REMEMBER TO KEEP YOUR TRADE SECRETS "SECRET."

Most companies have trade secrets.  These may include customer lists, strategic information related to product marketing, a formula or methodology used in making a product, and business methods that improve efficiency or reduce costs, among other items.  Often such trade secrets are critical to a company’s ability to compete and succeed.  Unlike with patents, where owners must disclose the details of their inventions to receive patent rights, the owners of trade secrets risk losing legal protection if they do not keep details secret.

With courts increasingly invalidating business method patents held to be directed to abstract ideas,[1] trade secret protection for such business methods has increased in appeal.  Trade secrets may now be protected from misappropriation under both state law (Uniform Trade Secrets Act (“UTSA”)[2]) and federal law (Defend Trade Secrets Act (“DTSA”)[3]).  The state and federal laws are quite similar in definitions, requirements and relief provided except that the federal scheme allows for ex parte seizure of misappropriated trade secrets.  Both permit injunctive relief and the recovery of actual loss, unjust enrichment damages; and for willful and malicious misappropriation, exemplary damages in an amount not exceeding twice the damages award, and an award of reasonable attorneys’ fees.

Both the UTSA and DTSA require that companies seeking to protect their trade secrets make reasonable efforts to maintain their secrecy.  Courts have disallowed trade secrets protection where plaintiffs have not taken reasonable steps to keep their trade secrets confidential.  See, e.g., PatientPoint Network Solutions, LLC v. Context Media, Inc. (S.D. Oh. 2014) (no non-compete or non-disclosure agreements were timely requested, and plaintiff unreasonably delayed in requesting return of laptop and iPad and other proprietary information); Delcath Sys., Inc. v. Folz, 2007 Conn. Super. LEXIS 101 **4, 16 (Conn. Super. Ct. Jan. 12, 2007) (no policy or procedures concerning trade secrets or confidential information and plaintiff failed to request an employee to return company information known to be on his home computer).  Non-disclosure and other agreements and technology have been recognized by courts as important measures to protect trade secrets.  See Aetna v. Fluegel, 2008 Conn. Super. LEXIS 326, *14 (Feb. 7, 2008) (“Aetna goes to great lengths to protect its trade secrets.  Aetna employees must annually review and agree to non-disclosure agreements.  Aetna’s high level employees … must sign a non-solicitation, confidentiality and non-disclosure agreement.  Aetna marks all appropriate documents as confidential and uses technology including password protection and encryption to limit access to confidential information to only key employees.”)

So be warned: if you wish to rely on legal trade secret protections, take appropriate measures to guard your trade secrets.  Discuss options you can have to protect your trade secrets by contacting us at info@toikkalawgroup.com.

© 2017 Richard S. Toikka, All rights reserved.

 

[1] See, e.g., Alice v. CLS Bank, 134 S. Ct. 2347 (2014).

[2] http://www.uniformlaws.org/shared/docs/trade%20secrets/utsa_final_85.pdf.  Some form of the UTSA has been adopted by 48 states and the District of Columbia.  New York and Massachusetts recognize a common law claim of misappropriation.

[3] 18 U.S. Code Ann. §1831-39