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The Coca-Cola caper: Lessons in protecting trade secrets

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Her name is Joya Williams. She was a secretary at The Coca-Cola Co. (Nasdaq: COKE). A jury of her peers recently found her guilty of conspiring to steal the 100-year-old but still super-secret formula for Coke and sell it to Pepsi. How was the would-be theft of the century averted? None other than a lawyer for Pepsi got wind of the deal and did the right thing. He told Coke.

The secretary's story is useful for us to know because it shows us not what a trade secret is, as much as how a trade secret can be lost.

There are many ways a company can lose its trade secrets.

The first most likely way to lose your trade secrets is at the hands of your own employees. Loss of trade secrets through employees can come through inadvertent, as well as intentional, disclosures. Employees may talk carelessly about their business and new developments, allowing information to be obtained by competitors.

Intentional disclosures are even more disturbing to the company. These arise most often when an employee leaves to begin work with a competitor or to begin a competing business. A large percentage of trade secret litigation arises in this situation. And of course there's criminal conduct too, though less common.

Another way to lose your trade secrets is through your distributors, customers, vendors and suppliers. Unless a company is totally vertically integrated, it may be forced to reveal all or part of its trade secrets to its suppliers, vendors and distributors. If proper precautions are taken, like the use of a nondisclosure agreement, everything may turn out OK, but if not, the proverbial cat has left the bag.

Surprisingly, trade secrets are often lost because of approved company presentations during trade shows, in publication in trade journals and in brochures, speeches and marketing materials.

Trade secrets also can be lost in the course of discovery and other aspects of litigation.

Trade secrets and commercial or financial information that is privileged and confidential may be declared exempt from discovery, but the courts may deny the request or may utilize such a narrow definition of trade secret for purposes of discovery that many trade secrets may be divulged despite the efforts to prevent that.

Finally, information that has been filed with the government, pursuant to regulatory requirements, is potentially subject to being obtained by a competitor under the Freedom of Information Act. Further, information revealed in reports required under government contracts may be revealed to the public.

The single most important thing to realize is that once a trade secret is lost, it is lost forever. If there is a disclosure to a third party and it is no longer a secret, not only can the party that got the information use it, but the rest of the world can, too. There are only two labels that fit: secret and not secret.

The preceding article is from The Licensing Lawyer, www.thelicensinglawyer.com, a podcast that provides practical solutions to your intellectual property problems.

Submitted by Randall K. Broberg of Allen Matkins Leck Gamble Mallory & Natsis LLP

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