Non-Competition And Trade Secrets

Trade secrets can be anything from customer lists, sensitive marketing information, unpatented inventions, software, formulas and recipes, techniques, processes, and other business information that provides a company with a business edge.

Information is more likely to be considered a trade secret if it is:

• Not known outside of the particular business entity
• known only by employees and others involved in the business
• subject to reasonable measures to guard the secrecy of the information, and
• difficult for others to properly acquire or independently duplicate

Misappropriation Of Trade Secrets In California

California’s version of the Uniform Trade Secrets Act (California Civil Code Sections 3426- 3426.11) refers to the theft of trade secrets as misappropriation. Under California law, “misappropriation ” refers to the acquisition of a trade secret by someone who knows or has reason to know that the trade secret was acquired by improper means — theft, bribery, misrepresentation, breach or inducement of a breach of duty to maintain secrecy. It also includes the disclosure or use of a trade secret without consent by someone who used improper means to acquire knowledge of the trade secret – for example, an ex-employee who spills company secrets to a rival.

Under California law, a trade secret thief can be prevented from disclosure by court order – an injunction. The injunction may be terminated when the trade secret has ceased to exist, but the injunction may be continued for an additional reasonable period of time in order to eliminate any commercial advantage that otherwise would be derived from the misappropriation.

A victim of trade secret theft can also seek financial compensation that measures the actual loss attributed to the theft or the profits (or “unjust enrichment”) acquired by the trade secret thief. In egregious situations, a California court can award punitive damages up to twice the amount of any award. Attorney fees will also be awarded in egregious (willful and malicious) situations.

California is unique in that its laws expressly establish that the employer owns trade secrets created by an employee. (Cal. Labor Code Sec. 2860). However, an employer in California would not own trade secrets created on an employee’s own time without the use of employee materials.

Courts are very careful about determining what a trade secret is, and denying such protection to things like commonly known methods, recipes, lists of well-known businesses, etc.

What Is Misappropriation Of A Trade Secret?

Misappropriation simply means taking or using something which the individual is not entitled to take or use. For example, misappropriating cookies means putting one’s hand in the cookie jar and taking cookies that they weren’t supposed to take. Misappropriation of a trade secret can involve wrongly or improperly downloading confidential information that provides value to the company, and using that information with/for a competitor. Read More

If you need any further clarification regarding Non-Competition And Trade Secrets, please contact us at (310) 477-7767 or fill out the form here.