by Wm. Greg Bennett, Esq.
Your long time employee starts his own company and immediately starts stealing your customers. If this happens, you may be the victim of trade secret misappropriation. In this series of articles, I will explain, using as little “legalese” as possible, what a trade secret is, what can be done to protect your trade secrets and what can be done after a former employee has stolen your trade secrets.
Under the Uniform Trade Secret Act (the “UTSA”), “trade secret” means virtually any information 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” (Civil Code §3426.1).
To satisfy the first prong of this test, information must derive economic value from the fact that is it a secret. If information is to qualify as a trade secret, it must not be generally known in the industry, by the public or by others who can derive an economic benefit from its use. So, for example, if the information could be easily discovered on the Internet, it would be considered “easily ascertainable” and not qualify as a trade secret.
Also, the alleged trade secret must not be the same as the general knowledge or skills of the employee. In other words, the knowledge and skills an employee obtains while working for you is his to take with him. You, as an employer, can’t prevent a former employee from utilizing his knowledge and talents for another employer, even if the new employer is in the same industry and gains an advantage from your former employee’s general knowledge and skill.
The final element in determining whether information is a protected trade secret is whether the employer made reasonable efforts under the circumstances to keep the information secret. What is considered a “reasonable effort” differs from industry to industry and situation to situation. Some measures taken by employers that have been considered reasonable are: password protecting information, implementing visitor access procedures, requiring nondisclosure agreements, shredding discarded documents and encrypting all information sent electronically. The general rule is that “although heroic measures need not be taken to preserve secrecy, a substantial element of secrecy must exist so that, except by the use of improper means, there would be difficulty in acquiring the information.” Steps must be taken to deal with the problems of both inadvertent and intentional disclosure.
In my next article, I will give specific examples of what does and does not constitute a “reasonable effort” to protect a trade secret, what specific steps can be taken to protect your trade secrets and what constitutes the misappropriation of a trade secret.
Wm. Greg Bennett, Esq. is an attorney with over 20 years experience in private business and commercial real estate transactions and litigation. Mr. Bennett is a partner in the law firm of Bennett & Bennett, APC with his wife, Kelly Bennett, Esq. who practices family law, is a professional mediator and the former Mayor of Murrieta. Mr. Bennett is also a partner in Mediation Law Group, Inc. an alternative dispute resolution provider specializing in civil litigation and divorce mediation. Mr. Bennett can be reached by calling (951) 719-3456 or emailing him at gregbennett@bennettandbennettlaw.com