Trade Secrets & Paper Towns

A paper town:

A paper town is a fake town created by map makers and done so as to protect their copyright, Map makers put fake streets, fake towns, and fake bridges in their maps, so if they see those same fake places on someone else's map, they will know that they have been robbed and by whom.

Agloe is a fictional hamlet in Colchester, Delaware County, New York, that became an actual landmark after mapmakers made up the community as a phantom settlement. Agloe became so famous that it attracted a lot of visitors. The increased traffic allowed a little town to become established with its own gas station and general store.

A ‘paper town’ is like a ‘trap street’. A trap street is a fictitious entry in the form of a  misrepresented street on a map for the purpose of trapping potential copyright violators of the map who, if caught, would be unable to explain the inclusion of the trap street on their map as innocent.

This practice of hiding fake data within genuine data was also followed by dictionary, encyclopaedia and phone book publishers who inserted fake entries to determine if someone was copying their work.

In the world of computing and software, the term ‘Easter egg’ is sometimes used to describe a secret message, joke or screen buried within an application. Some of these Easter eggs may act like paper towns or trap streets. One also comes across the term ‘junk markers’ used in relation to software source code, basically burying encoded messages within the software code.

Trade secrets:

A trade secret is information that:

·        is secret

·        has commercial value because it is secret

·        has been subject to reasonable steps to keep it secret

What qualifies as a trade secret is very broad indeed. A trade secret can be a formula, practice, process, design, instrument, pattern, commercial method, or compilation of information which is not generally known or reasonably ascertainable by others, and by which a business or organisation can obtain some economic advantage. The scope of trade secrets is virtually unlimited.

Growing importance of trade secrets:

The importance of trade secrets has increased dramatically since the passage of the Federal Defend Trade Secrets Act in May 2016; the EU Directive on Trade Secrets in Europe passed in June 2016 and enacted by member states in June 2018; as well as the enhancements to the Anti-Unfair Competition Law in China, first in Jan 2018 and then more recently in April 2019.

Increase in trade secret theft cases:

The number of trade secret disputes are increasing. Trade secret misappropriation litigation is mostly a US issue but not exclusively so.

The 2017 Trends in Trade Secret Litigation Report by Stout on US trade secret litigation at both state and federal level reveals some insightful data.

·        25% of all cases originated in the industrials sector.

·        46% of trade secret cases involved multiple forms of trade secrets.

·        IT, Consumer Discretionary; and Healthcare saw major increases in cases.

·        Trade secrets related to computer software; computer technology; customer info; pricing info; supplier relationships; and designs / blueprints made up significant percentage of cases.

·        Plaintiffs received favourable decisions 69% of the time. Defendants / counterclaimants 24%, with 7% of cases split.

·        Damages awarded in 52% of Federal cases. Top 5 cases were each over $100M.

Trade secrets and paper towns:

This concept of 'paper towns' described above can be used to detect trade secret theft. Just like the map makers inserted fake towns into maps, companies owning trade secrets can insert fake information inside their genuine trade secrets.

It could be some fake test data inserted inside lots of genuine real test data being treated as a trade secret It could be some source code inserted just to act like a paper town where the source code is being treated as a trade secret. It could be fictitious client data buried inside lots of genuine client data where the client data is indeed a trade secret.

It may not be possible to do this with every trade secret. I suggest that it probably works best with trade secrets like …

·        Raw data

·        Processed data

·        Processing algorithms

·        Software code

·        Clients lists

Some examples of a paper town buried inside a trade secret:

An in-house IP Manager was called to a meeting by one of senior engineers in the company. The engineer informed the IP Manager that he was absolutely certain that their company’s ‘starter technology for fluorescent tubes’ was being misappropriated by a competitor.

When asked how he could be so certain he pulled out some photographs of the circuit layout of both their own design as well as the competitor’s product and pointed to a specific S-shaped in the layout.

The engineer explained that there was no technical reason for this feature. It was just something that he incorporated into the design simply so that he knew whether he had signed off the layout or not.

At the subsequent meeting with the competitor, their somewhat belligerent legal counsel floundered and quickly capitulated when shown the feature and asked to explain its purpose.

It transpired that the layout had been shared by a customer who had received it under a duty of confidence but who was looking for a second source of supply. Both other parties (i.e. the customer and the competitor) had incorrectly assumed that the company would not identify or challenge.

In another example, a company had a comprehensive client database established which it treated as a valuable trade secret. However, it inserted one fake client into the database together with an email address for that fake client which if used came back to the trade secret owner. Not only could the company prove the unauthorized use of the list, but the company was automatically informed about it if used by the thief.

There are lots of examples of Easter eggs within software code, admittedly not all inserted to detect theft.

·        Atari's Tempest arcade game

·        Microsoft 6502 BASIC interpreter

·        Apple Macintosh

Although not an example of a paper town hidden within a trade secret, I thought to highlight this example which I found most interesting. Genius is the name of a company that partners with artists, record labels and companies like Spotify to provide lyrics. Genius secretly watermarks certain songs with patterns of apostrophes. It basically used two types of apostrophes—-straight and slanted and inserted these apostrophes in a pattern that spelled out “RED HANDED” when converted to the dots and dashes of Morse Code.

Trade secret litigation – a three step process:

At a trade secret court case, the plaintiff has to prove three things, namely that the information was a trade secret at the time of the incident AND that the accused stole the trade secret AND that the theft of the trade secret caused damage to the company. Of course, the defendant will try to prove that the information was not a trade secret OR that no misappropriation took place OR that no damage was caused.

Having paper towns inserted into the trade secrets of the company may prove of tremendous value in the event of a trade secret dispute, especially a dispute involved another entity in the eco system as in the fluorescent tube example.

Trade secret asset management:

Trade secret asset management is about the policies and procedure, processes and systems, education and governance defined and taken into use to help manage such assets.

Simply deciding to keep something secret is not enough.

I suggest that trade secret asset management consist of a diverse range of elements, such as:

·        Having a trade secret policy in place

·        Designing, developing and deploying a trade secret process within the organisation

·        Taking a robust fit for purpose trade secret asset management system into use to underpin that process

·        Including a section on trade secrets to the basic IP training for all employees

·        Identifying trade secrets across the entire organisation

·        Identifying any trade secrets shared with 3rd parties

·        Identifying any trade secrets belonging to 3rd parties and entrusted to the company

·        Putting the appropriate administrative, legal and technical protection mechanisms in place

·        Gathering metadata about the trade secrets for management purposes

·        Installing a culture of confidentiality within the company as far as trade secrets are concerned

·        Putting a governance structure in place

If a company sees value in leverage paper towns, then it should be done as part of the company’s overall approach to trade secret asset management and integrated with the other steps outlined above. It should not be done in an ad-hoc manner.

Trade secret metadata:

Metadata is a set of data that describes and gives information about other data. Trade secret metadata summarizes basic information about the trade secret, which can simplify identifying and working with this unique form of IP. Managing trade secrets without the associated metadata is practically impossible.

With the increased prominence of trade secret protection courts, the world over, are providing protection and relief only when owners can demonstrate that their secrets were kept in accord with best practices. It is only by collecting, analysing and curating the metadata associated with one’s trade secrets that one can judge whether a company is abiding by best practices in trade secret protection.

I strongly suggest that if a company decides to insert paper towns into some or all of its trade secrets, that it should update its trade secret asset management system and the associated trade secret metadata contained therein to be able to log and track these paper towns for future reference.

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This material above is protected by copyright.

Any reproduction of part or all of the contents in any form is prohibited, except with my express written permission.

You may not, except with my express written permission, distribute or commercially exploit the content.

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Donal O'Connell is the Managing Director of Chawton Innovation Services Ltd.

His company offers trade secret management tools to companies as well as to Legal & IP Firms to help with the management of these important but fragile assets.

More details on the Hazel Trade Secret Asset Management tool are available on request. Our Trade Secret Asset Management has the functionality to manage any 'paper towns' inserted within the trade secrets of an organisation.