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Protecting Your Trade Secrets

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Whether you’re an employer or an employee, you shouldn’t keep quiet about IP policies

 

By Marian Moser Jones

 

Let’s say that upon filing for patent protection on your latest brilliant idea, you and your employer are accused by your former employer of stealing its trade secrets. A lawsuit ensues, your reputation is dragged through the mud, and your technology is hung up in legal battles.

From the perspective of Donald Montgomery, that’s the unpleasant scenario being played out between his current and former employers right now.

Nanogen, maker of electronic hybridization microarrays, sued semiconductor biochip maker CombiMatrix, alleging that Montgomery, a former Nanogen employee, took Nanogen’s trade secrets with him when he became CTO of CombiMatrix and filed patent applications on them.

Montgomery’s applications became two granted patents — the only US patents that CombiMatrix has so far. Nanogen, which initially filed suit in November 2000, is seeking a reassignment of the inventorship on the patents and the rights to the IP underlying them, as well as money damages and an injunction barring Montgomery from using the trade secrets.

Mum Is Not the Word

This suit, in fact, is part of Nanogen’s aggressive strategy to protect its trade secrets — the type of strategy that legal experts advise companies to follow when important IP is at stake. And whether you’re an employer with secrets to protect, or a scientist with a lot of your own ideas, it would be wise to understand the ins and outs of trade secret protection.

Intellectual property attorneys say that every genomics company should have an express written agreement with its employees precluding the use of trade secrets, says Gary Weiss, managing partner at the Silicon Valley office of Orrick, Herrington & Sutcliffe. “The key is that the employee is on notice” about the trade secrets.

When an employee decides to leave a company, this message should be reinforced in an exit interview, Weiss says. He tells employers, “You have an opportunity to say, ‘Do you know that the following pieces of information are proprietary to us? And we expect you not to use them.’” If the employee has a new job that is similar to the old one, and does not agree to avoid using trade secrets, “it’s time to spring into action,” Weiss adds.

Not only should the employee’s computer be searched for downloads near the time of departure, but supervisors and co-workers should be interviewed on whether the employee showed up at meetings at which he or she was not invited or requested copies of memos or to print information, according to Weiss. It might smack of paranoid behavior, but it’s preferable to winding up in a courtroom later.

An employer can then go to the new employer and, rather than sending a “nastygram” threatening the employer, inquire as to whether the employer is aware of certain trade secrets and is in agreement with the old employer that these secrets not be misappropriated.

With this trail of preventative steps, an employer is likely to have a solid case either in seeking legal action to prevent an unwilling former employee from misappropriating trade secrets, or in suing for damages once the trade secrets pop up elsewhere.

What if you are the employee, and you did nothing wrong? “The key is not only to be clean, but to make sure you can demonstrate to a court that you are clean,” says Weiss. “Don’t send e-mails to your home computer with your information on them, etc.” Also, he says, the new employer should be “bending over backward” to make sure that you are not using any trade secret from the previous employer and assuring the old employer that this is the case.

If these steps are taken, says Weiss, “it will be easier to convince a judge you did everything you could to prevent misappropriation.”

Sending a Message

As for Don Montgomery’s dispute: CombiMatrix had moved for partial summary judgment, alleging that the trade secrets at issue were not delineated in a settlement agreement between Montgomery and Nanogen, and therefore were not subject to these misappropriation claims. But in July a judge in the Southern District of California denied CombiMatrix its motion, giving Nanogen the go-ahead to proceed with its claims against Montgomery and CombiMatrix. The trial is scheduled for November.

William Franzblau, Nanogen’s vice president of legal affairs, waxes optimistic about the outcome. “All we need to prove to win our case is that Dr. Montgomery used or took some of Nanogen’s technology and brought it to CombiMatrix,” he says. “We brought out during depositions [testimony] that showed that the technology was originally developed and conceived at [Nanogen],” he adds.

Nanogen CFO Gerald Wills says that “it is hard to say” how the company is using the CombiMatrix-related trade secrets in its current work. “But still it is very important for us to send a clear message that technology does not walk out the door here,” he says.

 

A version of this article originally appeared in Genome Technology’s sister publication BioArray News.

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