The ability to keep trade secrets private has become increasingly difficult in recent years. Just a few decades ago, the stealing trade secrets generally meant an employee attempted to sneak a stack of papers or copy files onto a floppy disk out of the office. Now, a simple click of a button and a disgruntled employee can send vast amounts of data virtually anywhere.
This is problematic because companies rely on trade secrets to maintain competitive advantages. As such, in the event of misappropriation, it is important to use litigation to protect confidential business information from further unauthorized use or disclosure. Those who find themselves considering this course of action are wise to consider the following points before moving forward.
What constitutes a trade secret?
The first step is to determine if the information at issue qualifies as a trade secret. A trade secret is any information that provides a business with a competitive edge and is not generally known to the public. This can include formulas, practices, designs, processes, or any other confidential business information. To qualify as a trade secret, the information must meet two criteria:
- The information must be secret, meaning it is not known or easily accessible by others who could profit from its disclosure.
- The business must take reasonable measures to maintain its secrecy, such as implementing security protocols or confidentiality agreements.
When the owner of the trade secret meets these criteria, they can take legal action in the event of misappropriation.
What legal remedies are available for trade secret protection?
Both state and federal laws govern trade secret protections. Two of the most applicable laws are the Uniform Trade Secrets Act (UTSA) and the Defend Trade Secrets Act (DTSA). These laws define misappropriation and outline remedies in the event of misappropriation of trade secrets. For legal purposes, this occurs when someone uses or discloses a trade secret without consent. This can happen through theft, breach of a confidentiality agreement, or espionage.
Courts may grant injunctions to prevent further use or disclosure of the trade secret. They may also award damages for economic losses and, in some cases, exemplary damages for willful misconduct.
It is important to note that in the event of a legal challenge courts will review the measures taken to protect the secrets. The court generally looks to the reasonableness of these measures. The definition of “reasonable measures” evolves. As such, it is wise for those who own valuable trade secret information to review their procedures for protecting this information and update as necessary to better ensure their methods withstand legal scrutiny in the event of a challenge.