Protect Your Most Valuable Asset – The California Uniform Trade Secrets Act
Does your business have trade secrets? Of course it does! Trade secrets in California means any “information, including a formula, pattern, compilation, program, device, method, technique or process” that has actual or potential value that is not known to the public who could obtain economic value from its “disclosure or use” which is the subject of efforts to keep it secret. California Civil Code Section 3426.1(d). It can be a customer list, business plan, spreadsheet, board minutes or bid specifications, which, if disclosed to an unintended recipient, has actual or potential value to the recipient. Often, the most probable source of that information is someone from within your own organization and not necessarily from any intentional act.
California protects those trade secrets by prohibiting its misappropriation by two specific types of conduct: (a) improper acquisition of the information and (2) the disclosure or use of the information. “Improper means” of acquiring trade secrets “includes theft, bribery, misrepresentation, breach or inducement of a breach of duty to maintain secrecy, or espionage through electronic or other means.” California Civil Code Section 3426.1(a). The second type of conduct involves disclosure or use of the information. To recover for the misappropriation of trade secrets, the business claiming a misappropriation by a former employee need not show that the employee physically took the information constituting the trade secret, only that the employee used the information taken. There are limits the courts are willing to apply to the misappropriation, however, and the former employer must have some evidence of the use or disclosure of trade secrets before bringing suit.
The penalties for misappropriating trade secrets in California include (i) injunctive relief, i.e., prohibiting the further disclosure of the trade secrets (California Civil Code 3426.2); (ii) damages consisting of actual economic loss, a “reasonable royalty for no longer than the period of time the use could have been prohibited” and, “if willful and malicious misappropriation exists, . . . exemplary damages” not exceeding twice any actual damages or royalties (California Civil Code Section 3426.3; and (iii) potentially, attorney’s fees.
Employers should take reasonable steps to keep all of their information protected from disclosure by following these simple rules:
- Ensure that polices are in place to regulate the use of electronic media, such as thumb drives, CDs, the internet and e-mail systems, and make sure those policies are consistently applied throughout the organization
- Use employment and confidentiality agreements which prohibit employees from disclosing or using your trade secret
- Define what you consider to be trade secrets for your employees and remind them frequently of their obligation not to disclose that information