Trade Secrets Label on Folder


David H. Schwartz, INC June 19, 2022

Since the enactment of the federal Defend Trade Secrets Act (DTSA) in 2016, there has been an increase in trade secret cases in federal court—including in California, where the legal actions are also backed by the California Uniform Trade Secrets Act (CUTSA).

Generally speaking, if you suspect one of your business’s trade secrets has been misappropriated, you need to prove in court that a trade secret existed, that you took proper measures to safeguard it, and that the defendant you name in the lawsuit is responsible for the misappropriation. If you fail in proving all those elements, then you might be stuck with paying the other party’s legal fees, and the defendant will be free to continue to use your trade secret.

If your business in or around the San Francisco Area is being accused of misappropriating a trade secret—or if your business feels some other entity has misappropriated one of your trade secrets—contact the Law Offices of David H. Schwartz, INC. Attorney David Schwartz will meet with you, analyze the situation at hand, and advise you of your legal options going forward. He has 45 years-plus business litigation experience to bring to each and every case.

The Law Offices of David H. Schwartz, INC. serves clients in San Francisco as well as the neighboring cities of Oakland, San Jose, San Mateo, Santa Clara, and throughout Alameda County.

What Is a Trade Secret in California?

A trade secret in California, following the state’s adoption of the Uniform Trade Secrets Act (UTSA), consists of information, including a formula, pattern, compilation, program, device, method, technique, or process that has two qualifiers in the words of the statute:

(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.

Thus, a trade secret must not only be of economic value from being unknown and incapable of being arrived at independently by the public, but also must be subject to “reasonable” efforts to protect its secrecy.

Reasonable Efforts Needed to Protect a Trade Secret Explained

In California, employers in the past would rely on non-compete agreements (NCAs) to prevent departing employees from using proprietary information, including trade secrets, to help competitors or even start a competing business of their own. However, non-compete agreements are no longer legally enforceable in the Golden State.

How, then, do employers protect access and prevent misappropriation of their trade secrets? One way is by having employees who have access to the trade secret sign nondisclosure agreements (NDAs), which are still enforceable but with some limits.

Company practices and policies should also be used to protect any trade secret. Access must be limited. If it’s data stored on a hard drive, then only those who need to use the data should have access, and the access must be password protected. Non-digital trade secrets should be secured and locked to prevent unauthorized access.

Policies should be put in place that advise employees of the need to protect the trade secret. Company policies should also entail protocols for departing employees. To this end, many companies require exit interviews held by company executives or the human resources department. The exit interview should also include admonitions about the disclosure or sharing of any trade secret information the employee had access to.

Remedies & Protections Under the Law

If you go to court, under California law you will have to describe your trade secret with reasonable particularity to show that your trade secret is just that—a trade secret deserving of protection. Sometimes, doing this can reveal too much of your trade secret. It’s another factor to consider when you are eyeing legal action against the misappropriation of your trade secret.

If you prevail without being forced to reveal too much of your trade secret to the public, you can win an injunction against the misappropriating company as well as compensation for any losses you sustained. You can also sometimes obtain punitive damages against the defendant. If you lose, you may be subject to paying legal fees to the other party.

Unlike a patent or a copyright that eventually expires, your rights to a trade secret can last for as long as you exert the efforts necessary to protect it from others.

The Experienced Legal Help You Need

If your business is on either end of a trade secret misappropriation dispute, contact the Law Offices of David H. Schwartz, INC. immediately. Trade secret lawsuits pose risks to both plaintiff and defendant; the very existence of your business may be at stake. 

Reach out immediately to take advantage of Attorney David Schwartz’s broad business litigation experience. He will work with you on a strategy to resolve the matter in the best way possible.