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Proving Independent Development: A Winning Defense Against Trade Secrets Misappropriation Claims

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Litigation involving allegations of misappropriation of trade secrets has been on the rise since the enactment of the Defend Trade Secrets Act in May of 2016, which opened the Federal Courts to such claims. And cases like Waymo LLC v. Uber Technologies Inc. are making trade secrets cases front page news. Of course, the best way to avoid liability in such cases is for your company’s employees (including new hires) to not use or disclose the trade secrets of another company, such as a previous employer. Unfortunately, however, employees are not always as careful as their employers might like, and it is impossible for an employer to police the actions of every employee to maintain compliance. And, even if your employees are careful, a competitor may bring a trade secret lawsuit against your company based solely on the actions of your new hire before he even began at your company, or based on a good-faith belief that some misappropriation has taken place.

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When such claims are filed, they can be very difficult to defeat early in the case because the defendant must prove a negative — that none of the plaintiff’s trade secrets were used or disclosed by the defendant’s employees. Often, companies attempt to rely on on-boarding procedures, employment agreements and training to prove that no trade secrets were used. But this still leaves room for a plaintiff to prove that procedures failed and policies were ignored by connecting a few “buzz” words between the documents of the plaintiff and defendant, or connecting some features between the products of the plaintiff and defendant. The only real way that your company can stop such claims in their tracks is to be able to “prove the negative” by offering proof of your company’s own independent development, either using its own internally developed technology and/or information from the public domain. Such a defense allows your company to control the evidence, and has the procedural advantage of now forcing the plaintiff to “prove the negative,” i.e., that there was no independent development.

But proof of independent development is not typically maintained unless a company acts proactively to memorialize and store such proof. In the age of aggressive document retention policies — which seek to maintain only documents and information mandated by tax laws — proof of independent development can quickly be erased from a companies’ servers and archives. This program will focus on the importance of developing, memorializing and maintaining proof of independent development, and also discuss a few processes to put in place toward this end.

This presentation was recorded and current as of October 10, 2017. Content viewed after this date may no longer be current.

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.