EFF Question "General" 8.  "What are case law examples involving the loss of trade secret status
through inadvertence?"

Loss of trade secret status through inadvertence or accident generally will result in loss of that status, unless the disclosure was made during discovery.

The majority of case law involving inadvertent disclosure is related to pre-trial discovery. Rule 26(c) of the Federal Rules of Civil Procedure states that "a trade secret…not be disclosed or be disclosed only in a designated way." Courts are required to balance the risk of inadvertent disclosure of the trade secret to impaired prosecution or defense, and issue protective orders as needed. Brown Bag Software v. Symantec Corp., 960 F.2d 1465, 1470 (9th Cir. 1992). The case law evidencing the use of this balancing test is large and case-specific, and will not be outlined it in detail. Generally, however, even if inadvertent disclosure occurs at trial, trade secret status will not be lost. Courts have held that as long as adequate measures are taken after such a disclosure is made, companies may retain the status. The Gates Rubber Company v. Bando Chemical Industries, Ltd., 9 F.3d 823, 848 (10th Cir. 1993). Additionally, simply because a trade secret has been made available through a public record does not mean that its status as a trade secret will be lost. Hoechst Diafoil Co. v. Nan Ya Plastics Corp., 174 F.3d 411, 418 (4th Cir. 1999). Hoechst nicely summarized the law, stating "[W]hile a number of cases have dealt with the disclosure of trade secrets in public court files, none holds that such disclosure, when unaccompanied by evidence of further publication, automatically destroys the 'secrecy' of that secret." Id. Courts generally regard the unsealed filing of a document as a single, nondispositive factor to be weighed when determining whether trade secret status remains intact. Id. Again, a plethora of cases support these holdings, and will not be detailed here.

The brightline case regarding inadvertent disclosure outside trial deals narrowly with disclosure of a secret customer list. Defiance Button Machine Co. v. C&C Metal Products Corp., 759 F.f2d 1053 (2nd Cir. 1985). The possessor of a trade secret must take "reasonable measures" to protect its secrecy. See id. at 1063, quoting Milgram on Trade Secrets. "[T]he owner is entitled to such protection only as long as he maintains the list in secrecy; upon disclosure, even if inadvertent or accidental, the information ceases to be a trade secret and will no longer be protected." Id. While Defiance Button speaks specifically to disclosure of a customer list, other cases involving a wide range of trade secrets and types of disclosure have relied heavily on it. A Second Circuit district court stated that accidental or inadvertent disclosure will result in loss of status when deciding a case involving an electronic photographic retouching and imaging system. Julie Research Laboratories, Inc. v. Select Photographic Engineering, Inc., 810 F. Supp. 513 (S.D.N.Y. 1992). "The adequacy of the measures taken to protect the secrecy of the product is a fact question." Id. at 520. It should be noted that the appellate court reversed the damages awarded at the district court level; however, it left the dicta regarding loss of trade secret status untouched.

The Ninth Circuit weighed in on the issue with a similar statement before Defiance Button was decided. Chicago Lock Co. v. Fanberg, 676 F.2d 400 (9th Cir. 1982). "It is well recognized that a trade secret does not offer protection against discovery by fair and honest means such as by independent invention, accidental disclosure or by s-called reverse engineering." Id. at 404, quoting Sinclair v. Aquarius Electronics, Inc., 42 Cal.App.3d 216, 226 (1974). The same year, the Supreme Court affirmed Chicago Lock's dicta with an almost identical statement characterizing reverse engineering as "fair and honest" means. Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 476 (1974). The Court stated that trade secret law "functions relatively as a sieve," as it provides far weaker protection than patent law. See id. at 490.

It appears that disclosure of trade secrets outside the discovery process will largely be governed by policy concerns that appear analogous to those expressed in many attorney/client privilege cases. Courts deciding cases in which an attorney accidentally disclosed attorney/client protected material have imputed negligence to inadvertence, and therefore not deserving of the protection. The most important factor appears to be the steps taken by the holder of the trade secret to protect it, and "inadvertent" disclosure is often evidence of the holder's failure to use "adequate measures" to protect the secret.