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What does California law say about trade secret misappropriation?

News and Notes Focused on the 3 Public Faces of IP Law

  • Brand Image Protection - Trademark Law
  • Visual Image Protection - Copyright Law
  • Personal Image Protection - Right of Publicity Law

The Image Protection Law blog has been created in order to share stories and information on the legal aspects of: 1) the marketplace reputation of a company or product captured in its trademark, 2) published or publicly-displayed artwork, photography, and any created visual design, and 3) use of a person's photograph or likeness for product promotion or other commercial purposes.

The "IP3" share at least one thing in common: Image is everything. In these posts let's look at what that means in the realm of intellectual property in the news, but let's also be prepared to explore if there's something more beyond "everything." Don't forget, the intellectual in "intellectual property" doesn't mean smart or brainy, although by nature true creators often are. The word is used to refer to any creation, i.e., a "product of the mind." While this blog will be regularly updated, you are encouraged to share your thoughts on these posts.

Today we continue our discussion of trade secrets. Specifically, we will look more closely at what California statute says about trade secret misappropriation

California adopted its own version of the Uniform Trade Secret Act in 1984, with later amendments. Uniform laws, crafted by a national panel of legal experts, help to create some uniformity among various states in how they address particular legal issues, which can be helpful in a mobile and interconnected society like ours. States that adopt uniform laws sometimes tweak the original text to meet their unique needs.

Last week, we talked about how California law defines a trade secret and ways to protect trade secrets from misappropriation. Today, we will look at legal remedies. 

What is misappropriation? 

California's UTSA defines misappropriation as either: 

  • Acquiring someone else's trade secret using improper means like "theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy" or through electronic or another kind of espionage OR
  • Using or revealing someone else's trade secret without proper express or implied consent when the person using or revealing used improper means to get it, knew or should have known the knowledge came from someone else who used improper means or had a duty of secrecy, knew the circumstances created a duty of secrecy, or knew or should have known the knowledge came "by accident or mistake" before a "material change in his or her position" 

What can a court do to help? 

The California UTSA allows the victim of trade secret misappropriation to file a lawsuit within three years of discovery or within three years of the time when the victim should have discovered the misappropriation with the "exercise of reasonable diligence." 

First, the court may issue an injunction, meaning a court order to the person or entity accused of "[a]ctual or threatened" misappropriation to stop. The court may also order other "affirmative acts to protect a trade secret." 

Second, the judge may award money damages for actual financial loss plus an amount for unjust enrichment above and beyond the actual losses. If the plaintiff cannot prove actual loss or unjust enrichment, the court may order reasonable royalties for misappropriation during the time the court could have prohibited the use. 

If the misappropriation was willful and malicious, the court can order exemplary or punitive damages meant to punish the wrongdoer's behavior up to double the amount of financial damages awarded as actual loss, unjust enrichment or royalty. 

The law also allows the court to award legal fees and associated costs in any of these situations: 

  • Willful or malicious misappropriation
  • Filing a misappropriation suit in bad faith
  • Responding to an injunction in bad faith 

Won't the lawsuit itself reveal trade secrets? 

The court can protect trade secrets by reasonable means, including sealing records, ordering parties to keep them confidential, holding private hearings and more. 

We will continue to share information in this space about trade secrets going forward.

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