Trade Secret Disputes

Was your confidential business information (trade secrets) stolen?

Our Orange County based lawyers help companies protect their trade secrets.

In most cases, employees in California have the right to put in their two weeks’ notice and go work for any other company - including their former employer’s biggest competitor, bringing their business knowledge with them.

It’s not uncommon for employees to slip out of the office with confidential documents or a flash drive full of information and use it to their advantage on the job market. In fact, studies show that this very scenario has happened to more than 70% of companies.

Wrongfully acquiring, using and disseminating this type of data is called trade secret misappropriation, and it can be phenomenally damaging to companies that rely on top-secret information to maintain their competitive edge.

Businesses in the technology, manufacturing, consumer goods, pharmaceutical and food sectors are just a few examples of companies that commonly use trade secrets in their day-to-day business.

Due largely to the technology industry in Silicon Valley, Los Angeles, and Orange County, more trade secret litigation matters are filed in California than any other state. And few other CA law firms have the deep trade secret litigation experience of Hochfelsen & Kani. Our business litigation attorneys have decades of experience handling trade secret matters, representing both corporate clients whose trade secrets have been compromised as well as employees who have been wrongfully accused of trade secret misappropriation.

Clients from across Los Angeles, Orange County and greater Southern California have turned to us for their most pressing and urgent trade secret matters.

If you are involved in a trade secret misappropriation matter, call our Newport Beach office today to schedule a free, confidential case evaluation. Our attorneys can help you determine the best way to protect yourself and your business.

What is a Trade Secret in California Law?

A trade secret is any confidential information that is valuable to a business and gives it an edge over competitors. Unlike other intellectual property, like copyrights and trademarks, trade secrets are valuable specifically because they are kept secret.

California, along with many other states, has adopted the Uniform Trade Secrets Act, which protects trade secrets from being improperly acquired by or disclosed to competitors.

However, in order for trade secrets to be protected under the law, companies must take steps to maintain their confidentiality. If trade secrets become known to the general public, they become worthless and often legally unprotectable.

In many cases, trade secrets are even more valuable than other forms of intellectual property. Patents, copyrights and trademarks must be renewed and expire after a certain period of time. Trade secrets, on the other hand, can be protected forever, so long as they remain undisclosed.

Common examples of trade secrets are:

  • Customer lists
  • Chemical formulas
  • Food recipes
  • Manufacturing methods
  • Software and computer programs
  • Automation systems
  • Proprietary tools
  • Product design

The most famous example of a trade secret is the recipe for Coca-Cola, which the company has gone to extreme lengths to protect.

The Coca-Cola Company has made billions of dollars because of the specific taste of its products, which no other competitor has been able to replicate. If another company were to discover and reproduce the exact formula, it could significantly harm Coca-Cola’s business.

How to Tell if Trade Secrets Are Being Misappropriated

Employers may file a misappropriation lawsuit against an employee if they have a good faith belief that trade secrets were taken inappropriately. Although this can be difficult to know for sure without a full-blown investigation, there are some common, early signs that trade secrets may be at risk:

  • High-level employees have left to work for competitors
  • Competitors are tweaking their strategies or processes to more closely mimic yours, using information they should not know
  • Longtime clients are being solicited
  • Exiting employees transferred a lot of data or printed many documents during their last few days at work

These signs alone may be enough of a basis to contact a lawyer and begin an investigation. >From there, employers can use surveillance footage, computer history, reports from coworkers and other evidence to build a case.

For employees, it’s important to remember that employers have many resources to investigate misappropriation. Even if you do not sign a confidentiality agreement, you may still be barred from taking data from one employer to another. It’s best to assume that all the information you encounter at work is confidential, unless you are told otherwise.

Steps to Initiate Trade Secret Litigation

If you believe trade secrets are being misappropriated, you must act fast. The statute of limitations is only three years, and by the time a competitor has its hands on your company’s data, irreparable harm may have already been done.

  1. Find an attorney who can help you confirm that the misappropriated information is, in fact, a trade secret. Remember, if the information was not kept confidential, it may not be protected under the Uniform Trade Secrets Act. An experienced business lawyer can help you understand your legal options and chances of a positive outcome.
  2. Send a letter to the former employee and their new company demanding that they cease and desist. In some cases, this may be enough to put a stop to the misappropriation.
  3. If the employee and/or company does not immediately meet the demands of your cease and desist letter, you may file a trade secret misappropriation lawsuit against them. You may also be able to sue for related claims, including unfair business practices, copyright violations, conspiracy and breach of contract.  

It’s important to note that not all trade secret litigation is valid and done in good faith.

Companies may unlawfully accuse a current or former employee of misappropriation as a form of retaliation, or as a way to maintain control of data that actually belongs to the employee. In these cases, the employee may be able to countersue and recover damages.

In any of these scenarios, Hochfelsen & Kani trade secret attorneys can help you. With more than three decades of experience handling complex business litigation matters, our lawyers have the experience and background necessary to secure the best possible outcome for you.

Contact our office today to discuss your case.

How Courts (and opposing parties) Will Analyze Your Case

The most common defense to a trade secret claim is that the information in question isn’t a trade secret at all.

Because trade secrets are not publicly registered, like trademarks or patents, there is no hard-and-fast way to tell whether data is protected under the law or not.

The most important thing the court will do in this type of litigation is determine whether the misappropriated data meets the definition of a trade secret. The court will consider a number of factors, including:

  • What steps the business took to keep the information secret
  • Who in the company knows the information
  • How valuable the information is, both to the business and its competitors
  • How easy it is for competitors to obtain or replicate the information
  • How much effort the company put into developing the information

Your success in a trade secret misappropriation lawsuit depends largely on your attorney’s ability to make a persuasive argument on your behalf.

Find out what our attorneys can do for you by contacting us for a free case evaluation.

Penalties for Misappropriation

There are both civil and criminal remedies for trade secret misappropriation. In civil cases, the plaintiff may obtain:

  • An injunction prohibiting the defendant from using the trade secret
  • Compensatory damages for financial loss
  • Punitive damages, if the court finds that the misappropriation was “willful and malicious”
  • Attorneys’ fees

In criminal cases, there are a variety of charges that can be brought against the defendant, including theft of trade secrets, receiving stolen property, wire fraud, RICO and espionage. If found guilty, individual defendants may face fines and imprisonment up to 20 years, depending on the severity of the charge. Organizational defendants may face fines up to $5 million.

In addition to legal penalties, being accused of trade secret misappropriation can harm the defendant’s reputation and prevent them from finding a new job or starting their own business.

How to Safeguard Your Trade Secrets

The best way to protect trade secrets is to keep them safe before they are misappropriated.

There is no way to register trade secrets with the government, so their protection rests on your own ability to keep them private. If it ever becomes necessary for you to file a misappropriation claim, it will be much easier for you to prove your case if you have taken steps to maintain their confidentiality.

Safeguard your trade secrets by:

  • Asking employees, vendors and contractors to sign nondisclosure agreements
  • Marking sensitive documents as confidential
  • Limiting the number of people who have access to trade secrets
  • Using physical barriers, including locks and safes
  • Password protecting Word documents
  • Giving employees access to necessary computer networks only
  • Requiring visitors to sign in and be escorted through the building
  • Reinforcing the importance of privacy in staff meetings, interviews and exit interviews

Hochfelsen and Kani trade secret business lawyers are aggressive and experienced. We act quickly to protect your property and its value to your company. If you need advice on documenting and protecting your trade secrets or if you are at the beginning of a legal dispute, we can help.

Call Now to Learn Your Trade Secret Rights and Your Options