Legal Recourse for Trade Secrets Violations by Employees

Trade Secrets Violations

Legal Recourse for Trade Secrets Violations by Employees

When a startup expands, it can be difficult to place your trust in people. With more success and growth, you’ll go from a small group of founders to recruiting a range of employees who are less invested in the protection of your trade secrets. The value placed on corporate trade secrets and sensitive information is reflected in both federal and state regulations. Protecting your trade secrets is essential for success, especially in technology-driven industries where companies are valued for standing out.

Confidential Information & Trade Secrets

Only certain qualifying trade secrets are protected by state and federal law, although you can legally obligate your employees to maintain confidentiality on certain topics. Trade secrets are classified as information that has economic worth and is hidden from competitors since it is not widely recognized or easily ascertainable. Trade secrets may include:

  • Algorithms
  • Formulas
  • Patterns
  • Programs
  • Methods
  • Techniques
  • Devices
  • Conversely, confidential information that an employer wants to keep private may not necessarily qualify as a trade secret. Such information could include hiring procedures or employment benefits.

    Laws Protecting Trade Secrets

    The Uniform Trade Secrets Act (UTSA), which is modeled after the federal Defend Trade Secrets Act (DTSA), is implemented in most states in some form. Each law gives employers the right to sue both individuals who leak their trade secrets to third parties and businesses who intentionally use those secrets. To obtain compensation for trade secret infringement, you must demonstrate the following three elements:

    The information must meet the criteria for a trade secret, which is to have an independent economic value derived from secrecy; the precautions taken to prevent disclosure must have been reasonable in the circumstances (allowing every employee with access to a computer to access trade secrets may not qualify as taking reasonable precautions); and the information must have been wrongfully taken or misappropriated.

    Information that is protected as a trade secret include:

    • Recipes;
    • Marketing plans and strategies;
    • Sales records and data;
    • Customer information;
    • Chemical and mathematical formulas; and
    • Manufacturing procedures and processes.
    • Whether your information falls under the definition of a trade secret depends heavily on the specifics of each situation.

    Litigating Corporate Theft and the Misappropriation of Trade Secrets Against Employees

    Due to the fact that the DTSA and UTSA offer triple damages for willful misappropriation of trade secrets and corporate espionage, these statutes frequently serve as the foundation for trade secret lawsuits. Regardless of whether the information that was leaked met the criteria for being a trade secret or private information, you may still be able to take legal action against a disloyal employee. These consist of:

  • Default on a contract
  • Interference with a contract that is unlawful
  • Computer misuse and fraud
  • Breach of the loyalty oath
  • Fiduciary duty breach
  • In the aftermath of a damaging misappropriation, you may plead these claims alternatively. To secure your trade secrets and maintain your ability to pursue contract breach remedies, it’s beneficial to create corporate contracts and company rules.

    Skip to content