The California version of the Uniform Trade Secret Act
(UTSA) 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 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(d).
Both elements are required for proprietary information to qualify
for trade secret protection. (American Paper & Packing Products,
Inc. v. Kirgan (1986) 183 Cal.App.3d 1318.)
In order to comply with the second requirement, that "reasonable"
efforts be undertaken to preserve secrecy, employers should at least
advise employees of the existence of a trade secret; maintain
"company proprietary" legends; engage in Confidentiality or
Proprietary Information Agreements prior to any third party
disclosures; and require employees to sign Invention and
Confidentiality Agreements. (See generally, Commissioners Comment to
Section 1, Uniform Trade Secrets Statute, 14 Uniform Laws Annotated
541 (1985).)
In the event of an actual or threatened misappropriation of a
trade secret, an employer may obtain an injunction and recover any
damages caused by misappropriation. (Civil Code Sections 3426.2,
3426.3.) Misappropriation includes: (1) the acquisition of a trade
secret by a person who knows or has reason to know that it was
acquired by "improper means"; or (2) the disclosure or use of a
trade secret, without consent, by an employee or other person who
obtained the trade secret by "improper means." "Improper means"
include theft, bribery, misrepresentation, breach of a duty to
maintain secrecy or espionage. However, reverse engineering,
independent derivation, invention, discovery under a contractual
relationship (e.g., a license agreement), or obtaining the secret
from information available to the public, are not considered
improper means.
In addition to injunctive relief against actual or threatened
misappropriation, the court may compel the misappropriating party to
take affirmative steps to protect the trade secret. (Civil Code §
3426.2(c).) The court may also direct payment of a reasonable
royalty, (Civil Code § 3426.2(b)), or award damages for any actual
loss or any unjust enrichment caused by the misappropriation. (Civil
Code § 3426.3(a-b).) However, in order to preserve these remedies,
it is critical that the employer exercise reasonable efforts to
maintain secrecy under the circumstances.
The law helps the vigilant before those who sleep on their
rights. (Civil Code § 3527.)
