TRADE SECRET MISAPPROPRIATION
Find out what trade secret misappropriation is and what happens if you file a case for it.
Trade Secrets
What Is Trade Secret Misappropriation?
Trade secret misappropriation occurs under two circumstances
First, when a person a) comes into possession of a trade secret b) of another, c) that the person knows or has reason to know d) was acquired improperly that person is liable for trade secret misappropriation. For example, if an employee takes confidential information from his job home, and that violates a protective measures put in place by his employer, such as a valid policy, that would constitute trade secret misappropriation. Accordingly, the mere act of acquiring a trade secret improperly is sufficient; no use or publication is required.
Second, a person is liable for trade secret misappropriation when a) he discloses or uses a trade secret b) of another c) without the other’s consent. This can occur even if the trade secret is acquired through a third person, as long as the disclosing or using party knows that the trade secret was acquired by the third person improperly. For example, if documents come into the person’s possession that are labeled “Confidential” or “Secret,” this might be enough to give you reason to believe that they were acquired improperly. Of course, in this day and age when it is common practice to label every email as “containing confidential and proprietary information of company X,” the circumstances would be very important.
Generally, the First Amendment does not give a media organization carte blanche to publish a company’s trade secrets without permission. The case Ford Motor Company v. Lane, 67 F.Supp.2d 745 (E.D. Mich. 1999) addressed this squarely. In particular, in Lane a reporter received photographs from a number of current and former Ford employees, and published the same. The Court determined that despite the reporter not having a monetary interest in publishing the photos, he still violated had committed trade secret misappropriation, and was liable for damages. Nonetheless, the Court also determined that the First Amendment prohibited the Court from ordering the reporter to take the photographs down.
What if you have been sued in a trade secret case? Or, what if you are considering filing suit against someone you believe has stolen your trade secrets? You will need to know what the elements of trade secret misappropriation are.
Both ITSA and the DTSA have similar requirements in establishing trade secret misappropriation.
ITSA Misappropriation
Under ITSA, the following constitutes trade secret misappropriation:
“Misappropriation” means: (1) acquisition of a trade secret of a person by another person who knows or has reason to know that the trade secret was acquired by improper means; or (2) disclosure or use of a trade secret of a person without express or implied consent by another 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 knowledge of the trade secret was: (I) derived from or through a person who 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 position, knew or had reason to know that it was a trade secret and that knowledge of it had been obtained by accident or mistake.
765 ILCS 1065/2
DTSA Misappropriation
The DTSA requires the following for trade secret misappropriation: the term “misappropriation” means – (A) 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 (B) disclosure or use of a trade secret of another without express or implied consent by a person who- (i) used improper means to acquire knowledge of the trade secret; (ii) at the time of disclosure or use, knew or had reason to know that the knowledge of the trade secret was- (I) derived from or through a person who had used improper means to acquire the trade secret; (II) acquired under circumstances giving rise to a duty to maintain the secrecy of the trade secret or limit the use of the trade secret; or (III) derived from or through a person who owed a duty to the person seeking relief to maintain the secrecy of the trade secret or limit the use of the trade secret; or (iii) before a material change of the position of the person, knew or had reason to know that- (I) the trade secret was a trade secret; and (II) knowledge of the trade secret had been acquired by accident or mistake;
18 U.S.C. § 1839
Most legal analysis has indicated that the requirements for misappropriation under the DTSA and ITSA are identical. However, ITSA can be applied to all trade secret misappropriation. The DTSA, on the other hand, is statutorily limited as follows:
An owner of a trade secret that is misappropriated may bring a civil action under this subsection if the trade secret is related to a product or service used in, or intended for use in, interstate or foreign commerce.
1836 U.S.C. § 1836(b)(1)
Accordingly, the DTSA can only be invoked by the owner of the trade secret, and it can only be invoked where the trade secret involves a product or service used in, or intended for use in, interstate or foreign commerce.
Should You File a Case for Trade Secret Misappropriation?
Trade secret lawsuits tend to be expensive, and for this reason, should not be entered into lightly. If you contact us, we can help you determine if you have a likely case of trade secret misappropriation or not.
One common way that trade secret cases arise is when a trusted employee leaves for a competitor. In and of itself, this may not raise suspicions. However, if the IT department indicates that a large amount of file copying to external devices and printing took place in the employees last few weeks, alarm bells should be raised. If this is followed by a competitor suddenly making a bid for a longtime customer or announcing a competing product similar to a successful product of the company’s, a lawsuit should be contemplated.
Many trade secret lawsuits are quickly resolved via consent, meaning that the defendant effectively admits the accusations and agrees to make appropriate remuneration. However, where trade secret lawsuits are contested, defendants actually prevail a bit more than half of the time. This often involves the failure to actually identify a trade secret, or a failure to take reasonable measures to protect the trade secret.
Trade secret lawsuits in Illinois are often filed in the United States District Court for the Northern District of Illinois – one of the busiest federal courts in the United States. In certain cases, trade secret cases can also be litigated in various state courts. Our lawyers have litigated trade secret matters in the Northern District of Illinois, as well as in the Circuit Courts for Cook County, DuPage County, Kane County, and Will County. Often, when filing an action for trade secret misappropriation, the immediate goal is to obtain a temporary restraining order (“TRO”). Typically, a TRO will require the Defendant or Defendants to stop using the trade secret for a certain period of time – usually two weeks. When granted, a TRO can grant an enormous advantage to the plaintiff, as it can effectively shutdown the defendant’s business. Certain venues are far more likely to grant an immediate TRO than others, and in certain cases, Federal Court is not the best venue.
Remedies For Trade Secret Misappropriation
Generally, when trade secret misappropriation is established, a number of different types of remedies can be obtained. In particular, the following are often sought:
Injunctive Relief:
All states allow a plaintiff to seek an injunction ordering a defendant to stop violating the plaintiff’s rights and to take steps to preserve the secrecy of plaintiff’s trade secrets. Accordingly, a court can order a defendant to stop publishing a trade secret, or to stop using a trade secret.
Damages:
A court can also order a court to pay money damages for the economic losses that result from trade secret misappropriation. These damages can take many forms, including plaintiff’s losses and defendant’s profits, or a royalty.
Attorneys’ Fees:
Most jurisdictions will order a defendant to pay the plaintiff’s attorneys’ fees if it finds that the defendant acted willfully or maliciously in violating the plaintiff’s trade secret rights.
How Will a Lawsuit for Trade Secret Misappropriation Proceed?
Lawsuits for trade secret misappropriation all follow a similar path – at least generally.
The plaintiff will file a complaint, which will set forth the allegations that the plaintiff claims comprises trade secret misappropriation. There will generally be at least some factual allegations as well as a recitation of the elements of the claims they are bringing.
After the defendant is served with the complaint, the defendant will either answer the complaint or file a motion to dismiss. A motion to dismiss can cover many potential grounds, such a lack of personal jurisdiction, lack of venue, or a failure to plead a required element, such as an actual trade secret, or reasonable measures to protect the trade secret. Most trade secret lawsuits involve at least one motion to dismiss, and most will grant at least some relief. In certain jurisdictions, the filing of a motion to dismiss can hold off discovery, although in most jurisdictions, depending on the type of motion to dismiss, discovery will generally be allowed to proceed.
At the Law Offices of Konrad Sherinian, LLC we have prosecuted and defended many trade secret cases with great success. Contact us today if we can help you with a trade secret matter!
Wondering About Your Trade Secrets?
Phone Consultation
Find it easier to talk rather than write? Have a lot of questions you want to ask? Let's talk over the phone.
Virtual Consultation
Need to share something on screen with us? Like to see who you are working with? Let's get online.
In-Person Consultation
Prefer a face-to-face and a handshake? We have offices in Chicago or Naperville, Illinois.
If you have questions about what might constitute a trade secret, wondering if your business is taking reasonable measures to protect your trade secrets, need counseling, or require representation as a plaintiff or defendant, we can help.
Available 24/7
Trade Secrets FAQs
Here’s a list of the most frequently asked questions about trade secrets. Open each to see our pages dedicated to that topic.
Does my business have trade secrets?
Almost every company possesses not just one, but multiple trade secrets.
Some trade secrets are obvious, such as a special mix of spices that a restaurant uses to give a meal a signature flavor. Others are less apparent, such as a process used by the same restaurant to efficiently assign orders to different chefs in the kitchen.
But they can also be less obvious, like customer lists, prospect lists, product development plans and marketing plans.
Here's a page entirely devoted to examples of trade secrets.
What is a trade secret?
A trade secret is the oldest form of intellectual property protection, possibly dating to Ancient Rome. Trade secret forms one of the most potent and underutilized forms of intellectual property protection.
Nearly every successful business will have multiple trade secrets; for example, many law firms have templates of various documents, such as contracts or written discovery, along with guides on the use of the templates.
Here is a page entirely devoted to the definition of what a trade secret is.
How do I protect my trade secrets?
While there are no exact rules for what reasonable measures, precedent indicates that there are a few guidelines. To start, if none or minimal measures, were taken to protect the secret information, a court will likely hold that reasonable measures were not taken. There are other guidelines as well.
What qualifies as a trade secret?
To qualify as a trade secret, there must be information that is 1) used commercially; 2) is secret; and 3) that provides a competitive advantage to the person or entity with knowledge of it.
Here is our page devoted to the qualifications of trade secrets.
What is trade secret misappropriation?
Trade secret misappropriation occurs under two circumstances
First, when a person a) comes into possession of a trade secret b) of another, c) that the person knows or has reason to know d) was acquired improperly that person is liable for trade secret misappropriation.
Do I have a trade secret case?
Trade secret lawsuits tend to be expensive, and for this reason, should not be entered into lightly. If you contact us, we can help you determine if you have a likely case of trade secret misappropriation or not.
What happens in trade secret litigation or lawsuits?
Many trade secret lawsuits are quickly resolved via consent, meaning that the defendant effectively admits the accusations and agrees to make appropriate remuneration. However, where trade secret lawsuits are contested, defendants actually a bit more than half of the time. This often involves the failure to actually identify a trade secret, or a failure to take reasonable measures to protect the trade secret.
Trade secret lawsuits tend to be expensive, and for this reason, should not be entered into lightly. In fact, you may want to read our article on why, in some cases, litigating your trade secret can destroy you trade secret first.
Here is our page devoted to trade secret litigation and lawsuits.
What makes a strong trademark?
A strong trademark is unique, descriptive, and aligns closely with your brand's core values.
How can I protect my trademark internationally?
We can assist you in filing for international trademark protection through mechanisms like the Madrid System.
How long does trademark registration take?
The time can vary but typically takes several months. We will guide you through every step of the process.
What should I do if someone is infringing upon my trademark
Contact us immediately for a thorough assessment and a strategic enforcement plan.
Experienced Trade Secret Attorneys
We have extensive experience in dealing with trade secret issues, whether you require counseling or representation. Konrad Sherinian himself has litigated more trade secret cases than the vast majority of intellectual property attorneys.
Our attorneys have represented both plaintiffs and defendants and have prosecuted and defended many trade secret cases with great success. Contact us today.
