Online Data Theft and Trade Secret Litigation in California

Online data breaches and the acquisition of trade secrets are a real threat to Orange County businesses.

At the recently held Orange County Business Council's annual dinner, the topic of conversation was cybersecurity.

More than ever, data breaches, either by hacking or through internal leaks, are plaguing businesses. According to the California Attorney General's office, there were 508 major data breach incidents in California alone over the past three years.

As Senator Dianne Feinstein told the audience at the dinner, there are two kinds of companies: "those who have been hacked and those who don't know they have been hacked." Sen. Feinstein has pushed legislation to offer federal protection against class-action lawsuits by companies that experience a data breach. As yet, however, no such protection exists. Orange County businesses must therefore submit to regular security audits to protect themselves amid rapidly evolving technology.

California's Breach Notification Law

In this developing area of the law, data breaches are a serious matter. Since 2012, the AG's office has required businesses to report on its website data breaches that affect more than 500 consumers. In addition, California is the only state that requires companies to provide identity theft protection after a data breach under its unfair competition law. Failing to issue timely notification and protection to affected consumers can result in a lawsuit from the AG.

In addition, in 2014 six data breach settlements reversed a trend in which consumer lawsuits had been thrown out of court. In those cases, including the well-publicized Sony hacking and a recent $10 million settlement approval by Target, consumers have been able to receive compensation for data breaches in the wake of public outrage.

Protecting Consumers and Trade Secrets

Businesses must account for online risk and data security as part of the cost of doing business. If not managed properly, such breaches can result in a lawsuit, either from the California Attorney General, a class-action lawsuit filed by consumers, or in trade secret litigation between competitor businesses.

It is not just obtaining customer information, such as phone numbers and credit card information, which must worry businesses. It is also the acquisition of confidential or internal communications by competitor businesses. For example, in 2014, several executives of the Mount Olympus Mortgage Co., based in Irvine, downloaded confidential information on customers and transferred that data to a competitor. The executives then left to work for that competitor.

Legal Help With Protecting Trade Secret Information

At Hochfelsen & Kani, LLP, our experienced team can help businesses in a variety of e-commerce and legal business matters involving trade secrets. Contact our office to discuss your legal options.