As a trade secret law firm, we have seen many cases regarding trade secrets. But what are trade secrets? Trade secrets usually are customer lists, sensitive marketing information, unpatented innovations, proprietary software, formulas or recipes, techniques, processes, and other unique business practices that provide the company with a distinct business advantage.
Some of the information that would make the knowledge a trade secret is:
- It is known only by the employees involved in this particular business
- The information is not known to persons outside of this singular business
- It is valuable to the company
- It is known to be a guarded secret by the company with measures put in place to do so
- It is exceedingly difficult for others to obtain or duplicate
These trade secrets are usually protected by a carefully worded Non-Disclosure Agreement (NDA) signed by both the company and the employee at his or her time of employment.
Also, you need to know that California is one of the few states that have in place a Uniform Trade Secrets Act. Most states do not have legal provisions in place to protect trade secrets.
California is unique in that its trade secrets, if developed by a current employee, are owned by the company alone. If the employee developed the trade secret on his or her own, without the help of or use of materials from the company, then this ownership would not usually be valid.
An employee who steals a trade secret can be prevented from disclosure by court order or an injunction. This fact holds for both actual and threatened misappropriation. The injunction may be terminated when and if the trade secret ceases to exist; usually, however, it may be continued for an additional reasonable amount of time to eliminate any commercial advantage that otherwise would be derived from the misappropriation.
What is Misappropriation of a Trade Secret and What Are the Possible Penalties?
In California, misappropriation has a singular legal definition which includes two distinct types of misuse (or theft):
- The acquisition of the information was acquired by improper means
- The use or disclosure of trade secrets by another or to another
Improper means refers to the theft of the trade secret information by bribery, misrepresentation, breach of the employee’s duty to protect the information, or even “corporate espionage” by electronic means. Simply, the employee obtained or distributed the information illegally.
The second part of the definition includes cases by which a current or former employee could solicit new accounts on behalf of a new employer. This also constitutes the misappropriation of a trade secret.
The penalties can be severe, if the employee is found to be accountable for the misappropriation of the trade secret information. The employee’s company (or victim) of the trade secret misappropriation may seek substantial financial compensation that considers the actual loss of the profits (or “unjust enrichment”) due to the misappropriation of the trade secret thief. In certain severe and dire situations, a California court can award punitive damages up to twice the amount of any award. Attorney fees may also be included, especially if the misappropriation was willful and malicious.
Keep in mind that the legalities of these types of cases are overly complex and usually may hinge on the validity or the wording and intent of the non-disclosure agreement signed by the employee. If the wording of the agreement is not specific, it may not hold up under scrutiny so would not provide the protections that the employer intended for the company.
Hundreds of thousands and even millions may be at stake. So, you, as the accused, cannot take this matter lightly! It could ruin you financially, and possibly stop you from gaining further employment in your chosen field. The sooner you consult with a San Francisco trade secrets lawyer, the better your outcome may be.
Do Non-Disclosure or Confidentiality Agreements Hold Up in the California Courts?
Hard cold facts show that most NDAs do not hold up in court and that their wording must be exact. Also, non-disclosure agreements are most effective in establishing a paper trail of confidential information as it relates to partnerships and stopping partners from misappropriating proprietary information.
Non-disclosure agreements have legal standing in California, but they must be exactly and properly drafted, or they may be deemed unenforceable. The onus is on your company (or the employer) to avoid bigger problems down the road. They need to ensure that their current agreements are enforceable in a misappropriation case.
Here again is a prime example of how your California (or San Francisco) trade secrets attorney can be invaluable to your defense. He or she will thoroughly sift through the details of your case and your non-disclosure (or non-compete) agreement and defend you in the most professional manner possible.
What Steps Should I Take Immediately?
You see that these cases can legally be serious, damaging to you and your family, and financially catastrophic. Most cases depend on numerous facts, but, most of all, on the validity of your non-disclosure or non-compete agreement.
Since the advent of the California Uniform Trade Secret Act, trade secret misappropriation cases have been filed at an ever-increasing rate. Over approximately the past three decades, damages in litigation which include trade secrets have totaled approximately $3 billion with the five largest awards each being over $100 million!
If you’ve been accused by your employer of violation of a trade secret agreement, consult (or retain) a California intellectual property and trade secrets attorney, immediately. You do have rights and your trade secrets attorney will use all the varied details of your case to professionally defend you, your family, your career, and your future.
