Legal Recourse for Trade Secrets and Confidentiality Violations by Employees

AdobeStock_269304451-300x200As your Silicon Valley startup grows, it’s hard to know whom to trust. You’ve likely gone from a close-knit group of founders invested in the confidentiality of your trade secrets to hiring at-will employees who are less concerned with secrecy. Both federal and state laws reflect the value placed on corporate trade secrets and confidential information. Especially in technology-driven industries where startups are valued for their unique innovations, protecting your trade secrets is a key to success.

Defining Trade Secrets & Confidential Information

While you can contractually bind your employees to keep certain confidences, only qualifying trade secrets are protected by state and federal law. Trade secrets are defined as information that derives economic value by not being generally known or readily ascertainable by competitors and are subject to reasonable efforts to maintain confidence. Trade secrets can consist of:

  • Algorisms
  • Formulas
  • Patterns
  • Programs
  • Methods
  • Techniques
  • Devices

Confidential information, on the other hand, is information an employer wishes to protect that doesn’t necessarily rise to the level of a trade secret. Such information can include internal policies for hiring or employee benefits.

Trade Secret Legislation

Most states follow some variation of the Uniform Trade Secrets Act (“UTSA”), which mirrors the federal Defend Trade Secrets Act (“DTSA”). Each act provides employers with legal recourse against employees who disseminate employer trade secrets and companies that knowingly utilizing those secrets. You must prove the following three elements to recover damages for trade secret infringement:

  • The information must qualify as a trade secret, i.e., have an independent economic value derived from secrecy;
  • The precautions taken to prevent disclosure were reasonable in light of the circumstances (e.g., allowing every employee with computer privileges to access trade secrets may not qualify as taking reasonable precautions); and
  • The information must have been wrongfully taken or misappropriated.

Examples of information recognized as a protected trade secret in the United States include:

  • Recipes (e.g., the Pepsi formula);
  • Marketing plans and strategies;
  • Sales records and data;
  • Customer information;
  • Chemical and mathematical formulas; and
  • Manufacturing procedures and processes.

Whether your information qualifies as a trade secret is intricately dependent on the facts and circumstances of each case.

Litigating Trade Secret Misappropriation and Corporate Theft Against Employees

The DTSA and UTSA provide for triple damages for malicious misappropriation of trade secrets and corporate espionage; as such, they often form the basis of trade secret litigation. However, you may have multiple causes of action against a disloyal employee regardless of whether the disseminated information qualifies as a trade secret or confidential information. These include:

  • Breach of contract
  • Tortious interference with a contract
  • Computer fraud and abuse
  • Breach of the duty of loyalty
  • Breach of fiduciary duties

You may plead these claims in the alternative after a damaging misappropriation. However, it’s beneficial to develop corporate contracts and company policies that protect your trade secrets and preserve your right to pursue breach of contract remedies.

Hire an Experienced Silicon Valley Trade Secrets Attorney Today

From developing robust trade secret protections, to drafting employee confidentiality agreements, or pursuing litigation to protect your rights, the corporate attorneys at Structure Law Group, LLP are here to help.  Schedule your consultation with one of our Silicon Valley corporate attorneys at Structure Law Group, LLP by calling 408-441-7500 or contacting us online.