Trade Secrets & Business Torts

Under false advertising, _____ is usually an opinion (Papa John's)

"Best" Opinion's are not actionable under 43a

Texas Uniform Trade Secrets Act Definition: "Trade secret" means ________ forms and _________ of information, including business, scientific, technical, economic, or engineering information, and any formula, design, prototype

"Trade secret" means all forms and types of information, including business, scientific, technical, economic, or engineering information, and any formula, design, prototype

TUTSA Definition of Proper Means: means discovery by __________ development,_________ engineering unless prohibited, or any other means that is not improper means.

means discovery by independent development, reverse engineering unless prohibited, or any other means that is not improper means.

Hosch Definition of Trade Secret: 1) Information that owner has taken ____________ precautions to keep it a secret and 2) Derives __________ ___________ from __________ being generally known to or readily ascertainable through proper means by someone who can obtain an economic value from the use of disclosure

1) Information that owner has taken reasonable precautions to keep it a secret and 2) Derives economic value from NOT being generally known to or readily ascertainable through proper means by someone who can obtain an economic value from the use of disclosure

Limits to False Advertising Cause of Action (43a) 1) Standing - not directed to ___________ It's about a competitor vs competitor or state or federal entity. Consumers use the deceptive trade practices act (DTPA) 2) Scope - False advertising. Advertising has a common sense meaning. Not political or religious advertising. Must be _________ advertising. A single letter with misrepresentations is not ADVERTISING. 3) Limit - Reach Disseminated sufficiently to the ________ purchasing public to constitute promotion within that industry. ________ SPECIFIC. 4) Representations of statements of fact not ________ - statement is objectively susceptible to proof. i. Puffery: Wild exaggeration that no one would believe. ii. So vague and so general that no one would believe.

1) Standing - not directed to consumers. It's about a competitor vs competitor or state or federal entity. Consumers use the deceptive trade practices act (DTPA) 2) Scope - False advertising. Advertising has a common sense meaning. Not political or religious advertising. Must be commercial advertising. A single letter with misrepresentations is not ADVERTISING. 3) Limit - Reach Disseminated sufficiently to the relevant purchasing public to constitute promotion within that industry. INDUSTRY SPECIFIC. 4) Representations of statements of fact not opinions - statement is objectively susceptible to proof. i. Puffery: Wild exaggeration that no one would believe. ii. So vague and so general that no one would believe.

Cause of Action: Defamation & Negligent Misrepresentation Have to show: 1. D has provided information in the course of business or transaction in which the P has a ________ __________ 2. Information was __________ 3. D did not exercise reasonable care or competence either in obtaining this info or in communicating it 4. P justifiably _________on it 5. P suffered damages proximately caused by that release.

1. D has provided information in the course of business or transaction in which the P has a financial interest 2. Information was false 3. D did not exercise reasonable care or competence either in obtaining this information or in communicating it 4. P justifiably relied on it 5. P suffered damage proximately caused by that reliance

Tortious Interference with Contract Elements: 1. Existence of a contract that is subject to interference 2. _______ or _______ act of interference (must be wrongful) 3. Proximate cause of ________ 4. Damages

1. Existence of a contract that is subject to interference 2. Willful/Intentional act of interference (must be wrongful) 3. Proximate cause of harm 4. Damages

Cause of Action: Online Defamation and Disparagement Issues: 1. P must establish that court can exercise ________ ____________ over D (you have to identify the party) 2. Internet Service Providers (ISPs) will not release identities of customers - much less the content of those customers' communications - unless __________ 3. D will most likely bring _________ motion to dismiss

1. P must establish that court can exercise personal jurisdiction over D (you have to identify the party) 2. Internet Service Providers (ISPs) will not release identities of customers - much less the content of those customers' communications - unless compelled. 3. D will most likely bring Anti-Slapp motion to dismiss

Bass Factors: Apply statutory definition while keeping an eye on these factors. 1. The extent to which the information is known __________ the ______________ 2. The extent to which the information is known by ___________ and others involved in the business 3. The extent of measures taken to ___________ the secrecy of the information a. Reasonable precautions—if you're not taking it seriously and acting like it's tremendously valuable, then probably not a trade secret 4. The information's value to the company and its _____________ 5. Consider the _______ ___ __________ or effort the company expended in developing the data b. More expensive, more you treasure it 6. The ease or difficulty with which the information could be ___________ ____________ or duplicated by others

1. The extent to which the information is known outside the business 2. The extent to which the information is known by employees and others involved in the business 3. The extent of measures taken to guard the secrecy of the information a. Reasonable precautions—if you're not taking it seriously and acting like it's tremendously valuable, then probably not a trade secret 4. The information's value to the company and its competitors 5. Consider the amount of money or effort the company expended in developing the data b. More expensive, more you treasure it 6. The ease or difficulty with which the information could be properly acquired or duplicated by others

False advertising Hypo: "Outperforms any leading motor oil against viscosity breakdown [which leads to engine problems]. "Provides longer engine life and better engine protection."

1.) Outperforms—don't know if true or false. Outperforms according to what? Sounds like a comparison between this one and others and that comparison has been conducted by some accepted industry test. Isn't that implied by "outperforms?" Message to consumer that an industry accepted standard has been applied. Provides longer engine life and better protection? 2.) Held to be literally false. There was no accepted industry test for those things at the time. FALSE ADVERTISING

SLAPP Suit Case Analysis 1.) Defendant speaker (likely journalist) moves to dismiss the case on the basis of antislapp statute. 2.) Is this suit based on related to or in response to the defendant's speaker's exercise of _______, ___________, or _____________? a. If no, the lawsuit proceeds b. if yes, is there an exception that applies? (commercial speech does not apply brought against someone who's mainly in the business of buying and selling goods and if the speech arises out of that or a commercial transaction in which the intended audience) c. If yes, the exception applies, the lawsuit tomes forward d. If no, case must be dismissed unless P proves by clear and specific evidence a prima facie case of each element of a cause of action (higher burden)

2.) Free speech, right to petition, right of association

TUTSA Definition of Misappropriation: A. Acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by ________ __________; or

A. Acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or

Is there a cause of action? Holders of option to purchase savings and loan's government services division brought action against savings and loan's chairman and buyers of savings and loan's assets, alleging tortious interference with contract. The 160th District Court, Dallas County, David Godbey, J., entered judgment in favor of plaintiffs, and defendants appealed. The Supreme Court, Baker, J., held that: (1) evidence did not support tortious interference claim, and (2) officer of savings and loan was not personally liable for tortious interference with contract for voting to approve agreement selling division to outside party.

ACS Investors v. McLaughlinm * Ordinarily, merely inducing a contract obligor to do what it has a right to do is not actionable interference. Evidence shows that CS merely negotiated for First Texas to do what it had a right to do under the McLaughlin Agreement * Generally, a corporate officer's acts on the corporation's behalf are deemed corporate acts. A corporate officer or director may not be held liable for inducing the corporation to violate ac contractual obligation as long as he or she acts in good faith on the corporation's behalf. Plaintiff must show the officer acted in a manner so contrary to the corporation's best interests that his or her actions could only have been motivated by personal interest.

Duty to Maintain Secrecy: 30 trucks owned by independent contractors working for the company. Arizpe starts preparing to create his own company, drivers want to go with him. He was an independent contractor but did he have a fiduciary duty? Court finds there was formal, fiduciary relationship between Arizpe and Abetter. He could prepare to compete, had no general duty to disclose his plans, and could compete once he left. Jury found he did not breach his fiduciary duty or intentionally interfere with Abetter's contracts with Vulcan or the independent drivers

Abetter Trucking: If an agent, while employed by his principal, uses his position to gain a business opportunity belonging to the employer, such conduct constitutes an actionable wrong. However, a fiduciary relationship does not preclude the fiduciary from making preparations for a future competing business venture. such preparations don't necessarily constitute a breach of fiduciary duties. May take active steps do compete while still employed. Employer can only restrict the post-employment competitive activities through a non-compete agreement.

Is the interference wrong or improper? Case: Adopts the Oregon middle ground: P must prove (1) that D intentionally interfered with the P's _________ or _______ economic relations, (2) for an improper ________ or by improper _________, (3) causing injury to the P. Privilege is an affirmative defense (doesn't become an issue unless the acts charged would be tortious on the part of an unprivileged D).

Adopts the Oregon middle ground: P must prove (1) that D intentionally interfered with the P's existing or potential economic relations, (2) for an improper purpose or by improper means, (3) causing injury to the P. Privilege is an affirmative defense (doesn't become an issue unless the acts charged would be tortious on the part of an unprivileged D).

False advertising Hypo: "Hospitals trust TYLENOL and use it most among pain relievers." [Omits fact that TYLENOL is supplied to hospitals for free, or at very low prices.]

It would made a material difference to consumer's choice. Could argue that consumers would trust Tylenol but the message was that the hospitals were favoring for medical reasons not for price. Court held that they trust it because competitors could always lower their price.

Commercial Disparagement Cause of Action are likely to bring ____ ______ statute motions.

Anti-Slapp statute motion (provides procedural mechanism for dismissing frivolous cases which involve free speech quickly and decisively).

TUTSA Definition of Misappropriation: B. Disclosure or use of TS of another without ________ or __________ consent by a person who: (i) used improper means to acquire knowledge of the trade secret; (ii) at the time of disclosure or use, knew or had reason to know that the person's knowledge of the trade secret was: (a) derived from or through a person who had utilized improper means to acquire it; (b) acquired under circumstances giving rise to a ________ to maintain its secrecy or limit its use; or (c) derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use; or (iii) before a material change of the _________ __________, knew or had reason to know that it was a trade secret and that knowledge of it had been acquired by accident or mistake.

B. Disclosure or use of TS of another without express or implied consent by a person who: (i) used improper means to acquire knowledge of the trade secret; (ii) at the time of disclosure or use, knew or had reason to know that the person's knowledge of the trade secret was: (a) derived from or through a person who had utilized improper means to acquire it; (b) acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; or (c) derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use; or (iii) before a material change of the person's position, knew or had reason to know that it was a trade secret and that knowledge of it had been acquired by accident or mistake.

Money Recoveries Carefully note the differences between _______ (provable losses to the P), _________ of the amount by which the D has been unjustly enriched, enhanced or ________ or exemplary damages (additional amounts to punish the D, deter further misconduct, and serve as an example to others) and the recovery of attorneys' fees.

Carefully note the differences between damages (provable losses to the P), disgorgement of the amount by which the D has been unjustly enriched, enhanced or punitive or exemplary damages (additional amounts to punish the D, deter further misconduct, and serve as an example to others) and the recovery of attorneys' fees.

Causes of action for _________ ____________ and personal defamation may be brought in the same action and often are, provided there is no double ________________

Causes of action for business disparagement and personal defamation may be brought in the same action and often are, provided there is no double recovery:

Interference permissible for some contracts: 1. Contract for __________ 2. Contracts that are void as against _______ ________ Restrictive covenant in housing subdivision that won't sell to people of a certain race Unenforceable non-compete NDA over trade secrets are not void 3. Illegal contracts (prostitution, drug deal)

Contract for marriage Contracts that are void as against public policy Restrictive covenant in housing subdivision that won't sell to people of a certain race Unenforceable non-compete NDA over trade secrets are not void Illegal contracts (prostitution, drug deal)

Texas Theft Liability act creates different _______ of ________ separate from _________ of trade secrets but claims often brought in conjunction with ___________ trade secret claims. This act creates a civil cause of action to the victim of theft.

Creates different cause of action separate from misappropriation of trade secrets but claims often brought in conjunction with misappropriation of trade secret claims

Most commonly fought over trade secrets: _________

Customer Lists. Customer order history may also be some of the most important. Gives you an idea of what they're likely to buy in the future.

act of harming an individual's personal reputation (type of tort for individual)

Defamation 1. Statute of limitations: 1 year 2. Malice not required (except with respect to public figures, NY Times v. Sullivan) 3. Falsity presumed. D must prove statement was true. (P presumed to be a nice person). 4. Easier burden for P—no malice, no special damages, statement presumed to be false

Cause of Action: Online Defamation and Disparagement Before the court will issue that subpoena requiring the ISP to "unmask" the anonymous poster, or on a Motion to Quash, the court will usually require the plaintiff to prove the particulars of its case to an extent that would survive the online poster's motion for summary judgment. Under __________ the P must show (1) an attempt to provide _________ to the defendants that their identities are being sought, and how they can present a defense; (2) quote __________ the allegedly unlawful online speech; (3) allege all elements of the cause of action; (4) present evidence supporting the claims; and (5) prove to the court, on balance and under these circumstances, that the plaintiff's right to identify the defendant outweighs the defendant's ________ ________ right to speak anonymously.

Dendrite Case (1) an attempt to provide notice to the defendants that their identities are being sought, and how they can present a defense; (2) quote verbatim the allegedly unlawful online speech; (3) allege all elements of the cause of action; (4) present evidence supporting the claims; and (5) prove to the court, on balance and under these circumstances, that the plaintiff's right to identify the defendant outweighs the defendant's first amendment right to speak anonymously.

TI with prospective contract (favorable business relationship) is Different from TI with a contract because competition is still ____________. With a K, stability is expected whereas with a favorable business relationship, the conduct needs to be a lot more egregious to be actionable because competitions is still ongoing. (Hosch and his dry cleaner Carol. Carol still has to compete for his business because there is not contractual relationship).

Different from TI with a contract because competition is still ongoing. With a K, stability is expected whereas with a favorable business relationship, the conduct needs to be a lot more egregious to be actionable because competitions is still ongoing. (Hosch and his dry cleaner Carol. Carol still has to compete for his business because there is not contractual relationship).

Is this an actionable tortious interference? A supplies a particular product to both B and C, under one-year agreements that are renewable annually. A runs into financial trouble. B buys equity (1/6 of your stock) in A, and loans A substantial money interest-free. But as part of the transaction, A agrees not to renew its agreement with C.

Do these acts constitute tortious interference with C's relationship with A? No—just said don't renew it. So not interfering with current K. * Held that the key issue was B's intent. If primary intent was to drive C out of business, leaving it the only one standing in the field—looks like tortious interference. If intent was to preserve A as intended manufacturer—doesn't seem like tortious interference.

________ _________ : not consistently recognized by courts as an improper means of obtaining trade secrets. A ________ ________ victim faces the burden of demonstrating that even though the alleged trade secret was in the trash, its secrecy was "reasonably" protected—nearly insurmountable burden

Dumpster Diving

Reverse Engineering: Ds were hired by third party to take aerial photos of new construction at the Beaumont plant of P. P was in the midst of building a plant and they didn't want competitors to see what they were doing. P contends the D wrongfully appropriated trade secrets by taking the photos. Court concluded that the aerial photos were an improper means of obtaining the trade secret.

Dupont Case: TX Supreme Court rule: One who discloses or uses another's trade secret, without a privilege to do so, is liable to the other if: he discovered the secret by improper means OR his disclosure or use constitutes a breach of confidence reposed in him by the other in disclosing the secret to him

Economic value under the statute is ________ or _________ not objective or subjective. Ex: Nuclear codes to a stupid person. You objectively know the value of the codes. He dies with it, no damages.

Economic value under the statute is ACTUAL or POTENTIAL, not objective or subjective.

Cause of Action: False Advertising (Lanham Act 43(a)) Elements: 1. P must show that the D made false or misleading statements of fact as to his own products or services, or the products or services of his competitor's; Explicit: false on its face Implicit: Misleading in context 2. Such statement either ___________, or had the capacity to deceive a substantial segment of potential consumers People who have been misled v. People who are likely to be deceived. 3. That the deception is _________ in that it is likely to influence the consumer's purchasing decisions 4. That the advertised goods or services travel in _________ commerce 5. And that there is at least a likelihood of injury to the plaintiff through lost sales, price pressure or goodwill.

Elements: 1. P must show that the D made false or misleading statements of fact as to his own products or services, or the products or services of his competitor's; Explicit: false on its face Implicit: Misleading in context 2. Such statement either deceived, or had the capacity to deceive a substantial segment of potential consumers People who have been misled v. People who are likely to be deceived. 3. That the deception is material in that it is likely to influence the consumer's purchasing decisions 4. That the advertised goods or services travel in interstate commerce 5. And that there is at least a likelihood of injury to the plaintiff through lost sales, price pressure or goodwill.

Tortious Interference with Prospective Contract/with favorable business relationships Elements: 1. Contract that would have been __________ 2. intentional act of interference that is independently unlawful or tortious 3. proximate cause 4. harm

Elements: 1. Contract that would have been Imminent 2. intentional act of interference that is independently unlawful or tortious 3. proximate cause 4. harm

Is this an actionable tortious interference? A, B, and C are associates of a law firm. They decide to form their own partnership. They notify the firm's clients that they are about to do so. Clients left with them.

Here—not tortious interference because they were privileged, have professional obligation to give client all the information. Client can leave firm whenever they want to * Watch out—there are a lot of fiduciary duty cases out there about how to prepare to leave. Can't lure clients away—supposed to wait until you're gone and then announce your new business—in other markets. This scenario is different—because of professional relationships with clients.

False advertising Hypo: Ad compares pain relievers by use of a checklist of various features, including several side effects. [But omits the side effect of potential liver damage.]

Everything it said is true. But it omitted an important side effect. Not false, it's misleading.

False advertising Hypo: "Maximum Strength ANACIN is the 'maximum strength allowed.'" [Shown next to reference to competitor as "extra strength"]

False. implies that there is some authority which has allowed a maximum—and that's not true.

True or False: Texas adopted the Uniform Trade Secrets Act

False: Texas adopted the restatement. The TX restatement defines trade secret as any information used or that gives owner advantage and owner takes reasonable steps/precautions to keep it secret

Is this an actionable tortious interference? Bank has foreclosed on an apartment house. Real estate Broker approaches the bank on behalf of B, a potential buyer, to see if Bank would be interesting in selling to B. The bank is interested, so Broker submits a proposed contract to the Bank. The contract includes a commission to Broker. The Bank rejects the contract. Thereafter, B, the potential buyer, approaches the Bank directly and they agree to a sale. One of the terms is that the Bank will indemnify B, the buyer, against any claims to commissions by the Broker for inducing a breach of contract.

Found liable. Evidence of sneaking around, surreptitious going on, someone pulling a fast one.

Veggie Libel Statute: Oprah did a show about Mad Cow Disease. Said she quit eating hamburgers. Overnight effect—sales falling all over the US. Texas cattle ranchers sued Oprah on the veggie libel law. Was there defamation?

Held that it was not defamation because it wasn't directed to anybody in particular. Not veggie libel because the cows were not perishable food product—which is what the statute is addressed to. Statements were not made knowingly of their falsehood.

Is this an actionable tortious interference? A husband in a divorce case thoroughly despises his wife's lawyer. He threatens to "refuse any and all efforts at reconciliation" unless she fires him.

Held to be interference. Why? Wife could hire lawyer at any time—what if it's the wife's idea to fire the lawyer. Not her idea, it was his idea. CA in 1974—held liability exists. Just because K is at will of parties, doesn't mean its at the will of all others. Reasoned on classic at will stability basis.

Elements of a trade secret are: 1. Information 2.Secret (not _______ ___________ in the industry) 3. _____________ precautions to make sure its kept secret 4. Economic value (actual or potential)

Information Secret (not generally known in the industry) Reasonable precautions to make sure its kept secret Economic value (actual or potential)

TexUTSA: __________ shall be terminated when the trade secret ceased to exist. Affirmative acts to protect a trade secret may be compelled by court order.

Injunction

False advertising Hypo: "Tanker." [flash image of a railroad car]. "Rockies." [flash image of case of Coors Light]. "...a concentrated form of Coors Light leaves Colorado in a tanker and travels to Virginia, where local water dilutes the Rockies concentrate before it is sent to you."

Is that true? Yes. Held to be fair advertising.

Defamation & negligent misrepresentation Case: Johnson was relying on Baylor not to communicate that he had conduct issues, when it was really only how he looked and sounded.

Johnson v. Baylor Court held that Baylor owed Johnson a duty to exercise reasonable care in supplying his personnel records to Kitty Hawk and more than a scintilla of evidence exists that Baylor made a representation to Kitty Hawk for Johnson's benefit; upon receiving Kitty Hawk's reques for Johnson's personnel records, Baylor knew or should have known that Johnson was relying on Baylor to properly supply his records to Kitty Hawk.

Issues: what is a K that is subject to interference and what constitutes an interference as term defined in the law? Building owner who leased the bottom floor of his building to a furniture guy. Wasn't long before building owner made a terrible deal and had to runoff the guy so he could release to another person for something even better. Building owner methodically set out to make this guy's life a living nightmare over many years, including in front of furniture guy's customer. Was there tortious interference?

Leigh Furniture and Carpet Co v. Isom Yes, Court held that the facts IN COMBINATION is what constituted tortious interference

Commercial Disparagement Tort for Businesses 1. Seeks to protect the marketability and value of a business' goods or services 2. Statute of limitations—2 years (unless specified otherwise) 3. _________ is required in TX 4. P has to prove falsity of statement—if can't prove falsity, business loses 5. P must prove ________ ___________

Malice is required in Texas. P must prove special damages. Not easy for business to make out an action for commercial disparagement. Standards are so high—not much case law.

_______ : making it more or less likely the consumer will buy something. Effects the consumers purchasing decision.

Material (Paper John's Case)

Is this an actionable tortious interference? A car manufacturer has an agreement with a distributor. The agreement is terminable at will. The distributor has an employment agreement with its president, also at-will. The car manufacturer threatens to terminate its agreement with the distributor, unless the distributor fires its president and hires a new one.

Not liable. Why? K with president stated that his employment could be terminated if it wasn't satisfactory to Ford.

Case: Metal recovery business that added modifications. Combination of doing 4 things was new and different. Court found that Metallurgical disclosures to others were limited and therefore insufficient to extinguish the secrecy. The disclosures were not public, they were only to two businesses with whom M was dealing and the disclosures were made to further M's economic interests. Trade secret existed.

Metallurgical 1.) OK to communicate to employees involved in its use and those pledged to secrecy 2.) Limited disclosure ok, also was disclosed to further the companies' economic interest

Duty to Maintain Secrecy: Case; paradigm of departing employees. Group of employees left to form their own printing company. They took customer list, contact list and order history going back 52 years. New company cannot take the book. All they can do is _____ __________. Have to come up with customer lists independently. You can go back and research it yourself anew and independently recreate the book.

Miller v. Roberts All they can do is compete fairly. Have to come up with customer lists independently. You can go back and research it yourself anew and independently recreate the book. Could have used yellow pages to find the exact same information. There is a line between what is public disclosure and what isn't. You can use your improvements and knowledge to compete but you cannot use the confidential information from your employer.

Element 3: Tortious Interference, Proximate Cause Often becomes gets speculative. Hypo: Hypo: Company A makes printing presses. Client want so buy one from Company B, another company is refurbishing business. Company A sends letter to client saying only our machines are safe. Company B wants to sue company A for tortious interference with prospective K because client was leaning towards buying from company B.

Missing causation—how to prove the letter was the proximate cause of the loss of the sale

Case: employee downloaded customer info onto his personal computer then it was hacked. SEC came down on D for not having strong enough silos between employees so they couldn't access anything they didn't need to know. D had authorization controls in place at the time, as well as training programs for its employees; controls over data copying; and other policies and restrictions. But they were not sufficient to__________ its employees' ____________ to customer data to only that data the individual employees legitimately needed.

Morgan Stanley * Morgan Stanley had authorization controls in place at the time, as well as training programs for its employees; controls over data copying; and other policies and restrictions. But they were not sufficient to restrict its employees' access to customer data to only that data the individual employees legitimately needed.

Unlawful and Lawful "Use" of a Trade Secret: Case; P and D entered an NDA and D decided to back out and went into the business themselves. P couldn't point to specific trade secret but argued they made D smarter about the industry. Court said not unlawful "use" of trade secrets.

Omnitech * This falls under the exception in trade secret enforcement for general improvement of skills and products

One may ________ ________ or discover by independent research. But may not avoid these ___________ by taking the process without his permission

One may reverse engineer or discover by independent research. But may not avoid these labors by taking the process without his permission

A statement that does not present a factual claim, but rather amounts only to an _________, a general claim of superiority, or a boast about a product, will not support a ______ ________ claim. (Papa Johns)

Opinion, False Advertisement

Confidential Info vs. Trade Secret Case: Trade secrets are _________ _____________ that meet the prevailing judicial definition of trade secret. Confidential information: slang catch-all that is ________ and includes things that don't rise to the level of prevailing judicial definition of trade secret but parties agree to treat information as confidential (usually by contract). Trade secret can _________ Confidential information. Confidential information_______ _________ to the level of a trade secret.

Orthofix Trade secrets are quasi property that meet the prevailing judicial definition of trade secret Confidential information: slang catch-all that is broader and includes things that don't rise to the level of prevailing judicial definition of trade secret but parties agree to treat information as confidential (usually by contract). Trade secret can include Confidential information. Confidential information doesn't rise to the level of a trade secret.

Inevitable Disclosure Doctrine: held that a departed employee could be ________ even from taking a job with a close competitor—despite a good faith intent not to use any of his former employer's trade secrets—on the grounds that it was ___________ that he would do so anyway, because it would be impossible for him to do his job _________ it

PepsiCo v. Redmond: held that a departed employee could be prevented even from taking a job with a close competitor—despite a good faith intent not to use any of his former employer's trade secrets—on the grounds that it was inevitable that he would do so anyway, because it would be impossible for him to do his job without it

Duty to Maintain Secrecy: Phillips shows Frey the business of how to make deer stands so he could evaluate the business as he was considering purchasing it. The tree stand itself isn't confidential since you can buy it and reverse engineer it. How he makes it is confidential. Here, no NDA but the nature of the relationship created the existence of a confidential relationship. Reasonably clear to a jury that Phillips had communicated to him—I'm taking you somewhere secret that the public doesn't see—Frey knew or should have known that the information was a trade secret and the disclosure was made in confidence.

Philips v. Frey Texas Supreme court has held that an express agreement is not necessary where the actions of parties and the nature of their relationship, taken as a whole, established the existence of a confidential relationship.

How much is reasonable? Reasonable precaution is ___________

Proportional * Perfect security is a myth, it's not practical and not cost effective. This is why a proportionality test is required to determine if reasonable steps to protect the trade secret is enough.

You may use a ________ ________ when Both sides want some mechanism by which you can have orderly litigation with reasonable assurance that what you're exchanging is only going to be used in the course of this litigation

Protective Order * You don't have to have one, parties can negotiate whatever terms they want in it. Hosch hasn't seen a court mess with a protective order when both parties agreed

The main difference between Uniform Trade Secret vs. Texas Restatement is the approach. Restatement looks at ____________________ between owner and to home the secret was entrusted. What matters is ________ you get the secret.

Restatement looks at relationship between owner and to whom the secret was entrusted, the way someone would acquire the secret (proper or improper). What matters is how you get the secret. Uniform Trade Secrets Act focus on the trade secret as a form of property, what kind of injunction the owner is entitled to.

TUTSA Definition: _____ _________ the process of studying, analyzing, or __________ a product or device to discover its design, structure, construction, or source code provided that the product or device was acquired ___________ or from a person having the legal right to convey it.

Reverse Engineering: the process of studying, analyzing, or disassembling a product or device to discover its design, structure, construction, or source code provided that the product or device was acquired lawfully or from a person having the legal right to convey it.

Case: In this case, P took precautions to protect the drawings. P kept the drawings in a vault and required employees and outside vendors to sign confidentiality agreements. At the same time, Rockwell allowed unrestricted copying of the drawings and provided the drawings to numerous outside vendors. On balance, a jury might conclude that P's policy was reasonable based on the costs and benefits of secrecy. To be more restrictive and have higher level of security would have cost more than it was worth. "perfect security is not necessarily optimum security" and you have to strike the balance. (balance time and money v. optimum security)

Rockwell Case * The finder of fact must consider the costs and benefits of maintaining different levels of secrecy. Maintaining total secrecy is costly, and the maximum secrecy will not always be worth the cost.

Case: (unusual compilations of known information can be trade secrets): departing employee case. Took customer list and pricing information. Compilation of all the information was the secret, not one single thing. The court nevertheless enjoined Rugen from calling on former clients from his employment with Interactive, holding that compilations of information which have a substantial element of secrecy and provide an employer with an opportunity to obtain an _________ over ______________ may constitute trade secrets which a former employee may be obligated to continue honoring even after she leaves with the purpose of competing against it.

Rugen * holding that compilations of information which have a substantial element of secrecy and provide an employer with an opportunity to obtain an advantage over competitors may constitute trade secrets which a former employee may be obligated to continue honoring even after she leaves with the purpose of competing against it.

________ suit is a frivolous lawsuit aimed at silencing "citizens who are participating in the free exchange of ideas." Aim is to bury individuals (like journalists) from pointing out people's wrongs by burying them in a costly lawsuit. Ex: Ex—P would have to show prima facie evidence all elements that D commercially disparaged P. If P doesn't successfully do that, then suit will be dismissed and the act says the petitioner (usually D) shall be awarded attorney fees.

SLAPP Suits Procedural statute that allows the D in a case to challenge P immediately upon filing of suit, within first 60 days, and require P to show discovery, if the subject matter of lawsuit falls within the subject matter provisions of the anti-SLAPP act.

Case: departing employee case with different result. The identities of the clients were not confidential—many of the identities were known by all other employees, also widely known outside the business and could be easily and properly acquired by others. Not trade secret.

Sands v. Estate of Buys * Information was publicly available, different compared to Rugen Case

If you want to bring commercial disparagement case, have to show ______ __________ (Gulf Atlantic Case)

Special Damages In this case: No evidence was offered of damages resulting from loss of business expected from any particular customer or prospective customer to whom disparaging statements were made by defendants. The damages alleged and proved resulted only indirectly from the disparaging statements alleged, and more immediately from the receivership, the orders revoking their licenses, and their prosecution for misappropriation of insurance premiums.

In this case, Papa John's challenged statement is "Better Ingredients. Better Pizza." These phrases, both independently and in combination, do not amount to a ________ __ _________ that is able to be established as true or false through evidence. Rather, Papa John's statement is merely an exaggerated _________ of the superiority of its own product amounting only to puffery. Papa John's slogan is therefore non-actionable as the basis for a Lanham Act false-advertising claim.

Statement of fact, opinion

Is there a cause of acton for tortious interference with this contract? Sterner was a worker, sick, court concluded that he was sick, Sterner wins. 9 months later, working for another construction outfit. Walks into Marathon and starts working. As he's going in, he walks right by the guy at Marathon who testified against him saying in the first case that he wasn't sick. So Marathon goes to see the construction company head and says get rid of this guy Construction company head fires him. Sterner sues Marathon for tortious interference. Marathon says Sterner said he was disabled, but that was 5 years ago. Clear that the directive was that Sterner was not fired for cause or inability to work..

Sterner v. Marathon Held: Cause of action exists for tortious interference with a contract of employment terminable at will

Duty to Maintain Secrecy: P claims D stole P's customer identity, design information, pricing information etc. D say they only took general information and skills. P claims the specific means of upgrading were not common knowledge and they had learned which components worked and which don't. court held that the specific method of upgrading the Vipers was NOT common knowledge. P had figured out which were the good vendors and the bad ones. He also had taken a lot of reasonable precautions: Old abandoned Airplane Hanger where not many people see.

TNT Motor Sports: Classic fact pattern shifting between general skills information and knowledge and trade secrets. Illustrates the principle that the single most important thing about protecting trade secrets is articulating to yourself what they are—then the proper reasonable precautions will suggest themselves

Both TX and federal TS Acts have provisions for injunctions: TX 134A.003(1) Injunction Shall be terminated when the trade secret becomes public—but it does say it may be __________ for whatever time it takes to take away the head start that the D got by misappropriating in the first place because they didn't have to go through R&D * Punitive statute: incentivize people not to take chance on stealing * also permits affirmative injunction

TX 134A.003(1) Shall be terminated when the trade secret becomes public—but it does say it may be continued for whatever time it takes to take away the head start that the D got by misappropriating in the first place because they didn't have to go through R&D

In determining whether an actor's conduct in intentionally interfering with a contract or perspective contractual relation is improper, give consideration to the following factors: Wrongful was defined by the courts. Could be taken two ways: 1. Obvious, criminal, violence, trespassing 2. Balancing Test The nature of the actor's conduct The actors motive (intent = was it malicious?) The interests of the other with which the actor's conduct interferes The interests sought to be advanced by the actor The social interests in protecting the freedom of action of the actor and the contractual interests of the other The proximity or remoteness of the actor's conduct to the interference (distance between the act and harm) The relations between the parties

Test was criticized for being to vague

Defamation or Disparagement? Tex smith had a ukulelee act. Godfrey saw it and said on TV that to sell Smith's ukulele was bad and should be illegal. the defendant's claim that "to sell [plaintiff's] instrument as a ukulele might not be contrary to law but people who did it should be jailed" was defamation or disparagement?

Tex Smith, The Harmonica Man, Inc. v. Godfrey held to actionable as a personal defamation but Here it could go either way. Because he was trashing a product, but also taking a direct swing at the guy who put that on the market by saying "ought to be in jail"

Common Issue: what is a K that is subject to interference and what constitutes an interference as term defined in the law? Case: Facts: P and D both want to buy Getty. Getty and Pennzoil reached a handshake agreement on $100 per share. Texaco found out and offered Getty $110 per share. Getty agreed and Texaco indemnified Getty from Pennzoil. P sued D in Texas state court. Held: Jury agreed with P and said there was a contract.

Texaco v. Pennzoil Best argument for Texaco: huge oil deals don't finish until closing because it's a very complicated deal, a lot has to happen between press release and closing for the K. Best argument for Pennzoil: In Houston, not NY. An oral agreement with a handshake agreement is binding and issue press releases to signify a deal has been made in Texas.

Duty to Maintain Secrecy: Texas is ____ _______ state. You _____ ________ with former employee—use general skills, knowledge, and general information about the industry. But can't use or disclose former employer's confidential/proprietary info or trade secrets.

Texas is at will state. You can compete with former employee

Element 2 of Tortious Interference: Intentional Act of Interference Third party must ______ they ______ a breach. Ex of no inducement: Becoming the beneficiary of someone else's breach without knowing it was going to happen doesn't mean you induced it which means no liability.

Third party must KNOW they INDUCED a breach

Texas anti-SLAPP To challenge a lawsuit under Texas Anti-SLAPP Act, a petitioner must show that the opposing party's claim is based on the petitioner's ___________ in connection with his rights of _________ with others (promoting interest of common concern), _____ _________ (related to matters of public concern), or _________ (typically to government bodies).

To challenge a lawsuit under Texas Anti-SLAPP Act, a petitioner must show that the opposing party's claim is based on the petitioner's "communications" in connection with his rights of association with others (promoting interest of common concern), free speech (related to matters of public concern), or petition (typically to government bodies). Once D shows by preponderance of the evidence that the suit is in response to protected rights, the burden shifts and the P/respondent's burden to show by clear and specific evidence (higher burden) that it has a prima facie case for every element of its cause of action.

Defamation Hypo: call someone a thief. They are presumed not to be a thief in a defamation suit. What about calling someone a crook?

What about calling someone a crook? If you're imputing a crime, that's defamatory. If it's a general term, not defamatory. Have to determine from circumstances what it means.

Issues: what is a K that is subject to interference and what constitutes an interference as term defined in the law? Gold Bond had contract with 8 supermarkets in El Paso—supermarkets pay Gold Bond and Gold Bond gives advertising. Top Value (Gold Bond's competitor) heard about friction between stores and GB, offered better deal. GB matched, Top Value doubled. Tortious interference?

Top Value Case Tortious interference? Yes. Why? There was an existing contract. Top Value induced them to breach their K in order to get the business for itself. Also they knew there was a contract between GB and the supermarket because they hired one of GB's employees.

an intentional tort in which the defendant improperly induced a third party to breach a contract with the plaintiff

Tortious Interference

False advertising Hypo: "It's pure, pasteurized juice as it comes from the orange....It's the only leading brand not made with concentrate and water."

True or false? Pasteurized as it comes from the orange? Doesn't make sense. And he's drinking out of a orange. Visual is more powerful than the words. Held false.

______ Libel Statute: Person is liable if the person 1. disseminates in any manner information relating to a perishable food product to the public; 2. he person knows the information is false; and 3. the information states or implies that the perishable food product is not safe for consumption by the public.

Veggie Libel Statute

Tortious interference with a contract Occurs when a defendant deliberately harms a contractual relationship between two other parties Ex: Southwestern Bell builds a ditch in front of where you buy groceries. The store will run out of business. Does this count as tortious interference?

Yes SWB is interfering with ability for people to get to the store. BUT IS IT TORTIOUS? This is the arguable part.

Is this an actionable tortious interference? An automobile liability insurance company offers to settle with a plaintiff IF the plaintiff fires his lawyer.

Yes. Held to be because not justified. Why not? It's an interference. If we let this happen—lawyers won't take contingency fee K. There will be pay as you go K. Grand scheme effectively closes the door to justice to most of the public. Ultimately, you don't have to overthink this one to hold it unprivileged.

Restatement 2d TI with Prospective Contract defines an actionable interference with prospective economic relations as an interference that is both intentional and_________ (__________)

defines an actionable interference with prospective economic relations as an interference that is both intentional and improper (WRONGFUL). In determining whether an actor's conduct in intentionally interfering with a contract or perspective contractual relation is improper, give consideration to the following factors:

What constitutes improper means? TUTSA Definition: includes theft, bribery, ____________ breach or inducement of a breach of a duty to maintain secrecy, to limit use, or to prohibit ___________ of a trade secret, or espionage through electronic or other means.

includes theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, to limit use, or to prohibit discovery of a trade secret, or espionage through electronic or other means.