![]() ![]() The most common mistake by startups is failing to obtain proper written assignments or licenses of intellectual property rights that are developed by the founders prior to the startup's incorporation or rights developed by employees or consultants after the startup's incorporation. What happens if my company does not own the trade secrets created by one of its founders? Some information may not be protectable as intellectual property other than as a trade secret. Examples of such information can include pricing and cost information (but not if that information is readily ascertainable from customers), profit margin information, recipes and customer lists (unless readily ascertainable from public sources). ![]() However, once a patent is issued, trade secrets in the part of the computer software protected by the patent will be disclosed and will no longer be protected by trade secret law.īecause patent applications are published and made available to the public during the application process, inventions covered by patents are not protectable as trade secrets. Some companies may want to keep an invention as a trade secret for competitive market reasons and so may opt not to pursue patent protection and instead rely on trade secrets to protect their intellectual property assets. Microsoft protects certain functions of its Windows software with patents it uses copyright to protect the actual code of the Windows software from copying it uses trademark law to protect the "Microsoft" and "Windows" trademarks which identify the product and it uses trade secret law to protect the structure and methodology of its source code. For example, computer software can be protected by patents, copyrights, trademarks and trade secrets. ![]() Most products and services can be protected by a combination of intellectual property rights. When do you protect information as a trade secret? Failure to provide this notice would result in the company not being able to recover exemplary damages or attorneys' fees from the employee if the company were to sue the employee for misappropriation of trade secrets. The law gives an employee and individual independent contractor immunity from civil and criminal liability under state and federal law for disclosing a trade secret if the disclosure was made to report or investigate an alleged violation of law and the new law requires that companies include notice of such immunity in any agreement with an employee or independent contractor that governs the use of trade secret or confidential information. Trade secrets have long been governed by state law with most of the states adopting their own versions of the Uniform Trade Secrets Act (Massachusetts and New York being the only exceptions). On May 11, 2016, the Federal governments enacted the Defend Trade Secret Acts. This new law requires that employee inventions agreements and contractor agreements with individuals (not contractors or consultants that are entities) that are executed or updated ( ie, amendments or modifications to existing agreements) beginning on include notice of certain immunities provided under the law. On the other hand, reverse engineering, unless such reverse engineering breaches an agreement, is not misappropriation. ![]() For example, a classic example of trade secret misappropriation occurs when an individual takes confidential information from his employer to start a new company. Trade secret law provides rather limited protection: it prevents the "misappropriation" of the trade secret. Misappropriation of a trade secret requires "wrongful" taking. Consequently, a trade secret can endure forever. Examples of trade secrets include customer lists, source code, and semiconductor manufacturing processes. Trade secrets can include both positive and negative information. For example, the knowledge of which compounds are not effective therapeutic drugs against cancer can be very valuable and save a company tens or even hundreds of millions of dollars. Trade secrets arise automatically if a company takes the appropriate steps to maintain the information as a secret and they continue to be enforceable so long as they meet those criteria. Trade secrets are information of any type that is valuable to its owner because it is not generally known in the industry and its owner has taken reasonable steps to maintain the information in confidence. Among these key assets is the trade secret. Having a good basic understanding of intellectual property protection is essential for entrepreneurs to extract value out of their company's key assets and manage opportunities and risk arising from them. The crown jewels of a typical technology company are often found in its intellectual property portfolio. ![]()
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