. Prior to filing suit for trade secret misappropriation, theplaintiff does not have to prove that it has a trade secret. Only after court pro-ceedings are commenced and defendant refutes the allegation, is it necessary that theplaintiff prove it has something meeting the legal standards of a trade secret.Preliminary injunctions are also potentially available to a trade secret plaintiff.For example, if prior to trial on the issues, the plaintiff can convince the court thatit has a high degree of probability of prevailing in the trial, the court may issue apreliminary injunction preventing the defendant from using or disclosing the allegedtrade secrets pending completion of the trial. ** Since it usually takes one or twoyears to get a trade secret lawsuit to trial, the grant of a preliminary injunction canbe devastating to a defendant. Thus, the trade secret laws provide a ready, directaccess to the courts for protection of confidential proprietary information and thecourts can become involved on momentary notice.In our free enterprise system, the trade secret laws serve a very valuable purposewhen used properly and in good faith. They encourage the investment of time, money andeffort to develop proprietary property in the form of information, processes, materials