WEBVTT 00:00:00.166 --> 00:00:04.087 How can a startup or any other company really think through its choices 00:00:04.087 --> 00:00:06.589 of which of its IP deserve patent protection, 00:00:06.589 --> 00:00:08.383 and which should be protected by trade secret? 00:00:08.383 --> 00:00:10.760 Whenever someone thinks about IP, 00:00:10.760 --> 00:00:13.513 they just start thinking about patents to the exclusion of trade secrets. 00:00:13.513 --> 00:00:16.474 What about when startups are trying 00:00:16.474 --> 00:00:19.477 to get their technology out there for investment? 00:00:19.477 --> 00:00:23.481 One of the things that startups really need to do is get their information 00:00:23.648 --> 00:00:28.153 out there in a way that is appropriate for the investment and limited. 00:00:28.236 --> 00:00:31.740 Obviously, an important tool in this process is NDAs. 00:00:39.914 --> 00:00:42.709 Hi, welcome to the Latham Tech Podcast, 00:00:42.709 --> 00:00:46.337 where we survey the latest trends emerging from the world of tech 00:00:46.588 --> 00:00:51.176 and explore their impacts on your company, both the opportunities and the risks. 00:00:51.593 --> 00:00:54.929 I'm Tony Sammi, Global Vice Chair of Latham's Technology Industry 00:00:54.929 --> 00:00:57.932 Group, and joining me today is my colleague Rachel Blitzer, 00:00:58.224 --> 00:01:02.896 who represents clients in high stakes trade secret patent and antitrust cases. 00:01:03.146 --> 00:01:05.065 Welcome, Rachel. Thanks for having me. 00:01:06.316 --> 00:01:06.733 In this 00:01:06.733 --> 00:01:10.570 episode, we'll be talking about how high tech companies can navigate 00:01:10.570 --> 00:01:14.157 an increasingly complex trade secrets litigation landscape. 00:01:14.741 --> 00:01:17.410 So, Rachel, 00:01:17.410 --> 00:01:21.748 trade secrets have now increasingly become the battleground in US 00:01:21.748 --> 00:01:24.876 courts when it comes to AI, chips, 00:01:25.210 --> 00:01:27.879 pharmaceuticals, life sciences. 00:01:27.879 --> 00:01:30.131 What's driving that trend? 00:01:30.131 --> 00:01:35.095 So when we look at today's global economy, a large percentage of company 00:01:35.095 --> 00:01:38.681 value is tied up in its intangible technology assets. 00:01:39.432 --> 00:01:42.685 Some of those assets are protectable through other types of IP 00:01:42.685 --> 00:01:45.814 protections, like patents and copyrights. 00:01:46.189 --> 00:01:49.776 But I would say the vast majority of them are best protected 00:01:49.776 --> 00:01:52.570 and maybe only protected by trade secret. 00:01:52.570 --> 00:01:57.826 So to that end, we're seeing company value and protection of company value, 00:01:57.826 --> 00:02:02.288 and increase of company value play out in trade secret lawsuits. 00:02:02.747 --> 00:02:05.875 On top of that, there are opportunities for huge damages 00:02:05.875 --> 00:02:08.586 verdicts and people have taken notice of that. 00:02:08.586 --> 00:02:10.421 And we've seen a few of those, right? 00:02:10.421 --> 00:02:11.214 Yeah, we've seen 00:02:11.214 --> 00:02:15.009 them up in the hundreds of millions and up into the multi-billion dollar. 00:02:15.218 --> 00:02:19.305 Now, some of those huge verdicts that we're talking about have on appeal 00:02:19.305 --> 00:02:23.434 or post-trial motions, been reduced in a lot of those fights are continuing 00:02:23.434 --> 00:02:24.853 to play out years later. 00:02:24.853 --> 00:02:28.940 But the fact remains, there is a huge opportunity in trade secret litigation 00:02:29.107 --> 00:02:30.984 for really large verdicts. 00:02:30.984 --> 00:02:34.112 But, Tony, these disputes are not just happening in the U.S.. 00:02:34.154 --> 00:02:37.115 We're seeing lots of cross-border disputes given the amount 00:02:37.115 --> 00:02:40.118 of employee mobility there is from country to country. 00:02:40.201 --> 00:02:43.121 These days, I'm sure you've been seeing that in your practice. 00:02:43.121 --> 00:02:44.706 I have, and that's a great question. Right. 00:02:44.706 --> 00:02:46.708 So the corollary to U.S. 00:02:46.708 --> 00:02:52.547 litigation is how do trade secrets work extra territorially around the world. 00:02:52.547 --> 00:02:52.755 Right. 00:02:52.755 --> 00:02:53.506 And why is it 00:02:53.506 --> 00:02:57.093 why is it a good mechanism to protect your company's intellectual property? 00:02:57.427 --> 00:03:00.805 Let's answer that question by comparing it to patents traditionally. 00:03:00.889 --> 00:03:01.097 Right. 00:03:01.097 --> 00:03:03.892 So when you get a patent what's the quid pro quo? 00:03:03.892 --> 00:03:04.475 What's the deal. 00:03:04.475 --> 00:03:07.145 You strike in whatever jurisdiction you get the patent. 00:03:07.145 --> 00:03:10.148 Number one, you tell the world what your invention is. 00:03:10.148 --> 00:03:11.649 So the cat's out of the bag. 00:03:11.649 --> 00:03:15.445 And then if you want to enforce it, you have to rely upon the courts 00:03:15.695 --> 00:03:17.030 where that patent was issued. 00:03:17.030 --> 00:03:19.824 The enforcement mechanisms in the country you're in. Right. 00:03:19.824 --> 00:03:22.702 So that can often be a bit of a gamble, right. 00:03:22.702 --> 00:03:26.623 If you're in a country doing business, a country that has a robust court system, 00:03:26.623 --> 00:03:27.707 for example, right. 00:03:27.707 --> 00:03:30.043 You may be able to rely upon that enforcement mechanism. 00:03:30.043 --> 00:03:31.961 But suppose you're doing business in countries 00:03:31.961 --> 00:03:35.548 that don't have as robust a court system to enforce your patents. 00:03:35.715 --> 00:03:36.674 It's a bit of a quandary 00:03:36.674 --> 00:03:39.636 because you've already told the world what your invention is. 00:03:39.719 --> 00:03:42.347 Now let's compare that to trade secrets. 00:03:42.347 --> 00:03:45.433 So you're a company and you're operating cross-border, 00:03:45.600 --> 00:03:47.685 and you might use trade secrets in the following way. 00:03:47.685 --> 00:03:48.519 You say, well, you know what? 00:03:48.519 --> 00:03:51.981 I'm not going to tell the world what my secret sauce is. 00:03:51.981 --> 00:03:55.109 I'm not going to get a patent for it, however. 00:03:55.568 --> 00:03:55.985 Right. 00:03:55.985 --> 00:03:58.029 I'm going to be able to protect my information 00:03:58.029 --> 00:04:01.241 by keeping it secret without an expiration date. 00:04:01.241 --> 00:04:03.117 And to the extent that fit to enforce it, 00:04:03.117 --> 00:04:05.495 I will, but I'll hope not to get to that point 00:04:05.495 --> 00:04:07.580 because I won't reveal it in the first place. Right. 00:04:07.580 --> 00:04:10.583 You may not even need to use the court system in that country. 00:04:10.875 --> 00:04:13.836 But we're even seeing those issues play out in cases today. 00:04:13.920 --> 00:04:14.587 We are. 00:04:14.587 --> 00:04:19.300 Now Rach, let me ask you this, trade secrets can be the recipe 00:04:19.300 --> 00:04:20.593 for a company secret sauce 00:04:20.593 --> 00:04:23.721 of a lot of value, obviously, but they can also be a blind spot. 00:04:23.763 --> 00:04:28.059 What are the risks pitfalls that or blind spots that startups face 00:04:28.059 --> 00:04:29.227 when they think of trade secrets? 00:04:29.227 --> 00:04:30.311 Or they don't think of trade secrets. 00:04:30.311 --> 00:04:32.647 Right, well, great, great way to put it. 00:04:32.647 --> 00:04:37.151 So one of the real pitfalls that we see for startup companies 00:04:37.151 --> 00:04:40.154 these days is simply not recognizing what it is that they have. 00:04:40.196 --> 00:04:42.365 Startup companies are moving fast, 00:04:42.365 --> 00:04:45.368 and they're often doing it with a very lean team. 00:04:45.702 --> 00:04:48.621 And while they have so many issues to juggle, 00:04:48.621 --> 00:04:51.791 sometimes IP or thinking about IP goes on the back burner, 00:04:52.000 --> 00:04:56.379 or even when they're thinking about IP, sometimes they're thinking about the types 00:04:56.379 --> 00:05:00.800 of IP that require formal registrations, like patents or trademarks, 00:05:01.676 --> 00:05:04.637 but they're developing trade secrets all the time, especially 00:05:04.637 --> 00:05:05.847 in high tech industries. 00:05:05.847 --> 00:05:07.390 They're constantly developing 00:05:07.390 --> 00:05:10.393 trade secrets as they develop cutting edge technology. 00:05:10.935 --> 00:05:14.522 But the mistake that they make is not recognizing what they have 00:05:14.522 --> 00:05:18.151 and doing what they need to do to keep those trade secrets a trade secret. 00:05:18.568 --> 00:05:19.360 Under the law, 00:05:19.360 --> 00:05:23.323 a trade secret is only a trade secret if it's protected by reasonable measures. 00:05:23.698 --> 00:05:28.119 So startup companies, one thing that they sometimes forget to do 00:05:28.286 --> 00:05:31.539 is pause to think, how do we actually protect 00:05:31.539 --> 00:05:34.542 all of this wonderful information that we're generating 00:05:34.584 --> 00:05:38.254 to make sure that what is a trade secret stays a trade secret? 00:05:39.464 --> 00:05:41.007 Another pitfall for a startup 00:05:41.007 --> 00:05:44.886 can be not taking the time to document what it is they're doing. 00:05:45.136 --> 00:05:48.639 Like I said, startups are moving fast and we want them moving fast. 00:05:48.639 --> 00:05:51.434 That's how they're achieving such great success. 00:05:51.434 --> 00:05:55.813 But if they haven't documented how it is that they got from point A to point B 00:05:55.938 --> 00:05:58.858 in a later litigation, they might have trouble proving that 00:05:58.858 --> 00:06:02.195 this technology that they're using is actually their own. 00:06:02.445 --> 00:06:06.032 So it would behoove startup companies to retain some documentation 00:06:06.032 --> 00:06:08.368 of how it is that they develop their technology. 00:06:08.368 --> 00:06:10.495 I mean, I think those those are great points. 00:06:10.495 --> 00:06:13.081 I mean, number one, I think in common parlance, 00:06:13.081 --> 00:06:16.626 whenever someone thinks about IP, they just start thinking about patents 00:06:16.626 --> 00:06:19.587 to the exclusion of trade secrets, which is your point. Absolutley. 00:06:19.587 --> 00:06:23.466 On your second point was a really good one, what about when startups 00:06:24.050 --> 00:06:28.096 are trying to get their technology out there for investment. 00:06:28.179 --> 00:06:28.388 Right? 00:06:28.388 --> 00:06:31.599 I mean, how does that impact their ability to protect their trade secrets? 00:06:31.724 --> 00:06:32.934 Absolutely. 00:06:32.934 --> 00:06:36.020 So look, one of the things that we're trying to balance in this whole equation 00:06:36.020 --> 00:06:38.815 is balancing business interests with legal interests. 00:06:38.815 --> 00:06:41.234 You and I are thinking from the legal perspective, 00:06:41.234 --> 00:06:43.403 but these decisions need to marry both 00:06:43.403 --> 00:06:46.406 the business concerns with the legal concerns. 00:06:46.406 --> 00:06:47.949 In the investment scenario, 00:06:47.949 --> 00:06:52.036 one of the things that startups really need to do is get their information 00:06:52.036 --> 00:06:56.582 out there in a way that is appropriate for the investment and limited. 00:06:56.916 --> 00:07:00.461 Obviously, an important tool in this process is NDAs. 00:07:00.837 --> 00:07:02.463 Yeah, absolutely. 00:07:02.463 --> 00:07:03.923 And I've seen instances 00:07:03.923 --> 00:07:08.136 and I think you have as well, both of us have, where startups are so eager 00:07:08.136 --> 00:07:11.431 for investment dollars that they might write a white paper and disclose 00:07:12.014 --> 00:07:14.559 some really, you know, secret information that they 00:07:14.559 --> 00:07:17.228 then later can't capture anymore as a trade secret. 00:07:17.228 --> 00:07:18.938 You've seen that? Absolutely. 00:07:18.938 --> 00:07:20.273 And in some of the industries 00:07:20.273 --> 00:07:23.276 in which we work, especially and for example, software, 00:07:23.526 --> 00:07:26.654 it's even part of the culture to share what you know. 00:07:26.988 --> 00:07:29.949 But that becomes a problem when you later want to characterize 00:07:29.949 --> 00:07:31.534 something as a trade secret. 00:07:31.534 --> 00:07:35.079 So these decisions need to be carefully balanced. 00:07:35.204 --> 00:07:36.706 A white paper might be really helpful 00:07:36.706 --> 00:07:40.293 in getting investment and a big problem in a trade secret litigation. 00:07:40.543 --> 00:07:43.379 And it behooves startups to take a moment to pause 00:07:43.379 --> 00:07:46.048 and think which of these priorities is more important to me? 00:07:46.048 --> 00:07:50.678 It may be that the White Paper is the path to success for this startup, 00:07:50.678 --> 00:07:54.474 and it's worth taking that risk and worth maybe sacrificing a trade secret, 00:07:54.474 --> 00:07:57.477 but those decisions need to be made intentionally. 00:07:57.477 --> 00:07:59.645 Your point about NDAs is a really good one, too. 00:07:59.645 --> 00:08:01.063 Let's talk about that for a minute. Sure. 00:08:01.063 --> 00:08:03.941 How important are those NDAs for those startups? 00:08:03.941 --> 00:08:05.401 They are so important. 00:08:05.401 --> 00:08:09.697 And, you know, one of the things that we see way too much is incredibly 00:08:09.697 --> 00:08:13.701 sophisticated startup companies who are developing cutting edge technology 00:08:14.243 --> 00:08:17.622 using form NDAs, or in the days they grabbed off the internet, 00:08:17.622 --> 00:08:20.583 or that some collaborator went suggested to them. 00:08:20.583 --> 00:08:24.545 One of the best tools for a startup is a bespoke NDA, 00:08:24.670 --> 00:08:27.757 something that is tailored to the type of trade secrets 00:08:27.757 --> 00:08:30.551 they have, the type of confidentiality that's needed, 00:08:30.551 --> 00:08:34.180 and the types of protections that are needed for their specific information. 00:08:34.263 --> 00:08:37.850 Yeah, and I would add that that's in my view, I think you might agree 00:08:38.142 --> 00:08:42.772 that a little work ahead of time on those NDAs can pay big dividends later on. 00:08:42.772 --> 00:08:43.064 Yeah. 00:08:43.064 --> 00:08:46.359 This doesn't need to be a huge investment or a time or money. 00:08:46.484 --> 00:08:50.446 It just requires which again, is hard in a fast paced environment, 00:08:50.446 --> 00:08:54.033 but it just requires that moment of stopping and assessing where we are 00:08:54.325 --> 00:08:57.870 and taking some steps towards protection, that, again, 00:08:57.870 --> 00:08:59.997 needs to be tailored not to slow down your business. 00:08:59.997 --> 00:09:00.957 Absolutely. 00:09:00.957 --> 00:09:04.085 So we've talked already about both patents and trade secrets 00:09:04.085 --> 00:09:07.421 because they both come up a lot in the technology space. 00:09:07.838 --> 00:09:11.842 How can a startup or any other company really think through its choices 00:09:11.842 --> 00:09:14.345 of which of its IP deserve patent protection, 00:09:14.345 --> 00:09:16.430 and which should be protected by trade secret? 00:09:16.430 --> 00:09:17.807 So great question. Right. 00:09:17.807 --> 00:09:20.101 So let's let's really go back a little bit, 00:09:20.101 --> 00:09:21.060 without giving a 00:09:21.060 --> 00:09:23.479 sort of a dissertation on the law, let's just talk at a high level. 00:09:23.479 --> 00:09:26.315 What's really the fundamental difference between patents and trade secrets. 00:09:26.315 --> 00:09:26.983 Right. 00:09:26.983 --> 00:09:30.403 So patents are in the US Constitution, right? 00:09:30.444 --> 00:09:32.280 They're a monopoly that you get 00:09:32.280 --> 00:09:36.033 as a patent holder to exclude others from doing something right. 00:09:36.033 --> 00:09:37.702 And that something is your invention. 00:09:37.702 --> 00:09:41.956 And but you've got to meet a lot of, requirements before you get a patent. 00:09:41.956 --> 00:09:44.500 And you have to apply for a patent from the US government, 00:09:44.500 --> 00:09:47.295 and the government has to review your application. 00:09:47.295 --> 00:09:47.837 Right. 00:09:47.837 --> 00:09:49.380 And you have to prove 00:09:49.380 --> 00:09:53.050 that your invention is novel, not obvious, a whole host of things. 00:09:53.050 --> 00:09:55.011 And then you may be issued a patent. 00:09:55.011 --> 00:09:56.137 Okay. That's great. Right. 00:09:56.137 --> 00:10:00.683 But that patent has an expiration date roughly 20 years to today. 00:10:01.183 --> 00:10:05.396 But the quid pro quo again, the important part about patents 00:10:05.396 --> 00:10:08.316 is you need to tell the world what your invention is. 00:10:08.316 --> 00:10:10.151 So it's out of the bag, right? 00:10:10.151 --> 00:10:13.154 Now let's contrast that with trade secrets, okay. 00:10:13.487 --> 00:10:14.280 Trade secrets. 00:10:14.280 --> 00:10:18.576 There is no governing body that you apply for a trade secret from, right? 00:10:18.576 --> 00:10:20.202 You don't submit an application to the U.S. 00:10:20.202 --> 00:10:22.622 government and say, I want to trade secret. 00:10:22.622 --> 00:10:24.290 You have a trade secret. 00:10:24.290 --> 00:10:27.835 If you've got information that you keep secret 00:10:27.835 --> 00:10:31.756 with reasonable measures, that gives you an advantage in trade, right? 00:10:31.756 --> 00:10:36.719 And has value by virtue of the fact that your competitors don't know it. 00:10:36.969 --> 00:10:38.596 Now what can that be? 00:10:38.596 --> 00:10:40.097 Almost anything. Right. 00:10:40.097 --> 00:10:43.434 As long as you meet those requirements internally of you protect it 00:10:43.601 --> 00:10:46.062 and it gives you an advantage because it has value. 00:10:46.062 --> 00:10:49.190 Trade secrets, for example, can cover things like a business 00:10:49.190 --> 00:10:52.276 development environment, negative trade secrets. 00:10:52.276 --> 00:10:55.905 So let's say you're a startup and you're thinking of a way to solve a problem. 00:10:56.197 --> 00:11:01.327 And you go down three blind alleys and you spend a lot of money and resources. 00:11:01.327 --> 00:11:04.455 Then you find out that those three alleys are dead ends. 00:11:04.497 --> 00:11:05.206 Yup. Right. 00:11:05.206 --> 00:11:08.084 That's valuable information to your competitors. 00:11:08.084 --> 00:11:09.335 That's a negative trade secret. 00:11:09.335 --> 00:11:11.754 You can have that. So long as you keep that secret. 00:11:11.754 --> 00:11:14.507 Someone can't steal that from you. And you can have a trade secret. 00:11:14.507 --> 00:11:17.510 So trade secrets in some, right? 00:11:17.551 --> 00:11:20.805 Protect a broader range of information than patents 00:11:21.097 --> 00:11:24.433 don't have an expiration date, can continue indefinitely, 00:11:24.725 --> 00:11:28.270 and are very more flexible and more planet friendly when you have to enforce. 00:11:29.271 --> 00:11:32.441 So let's say you have a client, you pick up the phone, a client is asking 00:11:32.441 --> 00:11:36.070 you, look, we've just developed some incredible technology. 00:11:36.070 --> 00:11:37.029 What should we do with this? 00:11:37.029 --> 00:11:39.782 Should we get a patent or should we keep it a secret? 00:11:39.782 --> 00:11:41.534 So great question. 00:11:41.534 --> 00:11:44.203 Right. Again, what do we say? What do we how do we counsel that client? 00:11:44.203 --> 00:11:47.707 I would say things like, you start a conversation, you say, what is it 00:11:48.791 --> 00:11:51.794 that you're doing that is different than everyone else? 00:11:51.794 --> 00:11:53.462 And here's the example, right. 00:11:53.462 --> 00:11:57.383 Clients often make the mistake of thinking that the that 00:11:57.425 --> 00:12:00.970 everything that you're doing might not be that rise so level the trade secret. 00:12:00.970 --> 00:12:03.222 And that's a classic mistake, right. 00:12:03.222 --> 00:12:07.601 Because I asked clients this way, I'd say, okay, would you let a competitor 00:12:07.601 --> 00:12:08.644 come into your premises 00:12:08.644 --> 00:12:11.647 or log onto your computer systems and just take a look at what you're doing? 00:12:12.148 --> 00:12:14.316 Guessing the answer's no. Answer is always no. 00:12:14.316 --> 00:12:15.568 Why would you do that? Right? 00:12:15.568 --> 00:12:18.821 If you won't let a competitor come in and log into your systems 00:12:18.821 --> 00:12:21.407 or come to your offices and just walk around without, 00:12:21.407 --> 00:12:25.119 any oversight, that means you're you've got secrets. 00:12:25.202 --> 00:12:26.996 That means you've got secrets that are valuable. 00:12:26.996 --> 00:12:32.042 That means you've got a way of doing something that is protectable, right, 00:12:32.042 --> 00:12:33.544 and that you don't want your competitors to have. 00:12:33.544 --> 00:12:36.464 So let's start by taking stock with our clients. 00:12:36.464 --> 00:12:41.427 Tell me what it is that you do that separates you from your competitors 00:12:41.677 --> 00:12:42.887 and that they don't know about. 00:12:42.887 --> 00:12:44.847 And let's start there and we'll catalog it. 00:12:44.847 --> 00:12:46.766 And then if we come across things 00:12:46.766 --> 00:12:50.019 that are patent eligible, we can do that as well, right? 00:12:50.019 --> 00:12:54.148 If we come across things like source code, which are can be trade secrets 00:12:54.148 --> 00:12:58.569 and be eligible for copyright protection, we can do both things like that. 00:12:59.528 --> 00:13:01.655 So let's say you and your client have decided 00:13:01.655 --> 00:13:05.367 that a certain innovation is within the trade secret protection world. 00:13:05.618 --> 00:13:08.746 What questions are you asking to that client to help them figure out 00:13:08.746 --> 00:13:11.999 what the best strategy is for that client to protect their trade secrets? 00:13:12.041 --> 00:13:13.042 Sure. 00:13:13.042 --> 00:13:17.004 We'll first take a look internally as to how they treat that trade secret, 00:13:17.004 --> 00:13:18.130 that information. Right. 00:13:18.130 --> 00:13:20.299 Do they have sufficient protections? 00:13:20.299 --> 00:13:24.220 Do they are they are they allowing only the people who need to have access to it, 00:13:24.345 --> 00:13:27.306 have access to it, not the cleaning staff, but the engineers only. 00:13:27.306 --> 00:13:27.973 Right. 00:13:27.973 --> 00:13:30.476 Are there protections in how they log on? 00:13:30.476 --> 00:13:32.353 And security measures. Right. 00:13:32.353 --> 00:13:35.606 And you mentioned this earlier, NDAs when you're working 00:13:35.606 --> 00:13:37.983 when they're working with vendors or partners. Right. 00:13:37.983 --> 00:13:38.776 Are they making them 00:13:38.776 --> 00:13:42.822 sign NDAs before they divulge what these trade secrets could be? 00:13:42.905 --> 00:13:43.364 Right. 00:13:43.364 --> 00:13:46.659 All that's going to matter when it comes time to enforce your trade secrets. 00:13:46.659 --> 00:13:49.078 So we've got to sort of build a plan with a client. 00:13:49.078 --> 00:13:51.956 And I think it's low hanging fruit. Right? 00:13:51.956 --> 00:13:54.667 I mean, it sounds complicated. We're we're lawyers, we're outside counsel. 00:13:54.667 --> 00:13:56.961 We can say, oh, you should do this. You should do that. 00:13:56.961 --> 00:13:59.588 But at the end of the day, it's a little work on the front end 00:13:59.588 --> 00:14:01.966 that can reap vast rewards on the back end. 00:14:01.966 --> 00:14:03.467 Yeah, absolutely. 00:14:03.467 --> 00:14:07.137 Rachel, we've talked a lot about sort of how to protect a company's 00:14:07.137 --> 00:14:10.140 own trade secrets, how to companies, particularly startups, 00:14:10.599 --> 00:14:14.228 protect themselves from litigation and trade secrets. 00:14:14.728 --> 00:14:17.106 Well, look, it's a great question to be thinking about. 00:14:17.106 --> 00:14:18.440 And one of the things 00:14:18.440 --> 00:14:21.902 that we're really looking to do here is minimize litigation exposure, 00:14:21.902 --> 00:14:27.366 because it can be nearly impossible to avoid litigation entirely. 00:14:27.992 --> 00:14:30.578 But one of the things that startups 00:14:30.578 --> 00:14:34.164 and other companies can think about as they're working with their IP 00:14:34.415 --> 00:14:37.501 is developing formal procedures to protect it. 00:14:37.918 --> 00:14:42.172 Oftentimes, especially, startups don't necessarily see the threat 00:14:42.298 --> 00:14:46.176 coming from other companies as they're developing, as they're going along. 00:14:46.468 --> 00:14:51.765 But activity that happened years ago can all of a sudden rear its head, 00:14:52.099 --> 00:14:53.267 especially when a company see 00:14:53.267 --> 00:14:57.563 some success gets acquired, has a hit product, has an IPO. 00:14:57.605 --> 00:14:59.440 I mean, we've seen that scenario a lot, right? 00:14:59.440 --> 00:15:01.442 It plays out over and over again. 00:15:01.442 --> 00:15:02.526 And when that happens 00:15:02.526 --> 00:15:06.405 we're typically looking at conduct back two, three, five years back. 00:15:06.405 --> 00:15:10.034 That is actually what's being alleged in these cases. 00:15:10.034 --> 00:15:14.079 So what the companies had done earlier on before they ever recognized these threats 00:15:14.288 --> 00:15:15.581 comes into play. 00:15:15.581 --> 00:15:18.667 So what are the things that companies can do in the process 00:15:18.667 --> 00:15:22.922 of developing and sharing its IP to protect itself 00:15:22.922 --> 00:15:26.800 and to think about the IP from others that might be coming in the door? 00:15:26.926 --> 00:15:28.844 Yeah. And before you answer that, right. 00:15:28.844 --> 00:15:30.262 One and one of those scenarios 00:15:30.262 --> 00:15:33.766 that we think about that we face all the time is startups, right? 00:15:33.766 --> 00:15:35.935 People aren't hatched. They had previous jobs. 00:15:35.935 --> 00:15:37.061 Their previous experience. 00:15:37.061 --> 00:15:38.646 They come from other companies. 00:15:38.646 --> 00:15:40.064 Right. Absolutely. 00:15:40.064 --> 00:15:43.984 And a lot of these cases come up in instances of employee movement 00:15:44.068 --> 00:15:46.695 where somebody moved from one company to another 00:15:46.695 --> 00:15:48.906 and maybe they took trade secrets and maybe they didn't. 00:15:48.906 --> 00:15:51.825 But either way, we're in a litigation and we're going to figure it out. 00:15:51.825 --> 00:15:55.245 So some of the things that companies can do to protect themselves are 00:15:55.245 --> 00:15:58.082 we've already talked about NDAs, but there are a lot of other 00:15:58.082 --> 00:16:01.627 formal procedures that companies have that can bear on this. 00:16:01.919 --> 00:16:04.880 Think about their internal policies, their 00:16:04.880 --> 00:16:08.676 IP training, and in particular their onboarding and off boarding. 00:16:08.801 --> 00:16:11.303 Onboarding and off boarding need to be taken so seriously. 00:16:11.303 --> 00:16:14.139 And when we're really talking about the risks to a company of being sued 00:16:14.139 --> 00:16:17.226 by somebody else, we're thinking in particular about onboarding. 00:16:17.434 --> 00:16:21.522 What is the procedure that you're taking to make sure that when you have a new 00:16:21.522 --> 00:16:25.609 hire, that they're not bringing in any information from their prior company? 00:16:26.360 --> 00:16:27.987 Are you doing forensic checks? 00:16:27.987 --> 00:16:29.488 Are you talking clearly with them? 00:16:29.488 --> 00:16:32.408 Are you giving them written policies to look at? 00:16:32.408 --> 00:16:36.620 Are you having them sign a document saying, I did not bring anything 00:16:36.620 --> 00:16:40.749 into this company and signing their name at the bottom of that document? 00:16:41.041 --> 00:16:42.418 Also, think about your culture. 00:16:42.418 --> 00:16:46.755 Are you making it clear to new hires that this is not tolerated 00:16:46.755 --> 00:16:48.507 here, that we do not use other companies 00:16:48.507 --> 00:16:51.510 information, that we do not need other companies information 00:16:51.593 --> 00:16:54.930 or, you know, are you do you use these formal procedures? 00:16:54.930 --> 00:16:59.893 But then there's a wink and a nod and, an indication that that might be okay 00:16:59.893 --> 00:17:00.310 here. 00:17:00.310 --> 00:17:02.730 Companies need to make it really clear to their employees, 00:17:02.730 --> 00:17:05.315 both through formal channels and through their culture, 00:17:05.315 --> 00:17:08.736 that the use of IP from other companies is not appropriate here. 00:17:08.902 --> 00:17:10.529 I think that's exactly right. 00:17:10.529 --> 00:17:13.198 And let me add, I love your take on this. 00:17:13.198 --> 00:17:14.533 It's a two sided coin. Right. 00:17:14.533 --> 00:17:19.246 So on the one hand we say to our clients, you may not realize what is protectable 00:17:19.246 --> 00:17:21.665 by trade secrets, so you should look into it 00:17:21.665 --> 00:17:23.917 so you can maximize the value of your company. 00:17:23.917 --> 00:17:25.044 The other side of that coin is 00:17:25.044 --> 00:17:28.630 you might not realize as an employee who's departed somewhere else, 00:17:28.839 --> 00:17:31.967 what that previous employer might claim as their trade secret, 00:17:32.009 --> 00:17:33.385 because you might think, you know what? 00:17:33.385 --> 00:17:34.928 Oh, everybody knows that. 00:17:34.928 --> 00:17:37.389 Or that's common knowledge, when in fact it's not. 00:17:37.389 --> 00:17:38.057 Absolutely. 00:17:38.057 --> 00:17:39.349 And it's also unfair 00:17:39.349 --> 00:17:41.268 to expect your new hires to know 00:17:41.268 --> 00:17:43.604 the answers to these sophisticated legal questions. 00:17:43.604 --> 00:17:47.232 So that's why you need to work with your in-house counsel and your outside counsel 00:17:47.357 --> 00:17:51.111 to develop strategies to get good onboarding procedures in place, 00:17:51.278 --> 00:17:53.739 so that you can take the right steps to really make sure 00:17:53.739 --> 00:17:56.742 nothing is coming in the door, whether on purpose or innocently. 00:17:56.825 --> 00:17:58.368 Yeah, I mean, I couldn't agree more. 00:17:58.368 --> 00:18:02.581 And I think that in our space, one thing we've come to realize is that there are 00:18:02.581 --> 00:18:06.043 some very, very brilliant and talented people who are doing amazing things, 00:18:06.251 --> 00:18:09.296 and they may have very skewed ideas of what IP really is. 00:18:09.296 --> 00:18:09.671 Absolutley. 00:18:09.671 --> 00:18:12.674 Particularly source code, people who author source code, right? 00:18:12.841 --> 00:18:14.676 They may have very, 00:18:15.636 --> 00:18:19.056 incorrect assumptions as to what qualifies as, you know, protectable. 00:18:19.056 --> 00:18:19.640 Absolutely. 00:18:19.640 --> 00:18:23.602 Some people think my work is my work and, you know, don't remember the employee 00:18:23.602 --> 00:18:27.689 agreements that they signed a decade ago that assign that work to their employer. 00:18:28.315 --> 00:18:31.485 Rachel, how do you see trade secrets 00:18:31.735 --> 00:18:34.696 and trade secrets litigation evolving going forward in the U.S. 00:18:34.696 --> 00:18:35.948 and abroad? 00:18:35.948 --> 00:18:40.119 Well, look, we talked earlier a bit about cross-border issues. 00:18:40.244 --> 00:18:45.457 I think one area where we're going to see a lot of litigation is in testing 00:18:45.457 --> 00:18:50.254 the limits of our federal trade secret statute and its reach. 00:18:50.546 --> 00:18:53.549 So, you know, our federal statute, the DTSA, 00:18:53.590 --> 00:18:59.346 allows for trade secret cases involving overseas activity, 00:18:59.638 --> 00:19:00.973 assuming that at least some act 00:19:00.973 --> 00:19:04.601 in furtherance of the misappropriation at issue happened in the US. 00:19:04.852 --> 00:19:07.688 So we're going to see a lot of litigation about that, about how far 00:19:07.688 --> 00:19:12.693 that reach goes, about what actual acts need to happen in the U.S to trigger 00:19:12.693 --> 00:19:16.780 that, to allow U.S law to be used, and how far the damages can reach. 00:19:16.780 --> 00:19:18.991 So expect a lot of litigation there. 00:19:18.991 --> 00:19:23.203 We're also expecting to see litigation regarding the time in a litigation 00:19:23.203 --> 00:19:25.247 at which trade secrets need to be disclosed. 00:19:25.247 --> 00:19:26.456 A real hot button issue. 00:19:26.456 --> 00:19:29.668 A real hot button issue, and we see a circuit split here right now 00:19:29.668 --> 00:19:33.755 with some circuits requiring identification of trade secrets 00:19:33.755 --> 00:19:35.841 right at the outset, at the pleading stage, 00:19:35.841 --> 00:19:39.803 some in early discovery and others in the course of discovery. 00:19:40.721 --> 00:19:44.975 We'll also expect to see those decisions have a big impact on forum selection 00:19:44.975 --> 00:19:49.146 by plaintiffs and whether they're trying to apply federal law or state law, 00:19:49.146 --> 00:19:51.190 because there are differences there as well. 00:19:51.190 --> 00:19:56.195 Last, I don't think we can do, podcast in 2026 and not talk about AI. 00:19:56.236 --> 00:19:57.821 Can't. And it's relevant. 00:19:57.821 --> 00:19:58.780 We're not just throwing it in there for no reason. 00:19:58.780 --> 00:20:01.450 It's not it's not possible, but it also is relevant. 00:20:01.450 --> 00:20:05.120 We're probably going to see a lot of AI related trade secret litigation coming up. 00:20:05.120 --> 00:20:09.374 There has not been much so far, but we expect to see plenty of it. 00:20:09.374 --> 00:20:12.127 One of the issues that you and I are seeing 00:20:12.127 --> 00:20:17.049 is the use of trade secrets to populate large language models. 00:20:17.049 --> 00:20:21.178 So where companies are feeding their own trade secrets into LLMs. 00:20:21.178 --> 00:20:22.429 There's going to be big questions 00:20:22.429 --> 00:20:25.849 about whether those trade secrets remain trade secrets and how they're used. 00:20:26.141 --> 00:20:30.854 So if somebody is able to prompt the LLM to give them the trade secret, 00:20:31.063 --> 00:20:33.440 was that an act of misappropriation, 00:20:33.440 --> 00:20:36.818 or is it the case that that trade secret really isn't a trade secret, 00:20:36.818 --> 00:20:39.196 because if you could prompt the LLM to give it to you, 00:20:39.196 --> 00:20:41.865 then reasonable measures were not taken to protect it. 00:20:41.865 --> 00:20:44.576 This is an area that has not been explored 00:20:44.576 --> 00:20:47.746 in litigation much yet, but expect to see more of it in the years ahead. 00:20:47.871 --> 00:20:50.499 I totally agree, and I'll add to that on the AI front. 00:20:50.499 --> 00:20:50.707 Right? 00:20:50.707 --> 00:20:54.711 So let's talk about, not just the large language model itself. 00:20:54.711 --> 00:20:57.881 Let's talk about the physical infrastructure that underlies AI. 00:20:57.923 --> 00:20:59.007 Right? On the chip level. 00:20:59.007 --> 00:21:01.885 On the software level, there's lots of trade secrets around there. 00:21:01.885 --> 00:21:05.555 And what we're really seeing the beginnings of are trade secret 00:21:05.555 --> 00:21:08.850 litigations between companies on the use, 00:21:08.850 --> 00:21:12.062 the algorithmic use of the prompts of AI, right. 00:21:12.062 --> 00:21:17.651 And how to maximize the efficiency of using prompts in AI. 00:21:17.693 --> 00:21:17.901 Right. 00:21:17.901 --> 00:21:21.655 That in itself, in and of itself, can be a protectable trade secret as well. 00:21:21.655 --> 00:21:25.033 So there's a lot that's going to happen on that front as well. 00:21:25.033 --> 00:21:26.076 And I'll just add that 00:21:26.076 --> 00:21:27.160 I think we're going to continue 00:21:27.160 --> 00:21:30.789 to see an uptick in trade secret litigation across the United States, 00:21:30.998 --> 00:21:35.043 given the ability of given the flexibility of damages, awards 00:21:35.294 --> 00:21:39.756 that remain in trade secrets, given the the broad range of material 00:21:39.756 --> 00:21:42.467 that trade secrets can cover and the advances in technology, 00:21:42.467 --> 00:21:44.469 I don't think it's going to let up anytime soon. 00:21:44.469 --> 00:21:48.432 No, there's lots of opportunity for plaintiffs here, 00:21:48.432 --> 00:21:52.561 and we expect to see plaintiffs continue to use the legal system to explore that. 00:21:52.894 --> 00:21:53.812 I think that's a great place 00:21:53.812 --> 00:21:56.648 for us to wrap up our discussions for today on trade secrets. 00:21:56.648 --> 00:21:57.399 Thanks, Rachel. 00:21:57.399 --> 00:22:00.152 Absolutely great chatting with you. Thank you. 00:22:00.152 --> 00:22:03.822 And thank you for tuning in to this episode of the Latham Tech Podcast. 00:22:03.822 --> 00:22:06.074 We hope you'll join us again next time. 00:22:08.160 --> 00:22:10.871 You can subscribe and watch or listen to new 00:22:10.871 --> 00:22:14.583 and archived episodes of Latham's podcasts on LW.com, 00:22:14.750 --> 00:22:19.004 YouTube, Apple Podcasts, Spotify, or wherever you get your podcasts. 00:22:19.296 --> 00:22:22.132 If you'd like more information about the topics in this podcast, 00:22:22.132 --> 00:22:24.676 please email us from the links located in the show. 00:22:24.676 --> 00:22:25.260 Description.