Confidential material often contains significant intellectual property, significant business information, customer lists, technical know-how, and secret “ingredients” and procedures. These are often best protected as Trade Secrets. These Trade secrets are not public knowledge, unlike other forms of IP (intellectual property) such as copyrights, trademarks, and patents. Coca-Cola’s secret recipe is perhaps the best example of a trade secret that is legally protected. Proprietary information, such as formulas, recipes, customer lists, and other data, can give a company a considerable edge in the marketplace. The theft or disclosure of such confidential data can have disastrous results both monetarily and in market share. If you have reason to believe your trade secrets have been disclosed, stolen, or about to be released, you must act quickly to contain the damage before it is too late.
Heimlich Law, PC, based in Silicon Valley in California, represents businesses in IP matters, including trade secrets, and is prepared to protect your intellectual property rights. Get in touch with us so we can start working on your case.
Theft of interstate trade secrets is illegal for both individuals and businesses. The Defend Trade Secrets Act (DTSA) allows suing for injunctive relief and damages if your trade secrets are stolen. This may work even if the accused is in another country because the 1996 Economic Espionage Act (EEA) criminalizes stealing trade secrets for a foreign agent. That is liability can attach to any person or entity which intentionally or knowingly engages in any of the following actions: theft or concealment of a trade secret; deceptively obtaining a trade secret; duplication of a trade secret without authorization; knowingly receiving or purchasing a wrongfully obtained trade secret; or attempt or conspiracy to commit any of the above acts.
State laws like California’s also safeguard trade secrets against misuse. Several states have implemented the Uniform Trade Secrets Act (UTSA), which protects commercial secrets. Section 3426 of the California Civil Code protects enterprises’ proprietary information. Ex-employees who steal or misuse confidential information may be sued civilly in California state courts.
Trade secrets are distinguished from public copyrights, trademarks, and patents by their secretive nature. Patents are a creature purely of Federal law. Trademarks are both Federal and State. Copyrights are registered with the federal government. Trade secrets outlive copyrights, trademarks, and patents.
Under California law, you must prove that the content is sensitive business information. Information is a trade secret if any of the following conditions are met:
The Uniform Trade Secrets Act protects formulas, recipes, unpatented innovations, manufacturing processes, computer software or source code, client or customer lists, business and marketing plans, price information and sales predictions, and spreadsheets or other data.
The second part of a trade secret claim is proving that the trade secret knowledge was stolen or misappropriated. Under the UTSA, “misappropriation of a trade secret” is defined as the unauthorized acquisition, use, or disclosure of a trade secret.
Acquiring a trade secret without authorization, primarily through dishonest or unlawful means, is a crime under the UTSA.
A violation of the UTSA may occur when an employee or former employee makes unauthorized use of confidential information. Ex-employees who take private customer lists to seek clients for a new job are a common source of trade secret litigation. The use of confidential information for customer acquisition is generally regarded as a clear violation of California trade secret law due to the UTSA’s prohibition on using or disclosing trade secret information.
To violate the UTSA, someone doesn’t need to have bad intentions when using or disclosing a trade secret. The corporation might be entitled to initiate a legal claim against the former employee if the information was revealed mistakenly or otherwise without the employer’s permission.
Under both Federal and California law, you can file a civil suit for damages. Several potential compensation options exist in the event of a successful trade secret claim. A permanent injunction is one remedy in trade secret litigation, and it orders the defendant to cease all further use or disclosure of the trade secrets raised in the lawsuit.
Monetary damages are another option for a successful trade secrets action. A court may require the defendant to pay you money to make up for any damages you incurred due to the trade secret misappropriation, depending on the specifics of your case. The defendant may also be required to disgorge any gains and/or profits made as a result of the trade secret theft or misappropriation. If the defendant’s actions were highly purposeful and malicious acts, the court could compel the payment of punitive damages. The plaintiff may be able to get their legal fees paid for by the defendant in such a case (but don’t count on it).
We advise businesses on how to safeguard their trade secrets from the beginning of the hiring process, helping them be proactive and avoid lawsuits. This involves drafting confidentiality and/or nondisclosure agreements (NDAs) to try and prevent employees from stealing or leaking proprietary information and when they leave the organization and enforcing such regulations as restricting access to certain information. Additionally, your employee handbook should have a section on Trade Secrets.