Trade Secret

Orange County Trade Secret Litigation — Misappropriation of Trade Secrets

Theft of trade secrets is a federal crime and can expose an individual to civil liability under California state law.

California’s Trade Secrets Act

California enacted the Uniform Trade Secrets Act (CUTSA) to combat the theft of trade secrets by a wide range of means. CUTSA prohibits misappropriation of trade secrets by means of theft, fraud, misrepresentation, bribery, or breach of a covenant or duty to maintain secrecy. Additionally, it also prohibits the disclosure or use of a trade secret if an individual acquired a trade secret using improper means such as soliciting trade secrets from a former employee of a competitor.

The prohibition against the use of improperly acquired trade secrets also extends to companies that have reason to know that information used by the company was a trade secret. This level of knowledge is known as constructive knowledge because a company may be liable for breaking CUTSA even if it did not actually realize that it possessed improperly gathered trade secrets. Nevertheless, if the company should have known they may be liable.

Definition of Trade Secrets

Trade secrets are information including “formula[s], pattern[s], compilation[s], program[s], device[s], method[s], technique[s], or process[es]” that give a company a business edge by keeping the information from being publicly available. Cal. Civil Code § 3426.1.

Additionally, the following six factors are used to determine whether specific information is trade secrets:

  • Whether it is known outside of a particular business entity.
  • Whether employees and other insiders know the information.
  • Whether the company has taken steps to guard the secrecy of the information.
  • Whether the information could be easily duplicated by others efforts.
  • The value of the information on the market.
  • The amount of resources and effort used in first acquiring the information.
  • California law also adds that trade secrets created by an employee on the job are the property of the employer.

Common Examples of Trade Secret Misappropriation

Every CUTSA case has 3 necessary elements: the information alleged to be a trade secret must actually be covered under CUTSA’s definition; the holder of the secret must show that it took steps to guard against disclosure of the information; and the information must have been wrongfully acquired. Examples include:

  • Unpatented products
  • Software
  • Recipes
  • Customer lists and related marketing information

Trade secrets continue to be protected under CUTSA for an indefinite period of time until the information becomes public knowledge. Although contracts are not necessary to bring a claim against another for violation of CUTSA a contract can be useful in that it provides evidence that a secret holder took steps to guard against disclosure of its information.

Remedies for Misappropriation of Trade Secrets

Competitors can be prevented from using trade secrets improperly acquired by an injunction. In some circumstances an injunction can allow future use by the competitor so long as it pays a royalty for as long as the information remains a trade secret.

Money damages are also available in the actual amount of the loss due to the theft of trade secrets or for restitution. Restitution damages require the party that misappropriated the trade secret to pay back the profits it acquired through the use of the illegally obtained information. Finally, punitive damages and attorneys fees are available in cases of egregious situations where the misappropriation was willful and malicious. Attorney’s fees can also be awarded against a plaintiff if a claim is brought in bad faith.

Orange County Trade Secrets Litigation Attorney

The Law Offices of Tony T. Liu pursues and defends trade secret disputes. To schedule a consultation with an experienced California business law attorney call (714) 415-2007 today.

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