Trade Secret Misappropriation

At Cohen Employment Law, we represent our clients in high stakes disputes involving the misappropriation of trade secrets and other confidential information. Our firm has significant experience successfully litigating claims in which highly sensitive confidential information, such as software, code, customer lists, business strategies, and more, have been stolen, misused, or disclosed without authorization. Whether you are seeking to protect your trade secrets or defend against accusations of misappropriation, we are here to guide you through every step of the process.

What is a Trade Secret?

Like patents, copyrights, and trademarks, trade secrets are a type of intellectual property that are vital to a business’s success. Unlike those other forms of intellectual property, trade secrets do not require formal registration and may be maintained indefinitely. Trade secrets generally have three key criteria:

Information — A trade secret must be some type of business, financial, scientific, technical, economic, or engineering information, including formulas, patterns, processes, techniques, plans, designs, algorithms, code, customer lists, customer requirements, supplier lists, product specifications, financial data, and marketing strategies, regardless of how the information is stored or maintained.

Independent economic value — A trade secret must derive independent economic value from not being generally known, and not being readily ascertainable through lawful means, by the public, a competitor, or any other person.

Reasonable efforts to maintain secrecy — The owner of the trade secret must take reasonable steps to keep the information confidential. This may include limiting access to those with a need to know, requiring those with access to sign a confidentiality agreement, encrypting digital files, and implementing physical security measures.

Well known examples of trade secrets include Coca-Cola’s formula and Google’s search algorithm.

What Constitutes Trade Secret Misappropriation?

Trade secret misappropriation occurs when someone improperly acquires, uses, or discloses a trade secret via improper means or without appropriate authorization. The legal framework for addressing trade secret misappropriation is outlined by federal and state law, including the Defend Trade Secrets Act, the North Carolina Trade Secrets Protection Act, and the Virginia Uniform Trade Secrets Act.

Trade secret misappropriation can take many forms. What follows are some examples of trade secret misappropriation:

Downloading code — An employee downloads proprietary code from their employer’s network onto a thumb drive, then uses the code in launching a competing program.

Emailing plans and strategies — A manager sends an email containing her employer’s plans and strategies from her work email address to her personal email address. She then uses the plans and strategies while employed with a new employer.

Uploading prospect and customer lists — A salesperson uploads prospect and customer lists from his employer’s system onto a personal cloud service, like iCloud, Google Drive, or Dropbox, referring back to the lists while employed by a competitor.

Exceeding authorization — An engineer employed by a company that contracts with a governmental agency is given access to the agency’s data pursuant to a confidentiality agreement. The engineer then exceeds the authorization provided to her, using her access to publicly leak sensitive data.

Using financial data personally — An employee with access to a company’s financial forecasts and reports uses that data to make personal financial decisions or discloses the same to his friends or family members.

Remedies for Trade Secret Misappropriation

The law offers several potential remedies when trade secrets are misappropriated. The appropriate remedy depends on the nature of the case, the damages caused, the likelihood of additional harm, and other factors. Available remedies generally include:

Injunctive relief — One of the first steps in most trade secret cases is to seek an injunction to stop further misappropriation of the trade secrets. Injunctions may be sought for the life of a case or on an indefinite basis.

Monetary damages — A court can require a defendant to pay monetary damages to the victim of trade secret misappropriation. Monetary damages may include actual damages caused by the misappropriation (such as lost profits) and punitive damages for willful and malicious misappropriation.

Attorneys’ fees — The prevailing party in a trade secret misappropriation action may be awarded their attorneys’ fees.