How Can I Avoid Misappropriating Trade Secrets?

This post discusses how one can avoid misappropriating a former employer’s trade secrets. I first wrote about this topic on Quora. Please see How does one make sure one doesn’t misappropriate software trade secrets?

Definition of Trade Secret

Unfortunately, there is no single definition of “trade secret”. Definitions vary somewhat from state to state, and the U.S. government recently created its own definition. (Please see Trade Secrets Receive Federal Protection.)

For simplicity, I will use the Uniform Trade Secrets Act (UTSA) definition:

“Trade secret” means information, including a formula, pattern, compilation, program, device, method, technique, or process, that:

(i) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and

(ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

Accordingly, the essential elements of a trade secret are:

1. Value from not being generally known or knowable, and
2. Efforts to maintain secrecy.

Definition of Misappropriation

Also unfortunately, the UTSA definition of misappropriation is rather complex:

“Misappropriation” means:

(i) acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or

(ii) disclosure or use of a trade secret of another without express or implied consent by a person who

(A) used improper means to acquire knowledge of the trade secret; or

(B) at the time of disclosure or use, knew or had reason to know that his knowledge of the trade secret was

(I) derived from or through a person who had utilized improper means to acquire it;

(II) acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; or

(III) derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use; or

(C) before a material change of his [or her] position, knew or had reason to know that it was a trade secret and that knowledge of it had been acquired by accident or mistake.

For an individual who wants to avoid misappropriating a former employer’s trade secrets, clause (ii)(B)(II) is relevant. This says that the individual will have misappropriated a trade secret if:

• She discloses the trade secret without the prior employer’s consent; and
• At the time of disclosure, s/he knew or had reason to know that s/he had a duty to maintain the trade secret in secrecy or limit its use.

How to Avoid Misappropriating Trade Secrets

So, here is a simple rule for how to avoid misappropriating a former employer’s trade secrets:

If your former employer maintained in confidence information that provided a potential or actual competitive advantage, don’t use that information for anyone else’s benefit and don’t disclose it to anyone else.

Related post: Non-compete Enforced to Protect Trade Secrets

Dana H. Shultz, Attorney at Law +1 510-547-0545 dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.