What a mess! You recently hired an employee from a direct competitor who brought along some documents showing research and development efforts by that competitor related to a new product your company is also developing. A court may even have already entered an injunction prohibiting your company from using any of that information. Cleaning up a mess created by improper access to competitive information is hard work and potentially quite expensive. The Uniform Trade Secret Act (UTSA) defines “misappropriation” of trade secrets as the use or disclosure of another person’s secret information by someone who knew or should have known that the information was meant to be held in confidence. While you do not plan to use any of that new employee’s information, how do you prove the negative that you did not do so?
In those circumstances, consider using a “clean room” approach when developing a new product or software in the same space as the improperly obtained information. By using a “clean room,” you will produce powerful evidence that you independently developed or “reverse engineered” the product or program. Proof of independent development mitigates the “taint” of prior unlawful access to a competitor’s trade secrets by demonstrating that there was no “use” of the competitor’s information. Moore v. Kulicke & Soffa Ind., 318 F.3d 561, 567 (3d Cir. 2003)(“If there is proof that a defendant independently developed a technique that resembles the trade secret, then the defendant did not “use” the trade secret.). The end goal is to negate the element of “access,” which is required to prove a claim for misappropriation.
One way to implement a clean room environment for new product or software development is to create separate teams for specification and design. None of the team members should have had access to any of the “tainted” documents or information and they should be “walled off” from any “tainted” employees. The specification team is responsible for identifying the general parameters for the potential new product or software, and creating a list of specifications for developing it. The design team is then figuratively isolated in the clean room and should only get access to the specifications and information approved by the specification team. The design team is solely responsible for actually executing the design or architecture and creates and tests the new product or code. As an alternative, both of those functions can be performed by outside vendors, but careful vetting is required to be sure the vendors are “clean” from any prior access to the competitor’s trade secret information as well.
The key is to closely document the communications into and out of the clean room as well as between the specification and design teams and to meticulously document the work of those teams to prove the design team did not have access to the “tainted” confidential information while developing the new product or software. Consider engaging a third party with impeccable credentials to monitor and audit the work of both teams or the vendors and all communications between the teams or vendors. For example, in a case involving military contractors, we engaged a retired four star general to act as the auditor. The auditor should attend all key specification or design team meetings, spot check the development efforts and interview key personnel as appropriate. The auditor can also help assemble and secure a collection of key documents showing independent development. And the auditor should be hired with the thought in mind that she will likely need to testify at some point in the future about the work by each team and the “cleanliness” of that work.
The costs of trade secret misappropriation are high. In recent years, juries have awarded victims of trade secret theft millions of dollars in damages after the defendant failed to demonstrate it had independently developed a product or an idea. See Epic Systems Corp. v. Tata Consultancy Services, Ltd., 2017 WL 4357998 (W.D. Wis. 2017) ($140 million in compensatory damages and $280 in punitive damages awarded); RRK Holding Co. v. Sears, Roebuck and Co., 563 F. Supp.2d 832 (N.D. Ill. May 27, 2008) ($21 million awarded). When a mess is dumped at your door, it is imperative you follow proper protocols and “Document, Document and Document” independent development to avoid these types of results.