1. MAINTAINING TRADE SECRETS FOR
BUSINESS INVENTIONS
Daniel Jon Holmander, Esq.
Barlow, Josephs & Holmes, Ltd.
401-273-4446
djh@barjos.com
www.barjos.com
©2012 Barlow, Josephs & Holmes, Ltd.

2. ©2012 Barlow, Josephs & Holmes Ltd.
Comparison of Different Types of
Intellectual Protection
• IP Law is important because it has been estimated that
45-80% of a company’s value lies in its intangible assets,
namely intellectual property rights
• The purpose of this course is discuss the following:
• 1. patent law – public disclosure
• 2. trademark law – “use in commerce”
• 3. copyright law - publication
• 4. trade secret law – once public, protection is lost forever

3. ©2011 Barlow, Josephs & Holmes Ltd.
Types of Intellectual Property
Rights
1. Copyrights – protects original works of authorship fixed
in a tangible medium of expression.
2. Trademarks - indicia affixed to goods or used in
connection with the sale or advertising of services to
identify the source of the goods or services
3. Patents- government grant of the right to exclude
others from making, using, selling or importing the
patented invention. (note, not right to use the invention)
4. Trade Secret – information not generally known to the
public that confers some economic benefit to its holder
and is the subject of reasonable efforts to maintain its
secrecy.

4. Patents - Overview
• What is capable of being patented?
• Any novel and non-obvious invention
• In the US this includes business methods
• Rights Awarded
• Government grant of the right to exclude others from making,
using, selling or importing the patented invention.

5. ©2011 Barlow, Josephs & Holmes Ltd.
Types of Patents in the U.S.
• Utility Patents
• Provisional Applications
• Non-Provisional Applications
• Design Patents
• Plant Patents

6. ©2011 Barlow, Josephs & Holmes Ltd.
Patentable Subject Matter
• A. Apparatus/Device or Article of Manufacture
• B. Composition of Matter
• C. Method of Manufacture
• D. Method or Process for Using
Apparatus/Device/Article
• E. Business Method Patents
• F. Software – must be tied to a physical structure

7. ©2011 Barlow, Josephs & Holmes Ltd.
Not Patentable Subject Matter
• A. mathematical formulae
• B. algorithms
• C. mental processes
• D. music
• E. basic mathematical and physical relationships
• F. phenomena of nature
• G. abstract intellectual concepts

8. Benefits of Patents
• 1. increase valuation of company
• 2. support higher profit margins by offering exclusive features
• 3. source of income through a licensing program
• 4. defensive measure if accused of violating a patent of competitor

9. ©2012 Barlow, Josephs & Holmes Ltd.
Federal Trademark Law
• Trademarks are indicia affixed to goods or used in
connection with the sale or advertising of services to
identify the source of the goods or services
• Many forms
• word mark
• slogan
• logo
• musical notes
• trade dress
• scents

10. Trademark Rights
• Common Law Trademark Rights TM
• Trademark Rights arise out of usage
• Rights accrue in geographic territory
• Federal Registration ®
• Nationwide protection
• Significant advantages
• Presumption of validity at trial
• Incontestability 5-6 years after registration
• Sample Federal Registration

11. ©2012 Barlow, Josephs & Holmes Ltd.
RI State Trademark
• Contents – similar to Federal Registration except no
intent-to-use application; must have use
• See http://sos.ri.gov/business/trademark/forms/
• Limited Prosecution Phase – granted or refund
• Less Expensive Filing - $50
• Protection – extends to the boundaries of the state of
Rhode Island only(also available in MA, CT, etc.)
• No connection between Secretary of State
incorporation and RI State Trademark

12. Benefits of Trademarks
• 1. maximize product differentiation, advertising and marketing, thus
enhancing recognition of your product or service
•
2. increase revenues as consumers pay higher prices for branded
goods
• 3. derive loyalty largely due to consumer’s ability to recognize the
product and distinguish it from the products of competitors

13. ©2011 Barlow, Josephs & Holmes Ltd.
Copyright Law
• What is copyrightable?
• Original Works of authorship fixed in a tangible medium of
expression – 17 U.S.C.102(a)
• What is NOT copyrightable?
• Ideas, facts (unless arranged in unique way), procedure,
process, system, method, concept, principle, discovery
• Examples of copyrightable Works
• books
• jewelry and sculptures
• photos
• performance art
• website
• software

14. Copyrights – Protection for
Business
• Is the work protectable?
• Original?
• Expression of ideas, not the ideas themselves
• non-functional
• Types
• Textbooks, magazines, newspapers
• Sculptures, jewelry designs
• Photographs
• Music, lyrics
• Content on the Internet

15. ©2011 Barlow, Josephs & Holmes Ltd.
Copyright - Limitations
• First Sale Doctrine – allows purchaser to transfer
(sell, lend, or give away) a particular lawfully made
copy of the copyrighted work without permission
once it has been obtained (CD, book, etc).
• Fair Use Doctrine – allows for copying for
purposes of criticism, comment, news, reporting,
teaching, scholarship, or research.
• Purpose and character of the use
• Nature of the work
• Amount of the work used in relation to the whole
• Effect of the use on the value of the work

16. ©2012 Barlow, Josephs & Holmes Ltd.
Copyright – Exclusive Rights
• Copyright is a bundle of exclusive rights:
• 1. reproduce the subject work
• 2. prepare derivative subject works
• 3. distribute copies of the subject work
• 4. perform the subject work publicly
• 5. display the subject work publicly

17. ©2012 Barlow, Josephs & Holmes Ltd.
Copyright – Benefits of Registration
• Under current law, no registration is needed to preserve
copyright to an original work. Presumption of validity if
registered within 5 years of first publication.
• Copyright Registration is prerequisite to filing suit in
Federal Court, key to courthouse
• Timing of Copyright Registration
• Pre-infringement (or within 3 months of publication) all
remedies available - statutory damages (up to 30k per
infringement), attorneys fees
• Post-infringement: Not preferred, remedies such as
actual damages of copyright owner and profits -hard to
prove and likely less than statutory damages

18. Trade Secrets - Overview
• What is a trade secret? – information not generally
known to the public, confers some economic benefit
on its holder, and is the subject of reasonable efforts
to maintain its secrecy.
• A trade secret is information that is valuable to the owner
a s a s e c re t, and therefore must be protected as such. If
the owner’s competitors generally know or could easily
discover the secret information, the owner could lose his
competitive edge.

19. ©2012 Barlow, Josephs & Holmes Ltd.
Examples of Famous Trade
Secrets
• Kentucky Fried Chicken – recipe
• Twinkies - recipe
• Coca-Cola – recipe
• Krispy Kreme Doughnut - recipe
• Listerine – formula
• Big Mac Special Sauce - recipe
• Mrs. Fields Chocolate Chip Cookies – recipe
• NY Times Best-Seller List – methodology
• WD-40 - formula

20. ©2011 Barlow, Josephs & Holmes Ltd.
Trade Secret – formal definition
• Information, including a formula, pattern, compilation,
program, device, method, technique, or process that:
• (i) 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 (ii) is the subject of efforts
that are reasonable under the circumstances to
maintain its secrecy (R.I. Gen. Laws sec. 6-41-1(ii)
• Note – a threshold is not required; the only
requirement is secrecy of information that derives
independent economic value from remaining secret

21. ©2011 Barlow, Josephs & Holmes Ltd.
Trade Secret – examples
• Formulas
• Processes
• Devices
• Customer Lists
• Software (source code)
• Pricing Information
• Know-How
• Negative Information
• Compilations
• Designs

22. ©2012 Barlow, Josephs & Holmes Ltd.
Loss of Trade Secret Protection
• 1. Secret is disclosed publicly
• 2. Reverse engineering
• 3. Independent development or creation

23. KFC – Story of Trade Secret Protection
• Colonel Sanders kept the secret recipe in his head -- and the
spices in his car -- although he eventually wrote it all down. His
original, handwritten copy is hidden in a safe in Kentucky, and only
a few select employees, bound by a confidentiality contract, know
what the recipe is.
• For further protection, two separate companies each blend a
portion of the mixture, which is then run through a computer
processing system to standardize its blending [source: KFC.com].
• Employees-in-the-know can't ever travel together by plane or auto
to further safeguard the secret, and that once, the recipe was
temporarily moved to another secret, secure location via an
armored car, which was further guarded by a high-security
motorcade [source: DailyFinance].

24. ©2012 Barlow, Josephs & Holmes Ltd.
Trade Secret v. Patent
• Patent
• Invention disclosed in a non-provisional application
patent for all of the public to see is protected for 20
years from date of filing upon issuance of patent
certificate (not a guarantee)
• Trade Secret
• In contrast, invention maintained as a trade secret
which will remaining secret and a competitive
advantage indefinitely so long as its not publicly
disclosed

25. ©2012 Barlow, Josephs & Holmes Ltd.
Patents – Pros and Cons
• In general, patents are more easily enforceable.
• Defenses to trade secret misappropriation not available in
patent context
• independent invention
• reverse engineering
• public disclosure, sale or publication
Con
First to File in March 2013 – “race to the patent office”

26. Trade Secret – Cause of Action
• Misappropriation – acquisition of a trade secret of
another by a person (corporation) who knows or
has reason to know that the trade secret was
acquired by improper means (R.I. Gen. Laws sec.
6-41-1(2)
• Examples – theft, bribery, misrepresentation,
breach or inducement of a breach of a duty to
maintain secrecy, breach of duty of confidentiality
(employees), or espionage through electronic or
other means (R.I. Gen. Laws sec. 6-41-1(1)

27. Trade Secret – Potential Relief
Trade Secret Misappropriation
1.Injunction –actual or threatened
2.Damages – actual loss/unjust
enrichment/reasonable royalty
3.Exemplary Damages –
willful/malicious (double damages
plus attorneys fees)

28. ©2012 Barlow, Josephs & Holmes Ltd.
Factors Used By Courts to
Determine Trade Secret Status
• 1. extent known external to business;
• 2. extent known internal to business as a trade secret;
• 3. reasonable measures taken to guard secrecy
• 4. economic value of information
• 5. cost of R&D
• 6. ease of reverse engineering or independent creation

29. ©2012 Barlow, Josephs & Holmes Ltd.
Statute of Limitations - Comparison
• R.I. Gen. Laws Sec. 6-41-6 – statute of limitations for
brining action for misappropriation is (3) three years
after discovery
• Patents – (6) six year statute of limitation after
discovery of infringement

30. Benefits of Trade Secrets
• 1. trade secrets have no registration costs (trademarks $275,
patents $533, copyrights $35)
• 2. trade secrets go into effect immediately (trademarks – 13
months, patents – 24 month min., copyright – 6-8 weeks)
• 3. trade secrets have no maintenance fees (trademarks, patents)
• 4. trade secrets have no specific compliance requirements – need
to take reasonable measures

31. ©2012 Barlow, Josephs & Holmes Ltd.
Maintain and Protect – Trade
Secret
• Reasonable means to protect trade secret:
• I. Contract Law – non-compete, non-
disclosure, licensing, employee, policies, work-
for-hire, consultant etc.
• II. Control access – passwords, encryption,
firewalls and network security, restricting
physical access, record keeping, exit
interviews, security guards, badges, etc.
• III. Notice –stamp/legend – “confidential”

32. Conclusion
• Identify
• Identify property and determine whether it is important to
you and your company
• Research
• Take early action to search inventions, clear trademarks
to avoid problems
• Protect
• File for appropriate patents, registrations
• Enforce
• Police property, pursue infringers