Trade Secrets file with lock and chainSmall business owners and entrepreneurs alike must take great care to protect sensitive and proprietary information from being disclosed in order to benefit from the protection afforded by the California Trade Secrets Law. Even the slightest failure to zealously guard against disclosure may lead to disastrous results. In fact, failure to guard against misappropriation of trade secrets can ruin a business.

What is a Trade Secret?

A trade secret is defined by a statute known as the California Uniform Trade Secrets Act (“the Act”).* The Act defines trade secrets broadly; it includes formulas, patterns, compilations, programs, devices, techniques, or methods that derive their actual or potential economic value from not being known generally to the public or known to people who can use the information for economic value. The Act further defines information which may be protected as a trade secret as being treated by the owner as a secret. In other words, the owner of the information must take reasonable steps to keep the information secret.

If the owner can prove they have taken these reasonable steps, they have the opportunity to seek civil remedies for any misappropriation of their trade secrets. The remedies available to a complainant who proves their trade secrets were misappropriated include compensatory damages, injunctive relief, royalties, and other forms of relief as supported by the evidence. Be warned–without proof that the owner took reasonable steps to protect their trade secret, there is no remedy against misappropriation and others can utilize your valuable trade secrets with impunity.

What are Reasonable Steps?

The Act does not define reasonableness. However, courts generally define reasonable steps as those actions which an ordinarily prudent person would take under the same set of circumstances. This is an objective standard although subjective factors may play a role in the analysis. In a recent decision by the United States District Court of Northern California, the court indicated that reasonable steps include, but are not limited to, ” advising employees of the existence of a trade secret, limiting access to the trade secrets on a ‘need to know basis,’ requiring employees to sign confidentiality agreements, and keeping secret documents sequestered under lock and key.” FormFactor, Inc. v. Micro-Probe, Inc., et al., No. C 10-3095 PJH, 2012 WL 2061520 (N.D. Cal. June 7, 2012)

The means of protecting trade secrets may include: 1) not permitting former employees to retain contact information (and having written agreements and policies in place delineating this); 2) not allowing employees to work from home in some situations; 3) not permitting use of personal email to conduct business; 4) refusing to allow employees to backup data to external hard drives; and 5) requiring departing employees to return company data. Documentation to support such efforts is critical in order to prove that reasonable steps were taken and similar measures should be taken when hiring or terminating independent contractors. Ultimately, the owner of the trade secret must be able to demonstrate, preferably through documentary evidence, how each and every trade secret is maintained as a secret.

Get Legal Help

For additional information and to learn how you can protect your company’s trade secrets, contact our experienced business attorneys. They will help protect your sensitive information from misappropriation and ensure you take reasonable steps to keep trade secrets, secret.§ion=civ