This article was originally published in the Greater Bridgeport Bar Association’s News Brief
Dur-A-Flex, Inc., based in East Hartford, is preparing for trial on a trade secret misappropriation case in May 2018, in Hartford Superior Court (HHD-CV14-6049281-S). In January, Dur-A-Flex filed a Motion to Seal, asking the court to close the courtroom and seal the record to the named defendant for a key portion of the trial – the part where Dur-A-Flex discloses the trade secrets it accuses the defendant of having taken.
To be fair, the former employee was not the only party to be excluded under the proposed Motion – Dur-A-Flex was trying to prevent unnecessary disclosure of the secret coating formula to other parties to the suit who did not yet know the formula, as well as the public in general. But it is hard to imagine how the accused employee would mount a defense without knowing what the information was that he was accused of misappropriating.
In an Order issued Feb. 27, 2018, the Court weighed the factors required in connection with the Motion to Seal, including Practice Book Sec 11-20 (favoring trials open to the public) on one hand, and on the other hand Conn. Gen. Stat. § 35-55, “Protection of Trade Secrets by Court,” part of Connecticut’s version of the Uniform Trade Secret Act. The court struck a measured balance between statutory protection for trade secrets, the defendant’s right to due process, and the interest of the public in having a transparent judicial system. Granting the motion in part, the court found that the public has little interest in disclosure of Dur-A-Flex’s secret formula, whereas making the formula available to Dur-A-Flex competitors would cause Dur-A-Flex harm. The former employee, who presumably already knew the formula, would be allowed to access to that evidence and thus afforded an opportunity to assist counsel in explaining exhibits and cross-examining witnesses.
Key to proceeding under CUSTA will be the need for Dur-A-Flex to show that the formula in question meets the classic statutory criteria for trade secret, i.e., that the information (1) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and (2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. Reasonable efforts typically include limiting access of the information to those who need to know, and requiring those employees having access to sign written agreements to keep the information confidential and to refrain from working for competitors. Thus, when a former employee takes trade secrets to a competitor, the former employer can normally assert a breach of contract claim in addition to statutory CUSTA remedies, as Dur-A-Flex has claimed in this case. In some cases, federal statutory remedies might be claimed under the Defend Trade Secrets Act (DTSA) of 2016.
Of course, once information becomes known to the public, the employee is freed from his obligation to protect that information. So Dur-A-Flex has made certain strategic choices by applying for patent protection for some of its formulations, which have been published as such, e.g., in U.S. Patent 9,657,191 and U.S. Patent Application Publications 2017/0158884 and 2017/0029653. Th defendant employee in the case just mentioned is not a named inventor in any of these documents, so these documents might have no bearing on that case.
Companies that develop new technology often face the trade secret vs patent decision, balancing the risks and benefits of these two competing forms of protection. A trade secret can potentially last forever, as long as it is secret, but it cannot be enforced against others who discover the secret independently by legitimate means. On the other hand, patents put the information out there for all to see, but if an application matures into a patent, it can be asserted against anyone who uses the patented invention, regardless of whether they developed it independently. Patents eventually expire, twenty years from their filing date, but in some industries, innovations come so quickly that twenty years is as good as a lifetime. But if finding infringement poses a problem (e.g., if it is hard to know whether a competitor is using the same floor coating claimed in a patent), protecting a trade secret may be the more attractive option.