Page 42 - AVN September 2016

LEGALESE | | By Clyde DeWitt
Hidden Treasure
A trade secret is as valuable as a copyright or patent
business activities,
what information you
”Think about your
and ask yourself
would withhold from
competitors.
It isn’t confined to
customer lists.
What about vendors,
pricing and business
procedures?
LEGAL NEWS
Clyde DeWitt is a Las Vegas and Los Angeles
attorney, whose practice has been focused on adult
entertainment since 1980. He can be reached at
ClydeDeWitt@earthlink.net. More information can
be found at ClydeDeWitt.com. This column is not a
substitute for personal legal advice. Rather, it is to alert
readers to legal issues warranting advice from your
personal attorney.
This column in the past has addressed copyright, trademarks and, even occasionally, patents, three of the species of intellectual
property. But a fourth, the trade secret, is equally important and valuable. The impetus for this focus is the recently enacted
federal Defend Trade Secrets Act of 2016 (the “DTSA”), which catapults trade secret protections into federal court and increases
protection.
Overlooking the trade-secret rules can have your employees running off with your customer list. Want that? What follows
includes legal issues involving trade secrets and a general cookbook as to how to protect them.
Perspective and Background
Federal protection of copyrights and patents arises from the
clause in Article I of the Constitution, enumerating the powers
of Congress to include the power “To promote the progress of
science and useful arts” by giving for a limited time exclusive
rights to artists and inventors. The idea is to encourage
scientific and artistic endeavors.
The tradeoff is the artist or inventor gets to use his/her
artistic work or invention exclusively for a defined period of
time in return for fully disclosing it. As an example, inventors
of drugs can make or license them exclusively for 20 years;
but after that, the world knows how to make them. That is
why drug prices plummet when patents expire. Congress has
elected to treat copyrights a little differently with respect to
music, with compulsory licenses, but for the most part, artists
get the same deal as inventors, except for way longer.
Trademarks are a little different. Trademark infringement has
been viewed for centuries as a species of unfair competition,
causing confusion as to the source or origin of goods and
services. Unlike patents and copyrights, protection of a
trademark is not exclusively federal. Federal registration arises
under the Commerce Power, another one of the enumerated
powers of Congress.
What is a Trade Secret, Anyway?
A trade secret is kind of the opposite of a patent. A patent
trades off 20 years of exclusive use for disclosure; a trade secret
is good as long as you are able to keep it close to the vest.
Theft or unpermitted use of trade secrets has long
been recognized in the common law, as has trademark
infringement, as a species of unfair competition. Trade secret
misappropriation is often overlooked—and overlooking it can
be a disaster.
If you think trade secrets are unimportant, think about this:
The formula for Coca-Cola is a trade secret; so is the Kentucky
Fried Chicken recipe, and also the formula for W-40 oil. As
noted, so are most customer lists. Trade secrets are important.
So, what is a trade secret? It’s just what it said. First, it must
be a secret, generally kept from the world outside its owner.
Then, it must be useful in a trade or business.
How Do You Protect Your Trade Secrets?
Trade secrets aren’t protected if they are not secret. Your
company needs to take “efforts that are reasonable under the
circumstances to maintain [the] secrecy” of a trade secret
in order to keep it. What efforts are “reasonable” depends
upon the circumstances; but here are some of the things you
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