As explained in the article Protect My Confidential Information, trade secrets are substantially more valuable than confidential information. They are the underpinning of a company’s competitive advantage. Recognizing the enormous value of this information, the California legislature first enacted the Uniform Trade Secrets Act (UTSA) in 1984, which has been amended and augmented since. In 2016, the federal government enacted a federal law known as the Defend Trade Secrets Act (DTSA). While there are some substantive differences between both laws, in many cases they can be viewed as complimentarily, with the new federal law providing for even more remedies.
Is It a Trade Secret?
Under the UTSA, a trade secret is defined as “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. Cal. Civ. §3426.1. The UTSA is usually intended to protect California companies and/or apply to activities within the state.
Under the DTSA, a trade secret is defined as “all forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing if (A) the owner thereof has taken reasonable measures to keep such information secret; and (B) the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, another person who can obtain economic value from the disclosure or use of the information. 18 U.S.C. §1839. The DTSA is intended to apply to trade secrets that are “related to a product or service used in, or intended for use in, interstate or foreign commerce.”
As one can readily see, the law under both acts are relatively similar, but federal law lists more explicit categories of information that can be protected. As the federal statute is much newer, Courts may interpret this statute to broader or narrower than California does.
Items Usually Considered Trade Secret
California has historically found the following types of information are trade secrets, provided that all other rules have been met:
- Customer Information – Identities of a company’s customers, those customers’ purchase (preferences), contract terms with those customers, and any special pricing
- Supplier Information - Identities of a company’s vendors, what products vendors sell to the company, vendor contract terms, and any non-standard pricing offered
- Employee Information – Usually the combination of names, skills, and salaries
- Formulas – Recipes for food, beverages, and chemical compositions
- Methods –Manufacturing techniques, the specification of a production line
- Research and Development – New products, technologies, and innovations
- Financial Information – Any aspect of a company’s financial information including revenue, profitability, and creditworthiness
Trade Secrets - Not Meant to be Shared
As society becomes more mobile and markets more global, it’s more important than ever to guard your company’s trade secrets. Tightly-held trade secrets can fly the coop in a heartbeat in this age of smartphones, flash drives and social media. Plus, there’s always “sharing” things remembered or scribbled down. If a former partner, disgruntled employee or bribable confidant chooses to reveal what’s behind the curtain to your industry rival, or even appropriate it for themselves, you could be waving good-bye to your competitive advantage and all the associated profits.
Once the Secret’s Out, You Better Make a Move
It took herculean efforts to develop your products and services, distribution, customer relationships, and operations. If someone takes your new technology, customers, and other sensitive information, time is of the essence. You need to act extremely quickly to stem the damage.
A trade secrets’ portfolio can be more valuable than all your other intellectual proper including copyrights, trademarks and patents…combined. The good news is there are many legal tools available, like seizure order, injunctions, and many more, that can limit the harm and ensure you’re fairly compensated.
At Nexio Law Firm our Trade Secrets Toolbox was created by our experienced attorneys who are extremely well-versed in both federal and state trade secret law. Whether or not someone knowingly uses or acquires your trade secrets without consent, you have rights that can entitle you to halt the damage, prosecute the thieves, seek penalties for misappropriation, and win compensation. Put us to work for you and reclaim what’s rightfully yours!
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The attorneys at Nexio Law Firm are committed to helping our clients achieve their objectives. We can be reached at (949) 478-6830 or complete the contact form and we’ll be in touch soon.