Yesterday, I received a nice email from Uber announcing that it had turned 5 years old. As I was looking at the origins and history of the company this evening, I came across an odd lawsuit recently filed against Uber. A couple weeks ago, it (and several investors) was sued by Kevin Halpern and Celluride Wireless, Inc., for allegedly having stolen the idea for a mobile ridesharing program back in 2006. According to the complaint, Halpern had the idea of connecting drivers and passengers using a mobile device beginning around 2003 and that he had a working demonstration completed by 2005.
The next part gets a little weird, but Halpern claims to have discussed his plans and company with Uber's founders and several investors over the course of several years between 2006 and 2008. There was no written confidentiality agreement for any of the discussions. According to Wikipedia, Uber's development began in 2009, and the service launched in June 2010. Halpern alleges trade secret misappropriation, conversion, and breach of contract. Halpern did not assert any patents.
Where do I start?
Trade secrets are protected under the Uniform Trade Secrets Act enacted in all but a few states. Trade secrets are defined as:
Information, including a formula, pattern, compilation, program, device, method, technique, or process, that: (i) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
Notably, "idea" is not specifically listed in the examples. Not to say that ideas can't become trade secrets, but they need more data behind them to get to a point where the ideas can derive independent economic value. For example, a business plan derives independent value because it would save a person time in developing the plan and cost of analyzing elements of how to execute an idea.
What about reasonable efforts to keep the secret? I'm not sure it would be reasonable to proceed without having a written confidentiality agreement in place these days. Granted, a written confidentiality agreement can take many forms, such as a signed agreement, and email exchange, an exchange of text messages, etc.
How would you shut down this claim if you were in Uber's situation?
- The Uniform Trade Secrets Act typically has a statute of limitations of three years. Halpern waited over 5.
- Conversion in this case is really the same as trade secret misappropriation so that claim ought to die with the first claim.
- There is no physical evidence of a contract between the parties. Some types of agreements simply aren't even enforceable under public policy if there is no writing. Here, this type of confidentiality agreement arguably should require a writing.
How can you prevent this type of claim if you find yourself in Uber's situation?
- Never accept information from someone without a written agreement stating what your obligations will be. Confidentiality agreements are so easy to come by that there is no reason to skip this step.
- Document your development efforts so you can prove important dates.
- Separate information received from other people from your development team. No need to taint development.
- File provisional patent applications. Even if they are not ever used, they can independently prove your development milestones with a filing date. And they don't ever need to be published or pursued if you don't want them to be published or pursued.
How can you protect your claim if someone legitimately takes your trade secrets?
- Only share confidential information after getting a signed confidentiality agreement.
- Only share confidential information using a means that shows when/what you shared (e.g., by email – which is then archived).
- Always mark information confidential when you share it, whether in the cover email/letter or in the confidential documents themselves.
- Keep a log of who/when/what you share with third parties and keep copies of all confidentiality agreements.
With any luck, you won't ever have a dispute like this interrupt your birthday.
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