News & Updates: Ideas Are Protectable As Trade Secrets

In Silvaco Data systems v. Intel Corp., 184 Cal. App. 4th 210 (2010), the Court of Appeals described the difference between a patent and a trade secret as follows:

The sine qua non of a trade secret … is the plaintiff’s possession of information of a type that can, at the possessor’s option, be made known to others, or withheld from them, i.e., kept secret. This is the fundamental difference between a trade secret and a patent. A patent protects an idea, i.e., an invention, against appropriation by others. Trade secret law does not protect ideas as such. Indeed a trade secret may consist of something we would not ordinarily consider an idea (a conceptual datum) at all, but more a fact (an empirical datum), such as a customer’s preferences, or the location of a mineral deposit. In either case, the trade secret is not the idea or fact itself, but information tending to communicate (disclose) the idea or fact to another. Trade secret law, in short, protects only the right to control the dissemination of information.

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Seizing on the sentence, “[t]rade secret law does not protect ideas as such,” the losing defendant in Altavion v. Konica Minolta Systems Laboratory Inc., ___ Cal. App. 4th ____ (2014), argued that design concepts – i.e., the ideas – underlying the plaintiff’s digital stamping technology was not protectable as a trade secret.

The Court of Appeal in Altavion soundly rejected the defendant’s arguments, and upheld the trial court’s finding of misappropriation. Trade secret law protects “information.” Civ. Code § 3426.1(d). Unlike patentable ideas, which must be novel, useful and new, “a trade secret in the broad sense consists of any unpatented idea which may be used for industrial and commercial purposes.” Sinclair v. Aquarius Electronics, Inc., 42 Cal. App. 3d 216, 222 (1974) (citation omitted). In other words, whether an idea is patentable or not is irrelevant; the key is whether the idea itself has been kept secret.

The evidence at trial in Altavion was that the trade secrets at issue were not disclosed to anyone other than the defendant, and that the disclosure to the defendant was subject to an NDA. Not only did the plaintiff testify that he knew of no other similar technology at the time his company made a significant investment to develop it, but the Court of Appeal found that the trial court could reasonably infer that the trade secrets were not generally known from the fact that the defendant obtained patents based on the technology.

Altavion confirms the critical importance of the plaintiff’s ability to demonstrate that the trade secret was not generally known and that the plaintiff took reasonable steps to maintain its secrecy. Carefully employed, trade secret laws can be an important tool for protecting commercially valuable information and should not be overlooked.[/accordion_panel] [/accordion]