Reference no: EM133314179

The College Board Inc.

The College Board Inc. ("College Board") is a private, not-for-profit organization in the U.S. that creates, markets, and administers the Scholastic Aptitude Test ("SAT"), a standardized test intended to assess readiness for college that is widely used for college admissions in the U.S. The test costs $45. College Board markets the SAT throughout the U.S., and it creates and administers multiple versions of the test throughout the U.S. on seven (7) days each year. It creates each version of the SAT eighteen (18) months before the scheduled test date (e.g., all versions of the December 2021 SAT test were written by June 2020). Recently, College Board paid a talent management firm to develop and implement an intensive two-week program to train College Board's testmasters. College Board has adopted heightened measures to protect information about its business and to protect its investment in its employees. It marks as "confidential" (or otherwise indicates the confidential nature of) all of its business plans, training materials, processes, and test materials. It includes provisions in its employee handbook requiring testmasters to agree, as a term of their employment, that they will not use or disclose any of College Board's confidential information without its permission. It uses firewalls to prevent testmasters from accessing each others' work or accessing pricing and other information about its agreements with colleges and universities. In order to sign up to take the SAT, test takers must agree that they will not record or duplicate any part of the test, and that they will return all test materials to the company after each test. Test takers are also required to sign a statement agreeing not to disclose any test questions or answers during or after the test.

ACT Inc.

ACT Inc. (originally named American College Testing) is a private, nonprofit organization in the U.S. that creates, markets, and administers the ACT, a standardized test used for college admissions in the U.S. The ACT was introduced in 1959 as a competitor to the SAT. The test costs $50. ACT markets the test throughout the U.S., and it creates and administers multiple versions of the test throughout the U.S. on seven (7) days each year. It creates each version of the ACT twelve (12) months before the scheduled test date (e.g., all versions of the December 2021 SAT test will be written by December 2020).

The Market for Standardized Testing for College Admissions

Taking the SAT or the ACT is required for freshman entry to many colleges and universities in the U.S. Most schools accept students' scores from either test. Each version of the tests is written by people called "testmasters" who are hired by College Board or ACT. They include high school teachers, college professors, psychologists, and full-time employees. It costs tens of thousands of dollars to develop each version of the SAT and the ACT. Both College Board and ACT generate profits from their testing in three ways: (1) from fees paid by test takers in exchange for their testing and score reporting services; (2) from the sale of test preparation materials, study guides, and practice tests using questions from previous tests that have been "retired" (meaning the question will never be reused); and (3) from selling test takers' personal and performance information to colleges and universities.

College Board's Response to ACT's Market Success

The SAT was the first and, for many years, the most widely used standardized test in college admissions. The number of people taking and the number of schools accepting the ACT increased over the years, however, and the ACT recently surpassed the SAT for the first time in total test takers. In response, College Board launched a confidential strategic planning process to compete more effectively with ACT. As a result of that process, the senior executives of College Board have developed a new marketing strategy, a business expansion plan, and a strategic hiring program, all of which it treats as confidential and shares on a need-to-know basis only with people who have signed nondisclosure agreements. They also hired a consulting firm to prepare top-secret report analyzing the college admissions market and the strengths and weaknesses of the SAT and ACT.

Hannah the Math Testmaster

For the past 10 years, College Board has employed Hannah as a testmaster, drafting SAT math questions. Hannah graduated from college with a math degree and worked as a high school math teacher for eight years before becoming an SAT testmaster. She has advanced knowledge and expertise drafting questions on logarithms, vectors, and polynomial equations. While working for College Board, Hannah has developed expert judgment about the format and level of difficulty that make for the best SAT math questions. She has also developed the ability to draft incorrect multiple-choice answer options by identifying the errors students are most likely to make on each problem. Hannah has been involved in drafting math questions for SAT test versions that are scheduled to be used through May 2021, although some questions could be re-used until January 2022. She recently completed College Board's new two-week intensive training program.

Hannah's Job Offer with ACT

Recently, ACT offered Hannah a job as director of math testing. The job would require Hannah to write math questions for versions of the ACT to be administered beginning in January 2020, to supervise and train other ACT testmasters on writing math questions, and to be one of the subject matter experts that helps market information to colleges and universities.

Seamus the New ACT Testmaster

Seamus was recently hired by ACT to write science questions. He previously worked for five years as a high school science teacher teaching both chemistry and biology. To prepare before applying for a job with ACT, Seamus signed up for and took the SAT, something he mentioned in his application and later job interview with ACT in an attempt to impress them with his initiative. After he was hired and began working as an ACT testmaster, Seamus signed up for and took the SAT again in an effort to improve his question-writing ability. He paid close attention to the science questions on both versions of the SAT, but did not duplicate any of those questions in his work writing questions for the ACT.

College Board Learns

College Board recently learned about ACT's job offer to Hannah. While investigating the possible trade secret issues involved, College Board also learned that one of ACT's current testmasters-Seamus-had taken the SAT right before and right after being hired by ACT. Answer the questions below based on the law and the above facts. For each question, identify any additional information that you would need (if any) to answer the question with greater certainty.

Question 1. Describe a strategy for ACT to protect itself from potential liability for misappropriating others' trade secrets in the future.

Question 2. Describe a strategy for College Board to protect its trade secret information in the U.S. and other countries.