Understanding California’s Trade Secret Laws

As a business owner, you likely have information that you would not want the public or your competitors to learn. This information can be anything from your marketing plan to a recipe that has been handed down for generations. Trade secrets are usually protected by nondisclosure agreements and are easily stolen because they are usually nothing more than information that is obtained by virtue of being an employee of your company. So what exactly is a trade secret and what happens when someone takes it?

What is a trade secret?

California has adopted a version of the Uniform Trade Secrets Act (UTSA) which defines a trade secret as information that derives economic value, is not generally known, and is treated as a secret. Information that may be protected is unlimited, but generally it is technical or business information.

Examples of trade secrets include software, formulas, recipes, processes, or even customer lists and marketing information. As you can see, a trade secret is a broad term that encompasses a variety of information. Although the UTSA protects a lot of information, California courts are even more likely to recognize information as a trade secret so long as the business takes reasonable measures to protect the information, whose value depends in part on it being kept a secret.

How does California law protect your business’s trade secrets?

Under California’s UTSA, the theft of a trade secret is known as “misappropriation.” A trade secret is misappropriated when someone acquires it who knows, or has reason to know, that the trade secret was obtained through “improper means.” Improper means refers to theft, bribery, misrepresentation, a breach of confidentiality, or use of the trade secret without consent by someone who used such improper means to get it.

Penalties

California prohibits use of trade secrets by a company that has “reason to know” (referred to as constructive knowledge) that the material is a trade secret. Under California law, a trade secret claim must be brought within 3 years after the misappropriation is discovered. If you bring a claim, the thief can be prevented from disclosing it by a court ordered injunction and is applicable for both actual or threatened misappropriation. The duration of the injunction will vary based on the circumstances, and can endure for as long as the trade secret exists, and even for a reasonable period of time after that.

If another company exploits your trade secrets either by actual or constructive knowledge, you may recover damages for the actual loss caused by the misappropriation. Further, you may also recover for any other benefit caused by misappropriation that is not taken into account in computing damages for actual loss.

Limitations to protection

In California, the former employer must have actual evidence of the use or disclosure of trade secret information prior to bringing a lawsuit. Therefore, merely showing that disclosure is inevitable or highly likely is not enough for a claim.

Trade secret misappropriation cases move fast, with temporary restraining orders and preliminary injunctions being granted without the need for a trial or extensive proceedings. Therefore, it is essential to speak with an experienced attorney immediately if you would like to either file a claim or have been served with an injunction. At Integrated General Counsel we are experienced in helping businesses in such claims within the state of California. Contact us today to see how we can help.

Share this on...Share on FacebookTweet about this on TwitterShare on LinkedInShare on Google+Email this to someone

Written by Integrated General Counsel

Our focus includes handling a variety of corporate matters and also includes litigation in state and federal courts. Our current practice includes providing transactional services and representing a variety of small and medium-sized companies as their outsourced general counsel.