Thiscountry’s economy thrives on its trade secrets and without them the economywould lack its competitive edge and economic value. The trade secret laws dateback to Roman law which punished a person who forced another person to revealsecrets relating to his masters commercial affairs. The current trade secretlaws evolved in England during the Industrial Revolution and the first reportedtrade secret case in the United States was Vickery versus Welch in 1837. In 1979the National Conference of Commissioners of Uniform State Law imposed theUniform Trade Secrets Act which has now been adopted by a majority of thestates.
In previous years these laws have been modified to meet the needs of ourgrowing technological society by incorporating such things as the Invention andNondisclosure Agreement and intellectual property laws. Trade secret lawsprotect a companys information that is not publicly known therefore allowinga competitive and economic edge over their competition. Intellectual propertyviolations fall under the trade secret laws which are used to determine if acompany or individual has compromised any information of another company orindividual. The issue of ownership of intellectual property is not only a legalissue but also an ethical issue that engineers face in their careers.
In thecase of Vermont Microsystems, Inc. (VMI) versus Autodesk, Inc. the courtdetermined that Autodesk violated the trade secret laws despite the warnings byVMI. In doing this they not only compromised themselves legally and economicallybut also ethically. Otto Berkes developed a Display List Driver while workingfor VMI.
After completing that project he took a position at Autodesk in thefall of 1991. At that time the president of VMI sent a letter to Autodeskwarning that Autodesk should be careful because Berkes was privy to VMIstrade secrets. However, in March of 1992, Berkes lobbied the management ofAutodesk to include the display list driver in R12 windows. He then becamedirectly involved in working on the specifications for a prototype of thedisplay list driver.
In designing this prototype he used two algorithms, thetriangle shading algorithm and the BPS algorithm, that he had developed whileworking for VMI. Soon after, VMI learned Berkes was working on the developmentof the display list driver for Autodesk. VMI once again warned Autodesk, via awritten notification, that they were at risk of trade secret violation. InOctober 1992, Autodesk and VMI met to attempt to resolve their differences. VMIoffered to transfer all technology to Autodesk for 25. 5 million dollars.
Afterreceiving VMIs proposal Autodesk considered proposals from other companysin order to replace the display list driver Berkes had developed. Autodeskrejected all proposals including the offer made by VMI and apparently foreconomic reasons decided to go ahead and ship their current version of thedisplay list driver despite the ethical and legal ramifications. The issue thecourt had to determine was whether or not trade secret misappropriationoccurred. It was VMIs responsibility to prove to the court that a tradesecret misappropriation had occurred.
In complying with these laws, VMIsubmitted evidence of eleven instances of trade secret misappropriation. Thefirst instance was the issue of the overall architecture. The courts felt thatVMIs next eight instances were incorporated into that of the first instance. In comparing Autodesk and VMIs architecture the variables, parameters,structures, and implementation of management functions of the two softwareprograms were almost, if not, identical. The add-on software that Berkesdesigned, for both Autodesk and VMI, included the same functions and tools.
Everything from the management of bounding boxes to the location of entities wasidentical. There were such similarities between the design of both companysproducts that the courts could not help but rule that Autodesk had violated thetrade secret laws for the first instance. The last two instances of trade secretmisappropriation were the triangle shading and BPS algorithms. The triangleshading algorithm was so close to that of VMIs that one expert witnessreported that “the resemblance goes right down to the names of variables,names of macros, and even many of the comments. Another pronounced thealgorithms identical” (United State District Court for the Districtof Vermont 1996, 8). Concerning the BPS algorithm, Berkes filed a counterclaimagainst VMI, claiming that he was entitled to use BPS algorithm even if VMI hasthe same technology.
He argued that he had developed the software on his owntime and was therefore entitled to use it as he pleased. It can be argued thatan employee has the right to carry his knowledge, skills, and experience fromone employer to the next. However, in that statement there is a “legal fineline” as to exactly what is the employees and what is the employers. The law attempts to define this “legal fine line” by stating that ifthe product has an economic value and is not known to the public then it can beconsidered information that is protected by the trade secret laws. The courtruled against Berkes because he developed, discussed, and tested the algorithmwhile being paid by VMI and using VMIs equipment. He did not develop the BPSalgorithm on his own accord and therefore was not entitled to hold the rights tothis algorithm.
If Berkes had developed the display list driver and itsalgorithms on his own time and with his own resources it would have been anotherstory. Instead, knowing he was being paid by a company and using their resourceshe had no right to disclose this information to Autodesk. Not only was he beingpaid by VMI and using their resources but he was discussing and brainstormingwith other employees of VMI. Although he may have developed the display listdriver, he developed it with the help of VMI employees. Although Autodesk washeld liable, Berkes held some of the responsibility. When Autodesk initiallyhired him they placed him in a position that was not in conflict with hisprevious position at VMI.
Three months later it was Berkes who went to thecompany to ask to be placed in a position that directly conflicted with hisprevious position at VMI. Once he obtained this position, instead of creating anew architecture for the display list driver and deriving new algorithms, heused the ones he had created while working for VMI, with some slightmodifications. “In two separate exit interviews with VMI, Berkes wasreminded of his confidentiality obligations under the Invention andNondisclosure Agreement. “(United State District Court for the District ofVermont 1996, 9). Autodesk and Berkes were well informed as to the potential ofviolating the Trade Secret Laws but were obviously willing to take the risk. Autodesk in turn was given ample opportunity to fix the code that violated thetrade secret laws but due to deadlines they opted not to, apparently foreconomic reasons.
The protection of trade secrets has been going on forcenturys. Companies and individuals not only rely on the law to protect thembut also take their own extreme measures. In the case of the Coca-Cola Companythey have their ingredients list, mixing, and brewing formulas locked in anAtlanta bank vault. Although this may seem extreme it is necessary in order tomaintain their competitive and economic edge. While a company or individual canplace written material containing ideas, formulas, plans and other materialmanifestations of ones inventive creation under lock and key, it cannot placean individual or an individuals mind under lock and key.
It is for this veryreason that Non-Compete Agreements and Invention and Nondisclosure Agreementsare frequently entered into between employers and employees. Some companysmight require their employees to sign a Non-Compete Agreement. Although theNon-Compete Agreements are meant to protect a companys interests, the courtstend to frown on them. For a Non-Compete Agreement to hold up in a court of lawit must contain realistic expectations, geographic and/or industry limitations,and a time frame. The Non-Compete Agreement typically restricts an employee fromworking in an identical job at a direct competitor for approximately six toeighteen months.
However, the Non-Compete Agreement cannot put undue hardship onthe employee. The employee must be able to find gainful employment in their areaof expertise. This agreement is usually directed at high level executives andcreative employees, such as engineers. Non-Compete Agreements are illegal inCalifornia but legal in New York and many of the eastern states.
The Inventionand Nondisclosure Agreement generally covers a broader language and is construedby the courts as a protection agent for companies. The Invention andNondisclosure Agreement prevents the disclosure of Trade Secrets outside of thecompany an employee is or was employed by. This is agreement is easily enforcedby the courts because it is an extension of the Uniform Trade Secrets Act,established in 1979. The Invention and Nondisclosure Agreement tends to berequired at all levels of a company. The agreement is legal in most states. Inboth cases Non-Compete Agreements and Invention and Nondisclosure Agreements areusually heavily worded in order to protect the company.
They also provide thecompany with ammunition if they are forced to go to court because of a TradeSecret Violation. In the case of VMI versus Autodesk, Berkes had signed anInvention and Nondisclosure Agreement which gave VMI the upper hand in court. However Berkes attempted to argue that VMI was not specific as to what tradesecrets it was attempting to protect under the Invention and NondisclosureAgreement, therefore, VMI was seeking to transform the agreement into aNon-Compete Agreement that would unfairly interfere with future employmentoptions. It must have been obvious to the court that this Invention andNondisclosure Agreement of which VMI and Autodesk were aware did not keep Berkesfrom being hired by Autodesk and initially being assigned to non-competingprojects. This in and of itself shows that Berkes was marketable based on hisskills and abilities apart from what he developed at VMI. To argue otherwiseBerkes and Autodesk would be practically admitting that Berkes was hired so thatAutodesk could benefit from the technology Berkes helped develop while he wasemployed by VMI.
The trade secret laws were put into effect to protect the ideasand products of an individual or company. Although trade secret laws were meantto protect they can also harm an individual. An employee should be aware of anyagreement he signs upon entering a company and should uphold the agreement towhich he committed. Engineers gain their ideas, techniques, and knowledge fromexperience which in turn enhances their careers. There is a fine line betweenwhat knowledge is considered an individuals and what knowledge is considereda companys.
It is the job, responsibility, and ethical duty of the employeeand the employer, both former and current, to make sure all parties are wellinformed and do not cross the boundaries set forth by the law. In the case ofVermont Microsystems, Inc. (VMI) versus Autodesk, Inc. these lines were crossedand ultimately Autodesk paid the consequences both financially, legally, andethically. Works Cited Anderson, Judy. 1998.
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