The Associated Press

JACKSON, MISS. --The Iams Company's records from seven years of pet food research at Mississippi State University are not public documents, the state Supreme Court has ruled.
In 2006, People for the Ethical Treatment of Animals sued Mississippi State University. It alleged the school violated the Mississippi Public Records Act by denying PETA access to records of dental experiments and other tests on animals conducted since 1999 for Iams.

Iams had argued that the experiments were the company's intellectual property. Iams said it had made a substantial investment at Mississippi State to develop and protect that property.

Journal of Intellectual Property Law
Spring, 2008

Introduction

Most people are probably familiar with the infamous tagline question posed at the conclusion of Britney Spears' provocative "Curious" perfume commercial: "Do you dare?" Ironically, considering the significant restriction trade secret law currently places upon the federal government's ability to enforce its own regulations regarding perfume ingredients, the "Curious" tagline could not possibly ask a better question. But perhaps the tagline should be amended to ask, "Do you dare to even put this substance onto your body?"
The perfume and fragrance industry has a major presence in both the United States economy and the global economy at large. In 2007, the global fragrance industry launched 316 new perfume fragrances for women and eighty-nine new cologne fragrances for men. Women's fragrances alone generate global sales of $20 billion each year. Many celebrities within the entertainment industry have realized that releasing a fragrance is a lucrative venture and have decided to diversify their revenue streams and release their own signature scents. Several popular singers and entertainment moguls have each released their own fragrances, including Beyonce ("True Star"), Gwen Stefani ("L"), Sean "Diddy" Combs ("Unforgivable Woman"), and Mariah Carey ("M"). Athletes have likewise entered the fragrance market, with cologne and perfume releases from basketball legend Michael Jordan ("Jordan") and tennis star Maria Sharapova ("Maria Sharapova"). In fact, perfume is so popular that designer fashion line "Juicy Couture" has even developed a special line of cosmetics for dogs ("Juicy Crittoure"), which includes perfume ("Dog Pawfume"). The use of the name and likeness of celebrities and their children to market fragrances has even resulted in legal disputes. Recently, Angelina Jolie filed a note (which she subsequently dropped) with the United States Patent and Trademark Office (PTO) against Symine Salimpour, claiming that Salimpour's new perfume, entitled "Shiloh," was named after Jolie's daughter. Jolie's main contention was that Salimpour should not be allowed to use her daughter's name to market the perfume.
In addition to the trademark disputes over perfume, there has also been a recent backlash against the ingredients in fragrances. Extensive laboratory testing has shown that increasing numbers of toxic chemicals, several of which are suspected to cause liver and kidney damage, are frequently being included perfume. There is evidence that some of the chemicals within many fragrances may be linked to several health issues plaguing the American public health today, including eye and skin irritation, respiratory problems, allergies, headaches, reproductive health problems, severe asthmatic reactions, and even cancer. In July 2007, a Detroit, Michigan city government worker became upset with the negative impact that her co-workers' fragrances had on her health. She filed suit under the Americans with Disabilities Act (ADA) to have perfume banned from the workplace altogether. Similarly, in 2005, a top-rated Detroit radio DJ host *319 claiming that she was sickened by her co-worker's perfume received a $10.6 million verdict after alleging that she had been fired because she complained about her co-worker's perfume. During the civil trial, three doctors confirmed that the plaintiff did not have problems with natural smells, but rather with the chemical basis of the perfume. [FN19] The plaintiff claimed that she had suffered raw chemical burns to her airways and sinuses as a result of inhaling toxic chemicals in the perfume, and according to her doctor, she could have died as a result of continued exposure to the perfume chemicals.

Although the Food & Drug Administration (FDA) provides some regulatory guidelines that attempt to ensure the overall safety of perfumes, the agency is still seeking to promote a lofty goal with one hand tied behind its back. This is because perfume manufacturers are able to exploit a loophole that allows them to circumvent disclosure of hazardous substances under the guise of trade secret protection. Trade secret law essentially allows fragrance manufacturers to include toxic chemicals in their products by classifying the ingredients as "fragrance." The term fragrance describes an amalgam of ingredients (typically referred to as the "fragrance formula") that fragrance producers do not have to disclose to anyone by claiming the ingredients constitute trade secrets. Not only can fragrance companies avoid providing an exhaustive list of fragrance formula ingredients on the labels of their products, they also are not required to disclose them to regulatory agencies such as the FDA. Because companies are not required to disclose the individual ingredients that comprise their fragrance formulas they are able to include hazardous substances in their fragrance products without either the FDA or the consuming public knowing.
This Note explores the loopholes available to perfume manufacturers via FDA regulations that permit them to circumvent the disclosure of harmful substances found in their products by claiming trade secret protection. Part II of this Note examines the definition, history, and function of trade secret law, as well as arguments explaining its dangers. This Part will also survey some of the dangerous ingredients that are typically used in perfume, how federal regulations have affected the use of certain ingredients in perfume over time, and how trade secret law factors into the present regulation scheme. This Part of the Note concludes by discussing competing lines of precedent regarding whether disclosure of individual ingredients that comprise the fragrance formula should be considered a Fifth Amendment taking. Lastly, Part III of this Note argues that public policy demands that the trade secret disclosure loophole be scaled back substantially, if not completely eradicated, in an effort to protect the public from the long term effects of being exposed to the hazardous chemicals contained in fragrances. More specifically, this Part contends that removing perfume manufacturers from the protection of their trade secret umbrella and requiring disclosure of certain chemicals collectively listed as "fragrance" should not be considered a Fifth Amendment taking but rather viewed as a legitimate exercise of the government's police powers to protect the public.

By Amy Lynn Sorrel

Appeals have been filed asking the state Supreme Court to determine whether some documents should be treated as public records or exempted as trade secrets.

When the South Georgia Physicians Assn. LLC noticed that the health insurer administering Georgia's state employee health benefits plan was requiring different contract terms for rural doctors than for those in urban areas, the group got suspicious.

The Georgia Dept. of Community Health in 2005 awarded United Healthcare a five-year, $55 million contract to service the state-funded plan. It took effect Jan. 1, 2006.

While the insurer was recruiting doctors to participate in the plan, John Crew, a consultant who assists practices in health plan contract negotiations, saw as many as six different versions with varying fee schedules offering lower reimbursement to rural doctors, he said. At one point, United also put all-products clauses in some contracts, added Crew, who works with South Georgia Physicians. The independent practice association has about 280 physician members practicing in about 30 counties in predominantly rural southern Georgia.

The Recorder, Vol. 132, No. 147, July 30, 2008

Chris Scott Graham and Jill Kopeikin

Many companies operate under the assumption that a robust patent portfolio is the sine qua non to the best protection of intellectual property.
Consistent with this philosophy, employees are instructed to compile the information necessary to apply for patent protection, and significant company resources are expended in that pursuit. By applying early and often to patent both key developments as well as incremental attributes, companies implement a de facto IP strategy heavily weighted toward patent protection.
Recent developments in patent law, however, suggest that this kind of IP strategy may not be in the best interests of all companies. And even companies with established patent programs would be well-served by re-evaluating how they're managing their most valuable assets.

DOWNSIDE RISK

An aggressive patent holder can use his or her portfolio to exclude competitors from a market through proceedings before the International Trade Commission or to obtain damages in district court. A well-publicized patent portfolio can also be an effective deterrent, announcing barriers to market entry a competitor must consider.
However, seeking patent protection as an IP strategy comes with downside risk. A company implementing a patent strategy to protect its IP is disclosing its cutting-edge technology to the public. And obtaining a patent, by the nature of the proceedings before the U.S. Patent and Trademark Office, is fundamentally inconsistent with the protections under the Uniform Trade Secrets Act.
To obtain a patent, the applicant must place in the public domain information that may constitute valuable trade secrets, including a written description of the invention that is specific enough to enable a person of ordinary skill in the art to practice the invention without undue experimentation. The description must also disclose the best mode contemplated by the inventor for practicing the invention.
Through this process, information that might otherwise constitute a trade secret under the UTSA will be made public under most circumstances within 18 months of the application being filed -- whether or not a patent ever issues on the application. Should the USPTO reject the application, all of this information becomes freely available to the public, and cannot thereafter constitute a trade secret. Even when the application successfully matures into an issued patent, a company must consider obtaining foreign counterpart patents in those countries where the company expects to compete.
Attacks on the process of obtaining and enforcing patents have recently increased. The USPTO, under pressure to step up its productivity, has attempted to promulgate rules to place more hurdles and limits on the application process.
The courts also have been more active recently in limiting the rights of patent holders. From making the issuance of permanent injunctive relief less certain, especially for plaintiffs who do not manufacture or use the patented invention, to increasing the rights of licensors to challenge the validity of patents, the U.S. Supreme Court has been increasingly willing to weigh in on patent issues.

By Noah Shachtman

Last year, iRobot accused one of its former engineers, Jameel Ahed, of stealing its trade secrets to build his "Negotiator" machine. Today, the company turned the tables, announcing it will start selling Ahed's robot as its own.

Ahed and his Negotiator generated enormous interest in the military robotics community, as a low-cost alternative to iRobot's PackBot. Last summer, the two 'bots went head-to-mechanical-head to compete for the Pentagon's biggest robotics contract to date. And, for a time, Ahed secured the $285 million deal to supply the Army with up to 3,000 bomb-handling machines.

But the contract was stripped from Ahed, after iRobot sued him for intellectual property theft. Ahed did his best to look guilty -- dumping evidence in the garbage, and blatantly BS'ing on the stand. The Army was forced to overturn its decision. And iRobot not only won the so-called "xBot" contract; in its settlement with Ahed, the firm won the rights to the Negotiator, too.

Market Watch

MARSHALL, Texas, Aug 06, 2008 (BUSINESS WIRE) -- Norit Americas, Inc. ("Norit") announced today it filed a lawsuit against ADA-ES, Inc. , ADA Environmental Solutions, LLC, and current ADA-ES employees, John Rectenwald and Stephen D. Young. Mr. Rectenwald and Mr. Young are former employees of Norit, having been employed by Norit for over 30 years.
Norit Americas filed the lawsuit in Marshall, Texas, and in the case asserts claims against the defendants including misappropriation of Norit's trade secrets related to activated carbon, breach of fiduciary duty, and interference with and breach of various contracts. Ron Thompson, CEO of Norit Americas, noted that "Norit considers its intellectual property to be among the Company's most valuable assets and Norit will act to protect it." Norit seeks to recover monetary damages from the defendants, as well as injunctive relief in the lawsuit.

The jury awarded a total verdict of $2.8 million.

Dan Wentzel, the former president and CEO of plaintiff North American Title Co., founded Liberty Title Co. as a joint venture with Land America Financial Group and Land America Alliance. Approximately 30 employees from three North American Title offices were hired by Liberty Title.

North American Title sued Liberty Title, Land America, Wentzel and three former North American Title employees who left for Liberty Title, Steve Gilliland, William Starner and John Thompson, alleging violation of the Uniform Trade Secrets Act, intentional interference with at will employment and breach of fiduciary duties.
North American Title contended that Gilliland, Thompson and Starner, former managers, shared employee salary information with Liberty Title, using it to lure North American Title employees to the new company.

The defense contended that no trade secrets were misappropriated, and denied all alleged wrongdoing.

by Gina Keating, editing by Richard Chang

LOS ANGELES, Aug 7 (Reuters) - The California Supreme Court on Thursday upheld the state's strict ban on most employee noncompetition agreements, ruling that companies cannot in any way limit a former employee's ability to ply his trade.
The high court's decision nullifies previous appeals court rulings that allowed companies to require workers to agree not to compete with their former employer as long as the restrictions were narrowly tailored.

The decision does not prevent employers from enforcing agreements to protect trade secrets, and should prompt California companies to take measures to protect themselves, intellectual property attorney lawyer Sean Lincoln said.

The Supreme Court left alone exceptions in state law that allow noncompete agreements in cases involving the dissolutions or sales of corporations, partnerships and limited liability corporations.

By JOHN MARKOFF

SAN FRANCISCO -- Tesla Motors, the Silicon Valley maker of electric sports cars, filed suit in San Mateo Superior Court on Monday against a competing company and two of its employees, saying they stole some of Tesla's design ideas and trade secrets.

Tesla, which has generated much interest among fans of cars and technology, recently started shipping a two-seat electric sports car in limited quantities. Last year it hired Henrik Fisker, a Danish-born designer who is known for his work on high-end exotic sports cars, to do the body design for a four-seat sedan, code-named White Star.

The Tesla lawsuit contends that Mr. Fisker and his chief operating officer, Bernhard Koehler, doing business under the name Fisker Coachbuild, fraudulently agreed to take on Tesla's $875,000 design contract to gain access to confidential design information and trade secrets, then announced a competing vehicle. Last fall Mr. Fisker founded Fisker Automotive, which is backed by the venture capital firm Kleiner Perkins Caufield & Byers.

By Cheryl Miller

In a ruling long awaited by the employment law sector, the California Supreme Court on Thursday effectively rejected the use of most non-competition agreements in California (pdf).

In Edwards v. Arthur Andersen, S147190, the unanimous court held that a state statute with roots in 19th century laws gives California workers great freedom to switch jobs, to compete against old employers and to solicit former clients.

"In sum, following the Legislature, this court generally condemns noncompetition agreements," Justice Ming Chin wrote. "Under the statute's plain meaning, therefore, an employer cannot by contract restrain a former employee from engaging in his or her profession, trade, or business unless the agreement falls within one of the exceptions to the rule."

By Tracy Neal and Scott Davis

Can knowing about the mere existence of a lawsuit be damaging ?

Recently, Circuit Judge Xollie Duncan requested that reporters leave her courtroom. The reason: A hearing in a civil lawsuit. The suit had been filed under seal, which meant not only court filings were sealed, but the proceedings in June were held outside of the press and public.

Everything about the case - the names of the parties involved in the suit, even the case number - was at first withheld.

Associated Press

WASHINGTON (AFP) -- A Taiwan-born American who admitted spying for China was given more than 15 years in prison, the US Justice Department said Friday.

Tai Shen Kuo, 58, of New Orleans, Louisiana, was sentenced by federal court in Virginia to 188 months in prison, and required to forfeit 40,000 dollars, after he pleaded guilty to charges of conspiracy to deliver US military information to China.

Kuo was charged as a part of a small ring that included a Chinese woman, Yu Xin Kang, and former Pentagon analyst Gregg Bergersen, that obtained secret information mainly on US military sales to Taiwan and US military communications security and sought to provide the information to Beijing.

By Jason Kincaid

Earlier this week, California's Supreme Court reaffirmed the state's position on noncompete clauses: they're almost never valid, except for in a few specific circumstances. While this has been the state's policy since 1872, the law recently came into question in the case of Edwards II v. Arthur Andersen LLP, in which the accounting firm tried to uphold a noncompete contract Edwards signed in 1997.

The point in question was a "narrow restraint exception", which effectively punished employees for joining a competitor, but didn't prohibit them for doing so. If the ruling had gone the other way, companies would be allowed to restrict employees' pensions and stock value in retaliation for their departure. The Court's ruling has stricken this exception, affirming that any such punishment is illegal.

Elizabeth A. Rowe
University of Florida - Fredric G. Levin College of Law

Abstract:
One advantage of using trade secret law to protect valuable business information or inventions is the ease and relative inexpensiveness of that form of intellectual property, versus for instance, seeking patent protection. Indeed, under the modern framework, trade secret law simply requires that the information be of value and that it be kept secret. The requirement of secrecy is thus the sine qua non of trade secret protection but it is also a double edged sword. It is at once the simplest and most difficult thing to accomplish. The doctrinal lens through which a court evaluates the sufficiency of protection measures is through the reasonable efforts requirement. While absolute secrecy is not required, the trade-secret owner is expected to show that it took efforts reasonable under the circumstances to protect the secret.

This Article explores a question previously unaddressed in the literature: should the greater risks presented to trade secrets in a digital world change the way that courts evaluate reasonable efforts when a trade secret is misappropriated using some form of computer technology? Should reasonableness be pegged to a should have known standard such that courts impute an objective expectation that higher safety precautions will be utilized because of the risks that in today's digital world trade secrets are easier to access and disseminate?

The Article discusses the digital world and the way in which electronic technologies has effected how we store, access, and disseminate trade secrets. It urges courts to give special consideration to the known technological risks that may or may not have been considered by the trade secret owner. It proposes consideration of such factors as: (a) the nature of the industry, (b) the nature of the trade secrets and how they were stored, (c) the nature of the measures taken to protect the secrets, and (d) the known risks from storage and protection choices. The Article concludes that trade secret protection cannot be an after thought. Rather, in order to be reasonable it requires a more conscious, risk assessment approach that better anticipates and ultimately stems the inappropriate dissemination or disclosure of the secrets.

Keywords: trade secrets, reasonable efforts, technology, protection, computers, efforts reasonable under the circumstances, digital world, digital, trade secret storage, trade secret dissemination, e-mail, internet, data security, technological risks, mobility

Rowe, Elizabeth A.,Rethinking 'Reasonable Efforts' to Protect Trade Secrets in a Digital World(July 16, 2008).
Available at SSRN: http://ssrn.com/abstract=1161166

A former employee brought action against his former employer, a
construction products manufacturer business, seeking declaratory judgment that
noncompete clause was unenforceable, and damages for tortious interference with a
business relationship, breach of contract, and violation of state "blacklisting"
statute. Former employee also asserted a defamation claim against his former
supervisor. Employer counterclaimed, alleging breach of contract and violation of
trade secrets, and asserted a third-party claim against former employee's newly
formed business, alleging tortious interference. The Circuit Court, Hamilton
County, Judith S. Proffit, J., entered summary judgment against former employee on
all claims. Former employee appealed.

Holdings: The Court of Appeals, Bradford, J., held that:

(1) employee did not breach covenant not to compete with employer by competing
with employer's subsidiary;

(2) employee was not constructively discharged so as to form the basis of a
wrongful discharge claim;

(3) statement from former supervisor was slanderous per se so as to create
triable defamation claim; and

(4) a triable issue existed as to whether former employee was damaged by

employer's alleged tortious interference with business relationships.

Affirmed in part, reversed in part, and remanded with instructions.

Crone, J., filed an opinion concurring in part and dissenting in part.

Allstate the "good hands" people have decided to forgo hundreds of millions of dollars in profits rather than show their "dirty hands" to Floridians. Florida Insurance Commissioner Kevin McCarty announced on Friday that Allstate Corp. will give it's existing Florida policyholders an additional 5.6% rate cut, forgive a $175 million dollar loan, and pay a $5 million dollar fine to the State of Florida rather than produce rate-related documents regulators had demanded.

This interesting settlement was only agreed to by Allstate after the Florida Insurance Commissioner suspended Allstate from writing new policies in Florida . The agreement resolves McCarty's legal action that accused Allstate of failing to produce rate-related documents, falsely claiming that the material requested contained trade secrets, and falsely certifying a request to raise rates by more than 40%.

By Leonard Deutchman
Pennsylvania Law Weekly

My firm provides digital forensics and e-discovery services. Most of our digital forensics investigations and analyses involve employees who have left their former employers for a rival or to start their own business. Our investigations focus on a constellation of issues familiar to all involved in "departing employee" litigation: whether the departing employee has deleted or destroyed any of the former employer's electronically stored information, copied or sent any proprietary information, such as pricing, customer lists, agreements or technical specifications, or violated any covenants of noncompetition, disclosure and so on. Often our clients come to us when the matter is fresh, with an eye towards seeking injunctive relief in addition to damages.

In Mintel International Group v. Neergheen, No. 1:2008cv03939 (N.D. Ill. July 11, 2008), the court was presented with this array of issues. Review of the opinion will help the practitioner understand not just the computer-related issues in this area of the law but also how they relate to the procedural and substantive issues the practitioner usually sees.

By Ann Knef

A California company that supplies data application systems to real estate agents is suing a former executive for violating trade secrets.

IDX Media LLC of Sebastopol, Calif., claims its former vice president for product development, Daniel Evans of Belleville, solicited multiple clients to end their work with IDX and switch to a new company Evans planned to form.

Evans, who ran an IDX office in O'Fallon, had previously worked as a contractor for the company, states the complaint filed Aug. 6 in St. Clair County Circuit Court.

By Jonathan Stoler

In these challenging economic times, layoffs and corporate reorganizations are becoming more commonplace. Employers in the midst of such job actions are also being forced to address an array of employment laws and business issues relating to these matters. Central among their concerns is the ability to continue their business operations with minimal disruption and to protect their business interests in the face of large-scale terminations.

Indeed, how to maintain protection over confidential business information and to ensure a company's continued competitive edge following layoff situations is the question of the day. One answer is through the enforcement of non-competition or other types of restrictive covenants that may have been in place prior to a layoff or similar job action. As the following suggests, however, an employer's ability to enforce restrictive covenants against employees subject to layoffs may be more difficult than it appears.

BY JERRY MITCHELL

An appeals court has upheld the dismissal of most criminal charges against five former Eaton Aerospace employees accused of stealing trade secrets from the Jackson company for aerospace contracts.

"It was a home run," declared their attorney, Ed Blackmon Jr. of Canton. "This trade-secret case is simply not supported by the facts."

Prosecutors had appealed the decision by U.S. District Judge William Barbour Jr., who threw out the first five counts of the latest indictment, saying the charges of conspiracy to defraud, theft of trade secrets and wire fraud were unconstitutionally vague. He also dismissed two trade-secret charges, saying they were barred by the statute of limitations.

Background: Lessors of various equipment to businesses brought action against
former employee and competitor, alleging claims for breach of fiduciary duties,
civil conspiracy, unjust enrichment, copyright infringement, misappropriation of
financial trade secrets, aiding and betting breach of fiduciary duties, and
trademark violation. Lessors moved for summary judgment on employee's counterclaim
for abuse of process.

Holding: The District Court, Robert W. Pratt, Chief Judge, held that lessors'
conduct was not an abuse of legal process.

Motion granted.

Baker Donelson Bearman Caldwell & Berkowitz PC

Bradley E. Trammell

The Tennessee Uniform Trade Secrets Act (TUTSA) was enacted by the Tennessee General Assembly to provide protection to individuals and businesses who possess trade secrets. Thus, Tennesseans who have trade secrets should be guided by the Act and the case law interpreting the Act.

What is a "trade secret"?

The Act defines a "trade secret" to be information which is "technical, nontechnical, or financial data, a formula, pattern, compilation, program, device, method, technique, process, or plan" that: (1) derives independent economic value from not being generally known; and (2) would provide economic value to others from its disclosure. In addition, the information must be (3) subject to "reasonable" efforts to maintain its secrecy. Tenn. Code Ann. §47 25 1702(4). While "absolute secrecy is not required, there must be a substantial element of secrecy." (Hickory Specialties v. B & L Labs, Inc., 592 S.W.2d 583 (Tenn. Ct. App. 1979)). To "constitute a trade secret, it must be difficult for anyone outside the confidential relationship to acquire the information by proper means." Wright Med. Tech., Inc. v. Grisoni, 135 S.W.3d 561 (Tenn. Ct. App. 2001).

Even information that is in the public domain, and thus having no independent economic value, can be protectible to the extent that it is combined with other non-public information to form a trade secret. Wright Med. Tech., Inc. v. Grisoni, 135 S.W.3d 561 (Tenn. Ct. App. 2001) (if portions of information are publicly known, the integration of those portions into a unitary whole may still be protectible). As one commentator has put it, "[t]he fact that some or all of the components of the trade secret are well known does not preclude protection for a secret combination, compilation, or integration of the individual elements." The Connecticut Supreme Court in Elm City Cheese Co. v. Federico, 752 A.2d 1037 (Conn. 1999), determined that a "plaintiff's ability to combine these elements into a successful . . . process, like the creation of a recipe from common cooking ingredients is a trade secret entitled to protection."

Trade secret protection is not limited to just "technical" information such as secret formulas or computer programs. Business information can also be a trade secret. Note that TUTSA provides coverage for things such as "nontechnical, or financial data." See, e.g., Int'l Security Mgmt. Group, Inc. v. Sawyer, et al, 2006 WL 1638537 (M.D. Tenn. Jun. 6, 2006) (pricing information). See also Cam Int'l L.P. v. Turner, 1992 WL 74567 (Tenn. Ct. App. Apr. 15, 1992) ("information concerning customers' specialized requirements, need and product preferences" may be entitled to protection) (decision prior to enactment of TUTSA).

Misappropriation of a Trade Secret

Generally, there are three elements necessary to prove misappropriation of a trade secret: "(1) the existence of a trade secret; (2) misappropriation of the trade secret by the defendant; and (3) resulting detriment to the plaintiff." Partylite Gifts, Inc. v. Swiss Colony Occasions, 2006 WL 2370338 (E.D. Tenn. Aug. 15, 2006). Liability for trade secret misappropriation is determined in part by Tenn. Code Ann. §47 25 1702(2) which defines various types of "misappropriation."

In basic terms, misappropriation can include not only the acquisition of the trade secret by improper means, but also the disclosure or use of the trade secret. Of critical importance, a third party - not the initial "misappropriator" - can be liable for misappropriation if the third party uses the trade secret and knows or should have known that the trade secret has been improperly acquired. For example, in PMC, Inc. v. Kadisha, 78 Cal. App. 4th 1368 (2000), a California court held that once the defendants knew or had reason to know of the use of misappropriated trade secrets, they were liable for the misappropriation even though they did not take part in the initial misappropriation: "[M]isappropriation is not limited to the initial act of improperly acquiring trade secrets; the use and continuing use of the trade secrets is also misappropriation." Id. (citing California statute identical to Tenn. Code Ann. §47 25 1702). Courts in Wisconsin and Pennsylvania have held likewise. Therefore, a trade secret holder need only show that a defendant either acquired trade secrets through improper means or disclosed or used the trade secrets of another under one of the listed conditions in the statute.

Improvements or Modifications to a Trade Secret

As a general principle, a party may not use another's trade secret, even with independent improvements or modifications, so long as the product or process is substantially derived from the trade secret. American Can Co. v. Mansukhani, 742 F.2d 314 (7th Cir. 1984); Atochem North America v. Gibbon, 1991 WL 160939 (D.N.J. Aug. 15, 1991) ("[S]light modifications or improvements of a trade secret will not defeat the misappropriation claim."); Olson v. Nieman's LTD, 579 N.W.2d 299 (Iowa 1998) (minor modification is not a defense to trade secret misappropriation).

Relief Under TUTSA

Under Tennessee's adoption of the Uniform Trade Secrets Act, a plaintiff may recover both monetary and injunctive relief. Tenn. Code Ann. §§ 47 25 1703 and 1704.

* Injunctive Relief

An injunction can issue for both "actual" and "threatened" misappropriation. At the outset of a lawsuit, a trade secret owner can seek a preliminary injunction to prevent the alleged misappropriator from using or disclosing the trade secret while the lawsuit is pending. At the conclusion of trade secret cases, courts have granted two types of permanent injunctions: (1) a permanent "use" injunction (to protect the trade secret) and (2) a "head start" injunction (to eliminate any commercial advantage improperly gained by defendant's misappropriation). See Chemetall GMBH v. ZR Energy, Inc., 138 F. Supp.2d 1079 (N.D. Ill. 2001); and Gen. Elec. v. Sung, 843 F.Supp. 776 (D. Mass. 1994).

* Monetary Relief

TUTSA provides that "[d]amages can include both the actual loss caused by misappropriation and the unjust enrichment caused by misappropriation that is not taken into account in computing actual loss." Tenn. Code Ann. §47-25-1704. Moreover, damages may be measured by "a reasonable royalty" where appropriate. Id.

TUTSA also provides for discretionary exemplary damages "in an amount not exceeding twice" the amount awarded for, in essence, compensatory (or "actual loss") damages. Tenn. Code Ann. §47 25 1704(b). Courts have awarded exemplary damages in double the amount of actual damages, resulting in a total award of three times the amount of actual damages. These damages can be sought when the misappropriator is found to have acted willfully and maliciously.

Conclusion

TUTSA can be a powerful tool for those who hold trade secrets. However, in order to avail itself of this law, those who possess trade secrets must make sure that they exercise "reasonable" efforts to maintain the secret nature of the trade secret.

8/19/08 Chemweek's Business Daily

Koch Industries ' (Wichita, KS) fibers subsidiary Invista has filed a lawsuit against DuPont and Rhodia, alleging that the two companies have "teamed up to steal" Invista's butadiene-based adiponitrile (ADN) technology. Koch acquired the ADN technology from DuPont as part of its 2004 purchase of DuPont's nvista textiles business. The lawsuit is necessary to "stop Rhodia and DuPont from unlawfully using Invista's intellectual property to build an ADN manufacturing plant in Asia or elsewhere," Invista says. "DuPont recently disclosed that it is an investor in Rhodia's ADN expansion plans," Invista says.

ADN is an intermediate chemical used in the manufacture of nylon-6,6. DuPont says there is "no factual basis for Invista's claim. DuPont will vigorously defend ourselves against this action." DuPont says it "takes great care to protect its intellectual property, and to respect the intellectual property rights of others." Invista's lawsuit seeks an injunction "preventing Rhodia and DuPont from using and disclosing Invista trade secret information in developing their own plant or using that trade secret information to compete unfairly in the marketplace." The suit also seeks damages. Rhodia chairman and CEO Jean-Pierre Clamadieu recently told CW that the company was evaluating a worldscale ADN and hexamethylenediamine (HMD) unit to supply Asian markets, and is
considering building the plant in the Mideast. Rhodia expects to make a final decision on the project by year-end and complete it in about 2013. Invista's lawsuit also says that DuPont signed a non-compete agreement prohibiting it from competing against Invista in ADN and through April 2011. DuPont and Invista have an HMD supply agreement that expires in 2012, according to Invista. The lawsuit says that Rhodia obtained unlawful access to the trade secrets through the Butachimie ADN joint venture between Invista and Rhodia in Chalampe, France, Invista says. Koch acquired its stake in Butachimie from DuPont as part of its 2004 acquisition of Invista. This is the second lawsuit Invista has filed against DuPont this year involving the $4.2 billion purchase of the fibers business. Invista in March sued DuPont, seeking more than $800 million in punitive and compensatory damages for alleged regulatory deficiencies associated
with plants included in purchase. Invista alleges that the acquired plants had more than 600 instances of regulatory noncompliance.