Keeping Trade Secrets from being Disclosed

Trade secrets are a crucial component of many businesses. In order to continue to enjoy the benefits of those trade secrets, it is critical that they are protected from disclosure to the public or your competitors. Through the Uniform Trade Secrets Act (UTSA), businesses are provided with tools to help keep trade secrets from being inappropriately taken or used.

What is a Trade Secret?

California is one of the majority of states that have adopted the UTSA. The few states that have not adopted the UTSA follow common law rules developed through case law. Under California law, a trade secret is information, including a formula, pattern, compilation, program, device, method, technique, or process, that derives independent economic value, actual or potential, from not being generally known to the public, and that is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. A trade secret is unknown by the public or a company’s competitors, and because it is unknown, gives that company an advantage over its competition.

Protection from Misappropriation

The California UTSA defines misappropriation as the:

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.

A common way that a trade secret is disclosed or used without consent is when an employee leaves to take a position in the same field of work. That person may take information with them beneficial to them in their new position at the cost of harming their former employer.

There are two methods in which a company can protect itself from misappropriation. The first is to file for an injunction against actual or threatened misappropriation. Alternatively, it is also possible to recover damages for any actual losses or unjust enrichment caused by the misappropriation. Further, if the misappropriation was willful and malicious, the court may award exemplary damages in an amount up to two times the award made for actual loss or unjust enrichment. However, if neither actual damages nor unjust enrichment can be proven, the court may order the payment of a reasonable royalty for a period no longer than the period of time that the use could have been prohibited.

It is important to note that the action must be brought within three years after the misappropriation is discovered or, by the exercise of reasonable diligence, should have been discovered.

Protect Your Company

The trade secrets that you have worked hard to develop create a competitive advantage for your company. In order to maintain the benefits that trade secrets provide, it is crucial that they be protected from disclosure. The attorneys at the Royse Law Firm can guide you through the prevention of, or recovery for, misappropriation, as well as help you develop strategies to protect your company from having trade secrets taken and disclosed. Contact us today at any of our offices.

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Roger Royse

Roger Royse, the founder of the Royse Law Firm, works with companies ranging from newly formed tech startups to publicly traded multinationals in a variety of industries. Roger regularly advises on complex tax structuring, high stakes business negotiations and large international financial transactions. Practicing business and tax law since 1984, Roger’s background includes work with prominent San Francisco Bay area law firms, as well as Milbank, Tweed, Hadley and McCloy in New York City.
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