FALL 2008

Trade Secrets


Course No. 9200-704 (and 804)-801

ID No. 16545

MW 3:00 - 4:30 p.m.
Room L-134
Professor Jay Dratler, Jr.
Room 231D (IP Alcove)
(330) 972-7972
Copyright © 2000, 2002, 2003, 2006, 2008   Jay Dratler, Jr.   For permission, see CMI.

Questions and Notes on American Paper and Packaging

1.  Ohio's definition of "trade secret" in 13 O.R.C. § 1333.61(D), infra, is a local variation of the Uniform Trade Secrets Act.  Unlike Ohio's variant, the uniform act's definition contains no reference to any "listing of names, addresses, or telephone numbers[.]"  Rather, the uniform act mentions only "information, including a formula, pattern, compilation, program, device, method, technique or process[.]"  UTSA § 1(4) (preamble).  Is the court right to focus on the word "compilation" as the noun in this list that best fits customers lists?

2.  The official commentary to the Uniform Trade Secrets Act suggests that the definition of "trade secret" is to be broadly construed.  That is, subject matter which meets the definition's general requirements is not to be exlcuded categorically.  Is this approach good policy?  Do the social and economic reasons for protecting trade secrets apply only to certain types of information, or do they apply to all information that is secret and that the owner reasonably guards?  Is there any reason to give an industrial process more protection than a customer list or the formula for Mason's Lynchburg Lemonade?  Or do the same general policies apply to all secret business information?

3.  The defendants in American Paper and Packaging had three defenses. First, they said the customer information at issue was not a trade secret.  Second, they denied that, even if it was a trade secret, it had been misappropriated.  Finally, they argued that, even if the information was a trade secret and had been misappropriated, no remedy should be granted. Which of these defenses did the court accept?

4.  The defendants' agreements fairly clearly covered what they did, yet they won the case.  Why?  Did the court ignore the agreements, refuse to enforce them, or reinterpret them?

5.  No state will enforce a noncompetition covenant that is unreasonble.  In addition, unreasonable noncompetition covenants that affect interstate or foreign commerce may be challenged under the federal antitrust laws.

A few states, however, have especially strict public policies regarding agreements not to compete, which are expressed in special statutes.  California is one of those states.  As the court notes, California's strong public policy favoring competition is explicit in Section 16600 of the California Business and Professions Code, which voids "every contract by which anyone is restrained from engaging in a lawful profession, trade, or business[,]" with few exceptions.  The exceptions include noncompete agreements made in connection with the sale of a business and employees' agreements to preserve their employers' trade secrets. Is California's special statute crucial to the result in this case, or might other states with less stringent approaches to noncompetition covenants reach a similar result on similar reasoning?  

6.  Note that the defendants were sued for using the customer lists, not for disclosing them to third parties.  This made the suit look more like an attempt to enforce a noncompetition covenant.  Would the result have been the same if the defendants had not used the customer lists themselves, but had disclosed them to third parties, who used them to start a competing business?

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