WHAT TO DO IF YOUR TRADE SECRET US MISAPPROPRIATED?
The economic system in the United States is based upon free and fair competition. The law prevents
businesses from taking unfair advantage of their competitors. Essential to this legal prevention is the protection of intellectual property, which includes trade secrets, trade symbols, copyrights, and patents.
These interests are protected from infringement, or unauthorized use, by others. Such protection is essential to the conduct of business. For example, a business would be far less willing to invest considerable resources in research and development if the resulting discoveries, inventions, and processes were not protected
by patents and trade secrets.
Similarly, a company would not be secure in devoting time and money to marketing its products and services without laws that protect its trade symbols and trade names. Moreover, without copyright protection, the publishing, entertainment, and computer software industries would be vulnerable to piracy, both by corporate competitors and by the general public.
TRADE SECRETS
Every business has secret information. Such information may include customer lists or contracts with suppliers and customers; it also may comprise formulas, processes, and production methods that are vital to the successful operation of the business.
A business may disclose a trade secret in confidence to an employee with the understanding that the employee will not reveal the information to others. To the extent the owner of the information obtains a patent on it, it is no longer a trade secret but is protected by patent law.
Some businesses, however, choose not to obtain a patent because it provides protection for only a limited time, whereas State trade secret law protects a trade secret as long as it is kept secret. Moreover, if the courts invalidate a patent the information will have been disclosed to competitors without the owner of the information obtaining any benefit.
The Uniform Trade Secrets Act, promulgated in 1979 and amended in 1985, has been adopted by almost all of the States.
DEFINITION
A trade secret is commercially valuable information that is guarded from disclosure and is not general knowledge. The Uniform Trade Secrets Act defines a trade secret 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.
A famous example of a trade secret is the formula for Coca-Cola.
MISAPPROPRIATION
Misappropriation of a trade secret is the wrongful use of a trade secret. A person misappropriates a trade secret of another (1) by knowingly acquiring it through improper means or (2) by disclosing or using it without consent, if her knowledge of the trade secret came under circumstances giving rise to a duty to maintain secrecy or came from a person who used improper means or who owed the owner of the trade secret a duty to maintain secrecy.
Trade secrets are most frequently misappropriated in two ways: (1) an employee wrongfully uses or discloses such information, or (2) a competitor wrongfully obtains it. An employee is under a duty of loyalty to his employer, which, among other responsibilities, obligates the employee not to disclose trade secrets to competitors. It is wrongful, in turn, for a competitor to obtain vital secret trade information from an employee through bribery or other means.
Besides breaching the duty of loyalty, the faithless employee who divulges secret trade information also commits a tort. In the absence of a contract restriction, an employee is under no duty upon termination of his employment to refrain either from competing with a former employer or from working for a competitor of that employer; however, he may not use trade secrets or disclose them to third persons.
The employee is entitled, nevertheless, to use the skill, knowledge, and general information he acquired during the previous employment relationship.
Another improper method of acquiring trade secrets is industrial espionage conducted through methods such as electronic surveillance or spying. Improper means of acquiring another person’s trade secrets also include theft, bribery, fraud, unauthorized interception of communications, and inducement or knowing participation in a breach of confidence.
In the broadest sense, discovering another’s trade secrets by any means other than independent research or personal inspection of the publicly available finished product is improper unless the other party voluntarily discloses the secret or fails to take reasonable precautions to protect its secrecy.
REMEDIES
Remedies for misappropriation of trade secrets are damages and, where appropriate, injunctive relief. Damages are awarded in the amount of either the pecuniary loss to the plaintiff caused by the misappropriation or the pecuniary gain to the defendant, whichever is greater.
A court will grant an injunction to prevent a continuing or threatened misappropriation of a trade secret for as long as is necessary to protect the plaintiff from any harm attributable to the misappropriation and to deprive the defendant of any economic advantage attributable to the misappropriation.
CRIMINAL PENALTIES
In 1996 Congress enacted the Economic Espionage Act of 1996 prohibiting the theft of trade secrets and providing criminal penalties for violations. (The statute does not provide any civil remedies.)
The statute defines trade secrets to mean 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 if
(A) the owner thereof has taken reasonable measures to keep such information secret; and (B) the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, the public.
The Act broadly defines theft to include all types of conversion of trade secrets, including the following:
1. stealing, obtaining by fraud, or concealing such information;
2. without authorization copying, duplicating, sketching, drawing, photographing, downloading, uploading, photocopying, mailing, or conveying such information; and
3. purchasing or possessing a trade secret with knowledge that it had been stolen.
The Act punishes thefts of trade secrets, as well as attempts and conspiracies to steal secrets, with fines, imprisonment for up to 10 years, or both. Organizations that violate the Act are subject to fines of up to $5 million.
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