Your company’s Intellectual Property is its most prized asset because your patents, trademarks, copyrights and trade secrets distinguish your products in the marketplace and give you a competitive edge.
Your trade secrets are an especially valuable form of IP, because, unlike patents and copyrights, trade secrets have no expiration date. If you keep your secret “in the vault,” like Coca-Cola’s legendary formula, you can enjoy exclusive rights to it in perpetuity. But what happens when someone “cracks your safe” and absconds with your trade secret? If you don’t act swiftly and decisively, that purloined asset could be rendered worthless, fatally damaging your company.
Fortunately, Hochfelsen & Kani, LLP, maintains a dedicated practice in trade secret litigation. We understand that businesses face stiff competition in today's market, and protecting proprietary information is essential. Serving both plaintiffs and defendants in trade secret disputes, our firm works quickly to mitigate immediate damages while preparing long-term strategies for a favorable resolution.
What are some common types of company trade secrets?
Although mid-sized companies generally have a plan for managing their IP portfolio, which includes their trade secrets, many small business owners don’t understand the importance of keeping proprietary information secret from competitors and the public. Many business owners don’t even know what intangible assets might qualify as a trade secret, such as:
- Client lists
- Ingredient lists
- Lists of suppliers
- Business processes
- Manufacturing methods
Does your company have trade secrets it should be protecting? If you’re unsure, just ask yourself, “Is there some aspect of our business we don’t want our competitors or the general public to know about?”
Here’s what you must do to have trade secret protection
Trade secrets are unique among IP assets because they don’t require any kind of formal registration. However, there are specific requirements you must fulfill in your business practices to be able to claim that an asset is, in fact, a trade secret:
- It must be a secret — If your secret is generally known or easily ascertained by people in your industry, it does not qualify as a trade secret.
- It must confer a competitive advantage by virtue of being secret — If giving the secret to your competitors would allow them to produce an imitation product that would cut into your business, the asset qualifies as a trade secret.
- You must take reasonable steps to keep the secret — If you allow only trusted employees to know the secret and require them to sign non-disclosure agreements, you have probably met this requirement.
To take action against someone who has misappropriated a trade secret, you must be prepared to prove all three of these elements in court. Conversely, a defendant accused of stealing a trade secret must only disprove one of the three elements.
How are trade secrets misappropriated?
Trade secret misappropriation, or trade secret theft, is a problem in virtually every industry. Companies lose trade secrets due to industrial espionage, computer hacking, and employee malfeasance. As unfortunate as it sounds, the most common way a company loses a trade secret is when a trusted employee who has access to the secret takes it for his or her own use or sells it to a competitor.
For this reason, companies need to have strong non-disclosure agreements that deal specifically with company trade secrets.
What are the laws governing trade secret theft?
Company trade secrets are protected by state and federal law. In California, the controlling state law is the California Uniform Trade Secrets Act. The California law makes it illegal to take a trade secret or to receive a trade secret through unlawful means, such as theft, bribery, misrepresentation, breach or inducement of a breach of duty to maintain secrecy.
Companies cannot receive or use information if they have reason to know it is a competitor’s trade secret. Remedies for misappropriation include an injunction prohibiting any use of the secret and damages. A wrongdoer may have to pay damages based on the actual loss of profits the trade secret owner suffered or the amount of unjust enrichment the wrongdoer obtained.
A court can also order punitive damages in extreme cases up to double the amount of the compensatory damages. The statute of limitations for an action under California law is three years.
The controlling federal law is the Defend Trade Secrets Act of 2016. Key features of this law include:
- Seizure — A plaintiff company may be entitled to seize a defendant’s property if a seizure is “necessary to prevent the propagation or dissemination of the trade secret.”
- Injunctive relief — The court can enjoin a defendant from using the trade secret and compel the defendant to return all records of the trade secret.
- Compensatory damages — The court can award monetary damages for the plaintiff’s actual losses due to the theft as well as damages for any unjust enrichment the misappropriating party gained.
- Punitive damages — In egregious cases, where the defendant’s conduct was willful and malicious, the court can award exemplary damages up to two times the amount of the actual and unjust enrichment damages.
- Attorney fees — The losing party must pay the winning party’s reasonable costs of pursuing the action.
Various factors go into the decision to sue in state court under California law or in the federal court under the DTSA. We carefully explain your options so you can make a fully informed decision.
Aggressive representation from accomplished trial attorneys
Whether you represent the company whose secrets have been taken or you are a defendant accused of misappropriation, you face serious consequences if the case doesn’t go your way. Hochfelsen & Kani knows what you’re up against, which is why we fight aggressively to protect your rights.
As a small firm of experienced litigators, we are able to establish close relationships with each client and create a level of trust and responsiveness not always seen at larger firms. Our in-depth knowledge of applicable law and court procedure enables our attorneys to thoroughly assess the merits of your case and develop effective strategies leading to positive results. Through regular communication and status updates, we keep our clients informed of developments at each stage of the process.
While our firm prepares for trial from day one, we have a solid record of obtaining successful outcomes through mediation and arbitration. Regardless of the route your case takes, our Orange County trade secret attorneys provide assertive advocacy at each stage of the process.
Newport Beach Attorneys Handling Non-Compete Agreements
Hochfelsen & Kani, LLP handles a variety of trade secret issues in Southern California and we are ready to help resolve your dispute. Call us at 714-907-0697 or contact us online to discuss your trade secret case.