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Trade Secret Regulations

Trade secrets are vital to a business’s growth and development.  From a practical standpoint, the advantage a business may have vanishes once the trade secret is publicly known. As a result, businesses have employed various methods to prevent the leaking of trade secrets. From confidentiality agreements to encryption, a smart business should attempt to prevent the risks. However, these efforts may not be enough, calling for the need of regulation. In general, the applicable regulations primarily clarify the definitions, parameters, and remedies for trade secret theft.

Uniform Trade Secrets Act

The Uniform Trade Secrets Act (UTSA) has been adopted in forty-seven states and the District of Columbia. It defines a trade secret as information that derives economic value from its secrecy and is subject to reasonable effort to maintain its secrecy.

The use of a trade secret does not automatically constitute misappropriation. Under the UTSA, misappropriation is defined as acquisition of information through improper means or the disclosure or use of another’s trade secret when it is known or should be known it was acquired through improper means, accident, or mistake. It defines improper means to include “theft, bribery, misrepresentation, breach or inducement of a breach of duty to maintain secrecy or espionage through electronic or other means.” Also, there is no statute of limitation for trade secret infringement claims under this statute.

Under the UTSA, the remedies available for trade secret infringement include damages, profits, reasonable royalties, and injunction. Damages could be both actual loss and unjust enrichment caused by the misappropriation. The injunction would call for the enjoinment of actual or threatened misappropriation. However, the injunction can be terminated when the trade secret no longer exists. The injunction can be continued for a reasonable period after the non-existence to terminate any commercial advantage the misappropriation created.

What is the law for states that have not adopted the UTSA?

Three states have not adopted the UTSA. For example, New York is one of those states. New York does not have any trade secrets laws and relies primarily on the common law. New York’s definition of trade secrets is confidential information a business uses to create an advantage over its competitors. This differs from the general definition since it does not require the advantage to be an economic one.

However, like the UTSA, New York has created civil liability for misappropriation of trade secrets. Also, the stealing of trade secrets can create criminal liability under the state’s criminal larceny statute. New York defines misappropriation as a disclosure of trade secrets acquired through improper means or through a breach of confidentiality. The remedies available are limited to injunctive relief and damages. There is, however, a statute of limitation on trade secret infringement claims. In New York, the statute of limitation is three years from the discovery of the misappropriation.

Also, the other states that have not adopted the UTSA are Massachusetts and Texas. Both states either follow the common law or have their own statute on trade secret protection.

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