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Trade Secret Protection (with Brewery and Distillery Considerations) By Dan Honz

In general, a trade secret involves information that is not generally known to the public, confers some sort of economic benefit on the holder of the information, and is the subject of reasonable efforts to maintain its secrecy. What type of information can be a trade secret?  The federal Defense of Trade Secrets Act of 2016 defines the information as all forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing.

This covers a lot of potential items relevant to the Brewery and Distillery Industry, such as product recipes, unique brewing or distilling procedures or processes, client lists, distribution protocols, or other information that provides actual or potential economic value from not being generally known and not being readily ascertainable by proper means. For example, a brewing or distilling recipe usually involves known ingredients such as water, malt, hops, yeast, fruit, other sugars, wood type for barrel aging, etc.  The value derived from a recipe can be attributed to the ratios, sources, and treatment of those ingredients to produce a desired result – an alcohol whose composition is valuable to a producer and whose recipe provides an economic advantage, such as through market demand or production efficiencies.  Other valuable information can include failed results – results of lengthy and expensive research or experimentation which proves that a certain process will not work.  For example, the 39 prior attempts at the WD-40 formula.  As Thomas Edison mused, “I have not failed. I’ve just found 10,000 ways that won’t work.”

So what types of information are not subject to trade secret protection? Examples of non-trade secret information include: information in the public record, copyright registrations, assignments, and contact information filed with the U.S. Copyright Office, Trademark information filed with the U.S. Patent and Trademark Office upon filing, Patent filings that are published (patent filings generally become published within 18 months of being filed unless a request not to publish is made), published sales figures, salary figures, and annual reports, information on a company website or social media pages, SEC filings, etc.  There can be some give and take in determining the proper intellectual property considerations for any given facet of a business, such as brand differentiation versus proprietary trade secret recipes.  To what degree do I want to disclose how we differ from other brands, and in doing so, am I jeopardizing a different facet of IP protection, such as trade secret protection?

Part of the value of a trade secret involves its ability not to be readily ascertainable by proper means. The “proper means” to discovering a trade secret can pose an economic hurdle to competitors, such as through reverse engineering (which involves buying the product through the open market), independent invention, through a license with the trade secret owner, or other legal observations.

Dan Honz and Mallory Henninger will be presenting more Brewery and Distillery Law Intellectual Property topics at a CLE in Des Moines, Iowa on June 23, 2017. Link for registration: NBI CLE Seminar Registration Page

 

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