California Trade Secrets Acts: Everything You Need to Know
In the United States, statistics have shown that a company's biggest threat to the loss of confidential and sensitive information comes from an internal source.3 min read
The California Trade Secrets Acts is just as important now as it ever has been. In the United States, statistics have shown that a company's biggest threat to the loss of confidential and sensitive information comes from an internal source, such as a company's employees.
Trade Secrets Litigation
Trade secrets litigation is a brutal, hard-fought battle, especially for inexperienced lawyers with a mindset for thrill-seeking adventures. Temporary restraining orders and preliminary injunctions are often part of the court proceedings, which tend to run at a lightning-fast pace, and inexperienced lawyers have already lost the case by the time they understand the legal proceedings involved.
While many people might visualize things such as the Coca-Cola formula, the California Uniform Trade Secrets Act, UTSA, provides protection for much more than big companies formulas and research information. Much more common pieces of information are provided protection under the Civil Code sections 3426.1-3426.11.
California will recognize common everyday information worth protecting if a company takes all reasonable measures in protecting its own information and data. The information that California may protect and recognize as trade secrets may include various types of information, such as:
- Business plans
- Corporate minutes and agendas
- Bid specifications
- Customer lists
Misappropriation is the term the UTSA uses, rather than the word, theft, when a use or disclosure of trade secrets has taken place, or there has been an acquisition of improper means. This legal definition can be found in Civil Code section 3426.1.
In cases where the provision has been interpreted and upheld as the misappropriation of a trade secret, a former employee uses or discloses customer information that is confidential, to seek new accounts on behalf of a new employer.
What Are Improper Means?
Bribery is considered to be improper means, according to Civil Code section 3426.1(a). For example, information acquired by improper means would be when a former employee physically takes or copies a trade secret.
What Are Trade Secrets?
The Trade Secrets Act not only affords protection for physical information but protects the contents of an employee's memory as well. The employer only has to show the employee used or disclosed contents that meet the definition of a trade secret, to prove that a misappropriation has taken place.
What Is the Wipe-Clean Doctrine?
The “wipe clean” doctrine is no longer viable since the enactment of UTSA. The doctrine refers to an argument that involved employee's who concurred that they could not be expected to wipe clean all the information in their memories, thus they should be allowed to use an employer's trade secret information. Since the 1984 UTSA enactment, cases before 1984 are no longer considered a reliable support in trade secret disputes.
How Does California View Trade Secrets?
Employees will often leave one employer and gain employment with a competitor or a company that involves the same field of work. In such circumstances, it is only reasonable to assume that the employee will inevitably disclose trade secrets of their former employer. However, California does not accept this “inevitable disclosure principle and demands that evidence of use or disclosure be presented.
In the case of Whyte v. Schlage Lock Co., 101 Cal. App. 4th 1443, 1459-60 (2002), the court ruled that the former employer must provide evidence of such use or disclosure of trade secret information before bringing a lawsuit.
While California tends to be looked upon as a key leader in regards to trade secret laws, many states remain divided over the so-called California rule. The California rule refers to the rule that says when a party makes claims of trade secret misappropriation, the party must identify trade secrets with specificity before being allowed to carry out discovery, relating to its trade secret claim.
The rule is highly criticized as plaintiffs lay claim to the fact that there is no way to know the specific trade secrets that have been misappropriated until they are allowed to conduct discovery on the defendant. The lack of harmony among courts is most likely an indication that competing policies are just simply hard to resolve in a speedy manner. In addition, until such competing policies and concerns are balanced, defendants and plaintiffs will continue to see different rules applied throughout courts in the United States.
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