WHAT IS A TRADE SECRET?

A trade secret is any information, including a formula, pattern, compilation, program, device, method, technique, or process, that: (1) derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and (2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

A party that has been damaged by the misappropriation of the trade secret may recover the actual loss caused by misappropriation.  The party also may recover damages due to the unjust enrichment caused by misappropriation.  If such damages or unjust enrichment are not provable, the court may order payment of a reasonable royalty for no longer than the period of time the use could have been prohibited.  In cases of willful and malicious misappropriation, the court may award exemplary damages in an amount not exceeding twice any award made.  Additionally, the court has the power to award a reasonable attorneys fee and costs in the appropriate case.

Actual or threatened misappropriation can be enjoined by the Federal or State Courts.  The court may protect a trade secret through an injunction.  The court may continue injunction for an additional period of time in order to eliminate commercial advantage that otherwise would be derived from the misappropriation.  Upon application to the court, an injunction shall be terminated when the trade secret has ceased to exist.  In certain situations, if the court determines that it would be unreasonable to prohibit future use, an injunction may condition future use upon payment of a reasonable royalty for no longer than the period of time the use could have been prohibited.

As defined under the trade secret law, "misappropriation" means: (1) acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or (2) disclosure or use of a trade secret of another without express or implied consent by a person who a) used improper means to acquire knowledge of the trade secret; or b) at the time of disclosure or use, knew or had reason to know that his or her knowledge of the trade secret was derived through improper
means.

Improper means, as defined by the law, includes theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means.  Reverse engineering or independent derivation alone shall not be considered improper means.

California enacted the Uniform Trade Secrets Act to codify the law which had been evolved through judicial decisions for remedies in trade secret cases.  A properly drafted trade secret agreement will protect most employers their confidential information from employees or from others.  Duration of trade secret is unlimited as long as there were efforts by the employer to maintain the information as “trade secret” based on the obligations and guidelines imposed by law. For this purpose, the employer must adhere to the guidelines very meticulously. The employer must also establish internal controls and procedures for monitoring in addition to executing trade secret agreements with its employees.

© 2016 by The Patel Law Firm

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