Trade Dress and Trade Secrets

Trade Dress

Trade dress is a subset of trademark law. However, it is an interesting element of intellectual property law in that it protects the overall look and feel  (i.e., design and shape) of a product. Rather than protecting a specific logo or design, it protects the overall appearance. Similar to trademark law, trade dress protects against an infringing product that causes consumer confusion.

Trade dress may include features such as size, shape, color or color combinations, texture, graphics, or even certain sales techniques. In other words, it covers the "total image of the product." Recent lawsuits have shown that companies can protect the size, colors, and organization of children's clothing, the set up of a magazine cover, stripes down a jacket sleeve, a comedian's style, and the decor of a Mexican restaurant.

Companies may register their trade dress through the USPTO, but this is not required. Common law gives protections for trade dress once a company puts those products into the marketplace. If not registered, the trade dress can be protected if it meets the following 2 requirements.

  1. Distinctive. The trade dress must be inherently distinctive from the trade dress of other companies. It must be memorable and unusual and serve to designate/identify the creator of the product.
  2. Non-functional. Features of trade dress will not be protected if they confer some functional or competitive advantage. For example, a company may want trade dress protections covering the style of a new reading chair. However, if the style is functional (e.g., makes it more comfortable while reading for long periods), then the style is not appropriate for trade dress protections and may be more applicable for other types of protection (perhaps via a patent). As a result, trade dress tends to be more ornamental rather than functional.

If trade dress is not inherently distinctive, the company is not necessarily out of luck. Courts now allow an investigation into whether the trade dress has achieved secondary meaning. To determine if the feature has achieved secondary meaning, ask the following:

  1. Has the brand spent a significant amount of money to advertise the design at issue?
  2. Do consumers tend to link the design to the brand that designed it?
  3. Is there unsolicited media attention or coverage of the product?
  4. Has the design sold well?
  5. Are other brands attempting to copy the design?
  6. Has the brand been using the design for an extended time?

As with trademark law, trade dress infringement occurs when the defendant's product creates a likelihood of confusion. Thus, for a plaintiff to win an infringement case, it must be shown that consumers incorrectly believe that there is a business connection between the two companies or that the plaintiff's company has endorsed the defendant's goods/services. 

The remedies for trade dress infringement are the same as those for trademark infringement. These include preventing the defendant from creating and marketing the infringing goods/services, recovery of profits, and the plaintiff's damages.

Trade Secrets

A trade secret, as you might imagine, is valuable information that is intentionally kept from the public. It is valuable to a company because it's a secret. As a result, an owner can maintain a monopoly on the trade secret for as long as it is not disclosed or independently discovered by another. Trade secrets are free other than the costs of secrecy; you may need to buy a vault or spend some money on keeping digital items secure. 

As one judge wrote in the 70's, "The term 'trade secret' is one of the most elusive and difficult concepts in the law to define." Fortunately for you, we will keep the definition rather simple. For our purposes, a trade secret is anything - a formula, a design, a compilation, a procedure, a code - that is securely contained and retained inside of a company. It does not include skills, talents, or abilities of employees. 

To be entitled to protection, a trade secret must be 1) original and 2) secret. 

A trade secret must have a certain degree of originality, though not as much originality as a patent would require. For example, a list of customers would not meet the requirements to be patented. However, assuming other businesses do not have identical client lists, it would be sufficiently original to protect as a trade secret. Sometimes included here under originality, is the requirement that it have economic value, either real or potential. This means that the trade secret does not have to be in current use to generate income, so long as it reasonably could be used for that purpose at a later time. 

Trade secrets must also be secret. Some types of information are obviously secret, like the chemical formula that is zealously guarded through elaborate systems and vaults within the company. However, something is not secret if there are no efforts to conceal or protect that information. For example, if a client list is left stapled to the wall where patrons frequent, that list clearly does not qualify as a trade secret, despite the originality and value it possesses. Courts frequently reference the reasonable standard here. Always ask yourself if the company's actions to maintain the secret were reasonable under the circumstances. 

Numerous cases are filed every year by companies against their former employees for trade secret misappropriation, the wrongful taking of trade secrets. The typical scenario involves a mid to high-level employee that had access to trade secrets. The employee is then solicited by, or simply changes jobs to work for a competitor and after going to work for the competitor, discloses those trade secrets to the new company. This situation would be wrongful misappropriation if the employee knew or should have known that the information was a trade secret. To ensure that employees know that certain information is indeed a trade secret, companies frequently have employees sign non-competition or confidentiality agreements. 

Similarly, companies may also be liable for trade secret misappropriation where they wrongfully acquired  trade secrets. This scenario frequently involves a company that entices or induces a mid to high-level employee of a competing company, and the employee discloses the trade secrets to the new company. 

An agreement not to disclose particular trade secrets learned or developed on the job is generally enforceable. But even without such an agreement, the disclosure of trade secrets may be criminal under federal law. We will soon discuss a case where an employee was criminally prosecuted for taking trade secrets to a competitor. Such cases go beyond the common scenario of workers leaving to join another company and that situation is played out everyday; the law does not prohibit workers from using the general knowledge and skills they developed on the job. The criminal cases, on the other hand, involve employees that leave attempting to cash in on trade secrets that they do not have the right to share with competitors.

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