Folder with The Label Trade Secrets and Charts


David H. Schwartz, INC June 13, 2022

When it comes to understanding trade secrets and what they are, the clearest reference point is the fact that Coca-Cola keeps its soft drink recipe locked in a vault in its headquarters in Atlanta, Georgia. Supposedly, no more than two people at any given time have access to the formula. A key characteristic of a trade secret is, accordingly, that the owner goes to special lengths to protect it from falling into the hands of competitors or others who would use it to their own advantage. 

Suppose, however, an employee who is privy to your trade secret—whether it be a recipe, an algorithm, an assembly process, or anything proprietary—takes that privileged information to a competitor after leaving your employ. That competitor takes your trade secret and utilizes it for their own profits. You want to sue, but how do you prove you have a protectable trade secret?

If you believe your business in or around the San Francisco area has been subject to trade secret theft—called “misappropriation” in California—and you want to seek civil action against the misappropriator, contact the Law Offices of David H. Schwartz, INC. With 45 years of experience in business litigation, attorney David H. Schwartz can help you press your claim and prevent further exploitation of your trade secret.

The Law Offices of David H. Schwartz, INC. proudly serves clients in the Greater San Francisco Bay Area, including San Jose, Santa Clara, San Mateo, Oakland, and Alameda County.

What Is a Trade Secret in California?

The California Uniform Trade Secrets Act (CUTSA) largely mirrors the Uniform Trade Secrets Act (UTSA) put forth by the nonprofit Uniform Law Commission (ULC). The CUTSA defines a trade secret as:

"information, including a formula, pattern, compilation, program, device, method, technique, or process, 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."

Examples of trade secrets include, but are not limited to:

  • Formulas and recipes

  • Survey methods used by professional pollsters

  • A new invention for which a patent has yet to be obtained

  • Marketing strategies

  • Manufacturing techniques

  • Computer algorithms

Misappropriation of Trade Secrets

In legal terms, the taking of another entity’s trade secret to be used for your own advantage is known as misappropriation, which California law defines as obtaining a trade secret through “improper means,” including “theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means.”

The law further states that misappropriation occurs even if the acquiring party “should have known” that “the trade secret was acquired by improper means” without the “express or implied consent” of the owner of the secret.

Proving that You Actually Had a Trade Secret

The Judicial Council of California Civil Jury Instructions for trade secret cases list three elements of proof that must be presented:

  1. The information was secret;

  2. The information had actual or potential independent economic value because it was secret; and

  3. The plaintiff made reasonable efforts to keep the information secret.

For “information,” you can substitute recipe, formula, algorithm, marketing strategy, or whatever the trade secret is purported to be.

The “reasonable efforts” part is crucial. Generally, a trade secret must be safeguarded. Perhaps you don’t have to go to the lengths of Coca-Cola, but you have to restrict access to the trade secret. Generally, you should have employees with access to your trade secret sign nondisclosure agreements (NDAs), so they can’t share the information with others either during employment or afterward.

Recovery Through Court Action

If you take a misappropriation case to court, the Civil Code lists three remedies that can result if you win your case. The first is injunctive relief. The misappropriating party can be ordered by the court to cease violating the trade secret owner’s rights.

The second is damages. The party whose secret has been violated and suffered resulting economic harm may be able to recover for those losses. In addition, if the misappropriation is considered malicious and willful, punitive damages may be awarded.

The third is the recovery of attorneys’ fees from the defendant. Keep in mind that if you fail in your lawsuit, you can be ordered to pay the attorney fees for the defendant.

Trade Secret Misappropriation Attorney
in San Francisco, California

Trade secret legal actions can hinge on a variety of factors, including how serious your efforts were to protect your trade secret. If you have trade secrets, you need to examine your policies and practices to ensure you’re safeguarding everything to the best possible extent.

If you suspect your trade secret has been misappropriated in or around the Greater San Francisco Bay Area, contact the Law Offices of David H. Schwartz, INC. Attorney David Schwartz will consult with you on the details, assess your options, and provide you with a framework for moving forward and protecting your right to your trade secret.