What is a Trade Secret?  

Welcome!  Our Pittsburgh lawyers hope to help you better understand the civil litigation meaning of "trade secret."

 

 

People often confuse "trade secret" with trademark, copyright, or patent law. The latter concepts involve intellectual property that is visible and public. A trade secret, by contrast, is a purely private fact that gives one business an edge over others. Developing and protecting a true secret takes time and money, which makes it valuable...and worth protecting.

 

Getting Ahead  

Understanding trade secret law is crucial for those contemplating a claim (or defending one). Our civil litigation lawyers also see non-compete agreements that contain a "trade secret" clause, blended (or buried) within the rest of the agreement.

 

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Call any time to learn your rights in this area.  The phone is attorney answered.

 

412.780.0008





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Some History

Before we define "trade secret," let's briefly look at how the law evolved. The Pennsylvania Bar Association describes the origins as follows:

In Pennsylvania, protection of information under the trade secret law was clarified by Pennsylvania’s adoption of the Uniform Trade Secrets Act in 2004. Prior to 2004, trade secret protection in Pennsylvania only existed through common law. The Act permits the award of damages or injunctive relief in order to protect trade secrets. This protection can be extended to anything that meets the definition of trade secret. Thus, in understanding whether something can be protected under the Act, the primary issue is whether the information meets the definition of trade secret, which requires that information was identified as a trade secret and the information was protected as a trade secret.

To understand the meaning of "trade secret," we first look at the Definitions sections of the Act, which is the real "meat" of the law. What is a "trade secret"? The statutory definition of trade secret includes:

...Information, including a formula, drawing, pattern, compilation including a customer list, program, device, method, technique or process that:
(1) Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use.
(2) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

Hence, in order for a remedy (either equitable or legal) to exist relative to the the Act, there must be economic value associated with the information being kept confidential, and reasonable efforts must be taken to maintain the secrecy of the information. Thus, the keystone of trade secret law requires the identification of information that has economic value as a secret and the maintaining of its secrecy. Contact experienced attorneys in Pennsylvania to understand the definition of trade secret.

 

Examples

Customer Lists.  Notice that "customer lists" are expressly enumerated in the Act, but note the qualifier:  the "secret" must not be generally known. Hence, a customer list derived purely from the phone book is not be protected.  (See Brubaker Kitchens, Inc. v. Brown:  Brubaker Kitchens could not protect their customer lists as a trade secret because they were readily obtainable through trade journals and other public resources.)

Training Manuals. The Act specifically lists "programs," such as training seminars provided to employees. Granted, the information must meet the other elements, by not being publicly available information, etc, such as information downloaded for free online, for dissemination to employees.

Information Protected by Contract. Parties are free to deem certain information a "trade secret," giving said information the protection under the Act. A pending case on this subject involves Mattern & Associates ("Mattern") versus a prominent, top tier law firm, Latham & Watkins ("Latham").  In that case, Mattern (a consulting company that purports to help law firms set pricing for services) claims that it reached an agreement with Latham to keep Mattern's procedures and methods secret, and that Lathan violated said agreement, as reported in the Legal Intelligencer.   That case is ongoing.

Intent to use an Infomercial and Financial Data. See Oceanic, Inc. v. Shields, (U.S. District Court for the Eastern District of Pennsylvania decided that the intent to use an infomercial and the financial data about a company were not trade secrets because the information did not have economic value and could ultimately be discerned by other individuals). See also B & B Microscopes v. Armogida (the U.S. District Court for the Western District of Pennsylvania decided that a former employee’s improvement to his former employer’s system, while continuously an employee, was a trade secret).

Recipes.  Coca Cola's secret formula is protected. That said, a cooking recipe that is widely known might not have protection, either, even if a "secret" to many. Further, the secret must be the subject of efforts "reasonable" to maintain secrecy. Thus, a business must undertake reasonable safeguards of the secret, and not simply expect the courts to claw back information that a business carelessly disseminated by failing to institute common sense safeguards to protect the information from disclosure.

 

Misappropriation

Once something is defined as a trade secret, what then does it mean to "misappropriate" a trade secret? What is the definition of theft of trade secrets? As used throughout the Act, the Definitions section, 12 Pa. C.S. § 5302, provides that misappropriation (or the stealing of a trade secret) entails:

(1) 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 (2) disclosure or use of a trade secret of another without express or implied consent...

 

Protections and Recoveries

What protections and remedies exist for trade secret misappropriation under the Pennsylvania’s Adoption of the Uniform Trade Secret Act? Here is what the Bar Association has to say:

Pennsylvania’s adoption of the Uniform Trade Secret Act provides protection where other forms of intellectual property protection do not. Under 12 Pa. C.S. § 5303, injunctive relief is available for actual or threatened misappropriation. In addition, section 5303 provides courts with the power to enjoin royalties or enjoin other affirmative acts. Under 12 Pa. C.S. § 5304, monetary damages are available for misappropriation and, in the case of willful and malicious misappropriation, exemplary damages not exceeding two times the monetary damages are available. The protection under section 5303 and section 5304 is limited by 12 Pa. C.S. § 5307. Under section 5307, a cause of action for misappropriation “must be brought within three years after the misappropriation was discovered or by the exercise of reasonable diligence should have been discovered.”

Hence, the prevailing party concerning a claim for misappropriation of trade secrets may be entitled to attorney fees, an injunction precluding further dissemination or use of the secrets, and exemplary damages of twice the actual damages for conduct that is willful and malicious.   But note the relatively short three year statute of limitations, which is shorter than the PA statute of limitations to bring a claim for breach of contract, which is 4 years.

 

Current State of the Law 

Remember, the Uniform Trade Secret Act ("the Act") does not replace all of Pennsylvania's trade secret case law developed over decades. Far from it. The Act merely adds to the common law protections concerning trade secrets. For example, the Act did nothing to abrogate Pennsylvania's Inevitable Disclosure Doctrine (the "Doctrine"), which is a common form of non-compete law that does not require a signed written non-compete.

The Doctrine precludes high level workers from going to work for a direct competitor in certain circumstances, even where a written non-compete is lacking. Click here for more information about Non-competes the Inevitable Disclosure Doctrine.  In short, a high level, high value employee can be presumed to be privy to trade secrets subject to "inevitable" disclosure" upon that worker gaining employment from a direct competitor.  (Parenthetically, the case law does not currently presume "inevitability," but certain inferences can be drawn from a high level employee going to work for a direct competitor, especially under suspicious circumstances such as bad faith by the employee or the company seeking to hire said employee).

The main thing to keep in mind is, the Act does not replace the protections that exist at common law concerning trade secrets.

 

Selecting a Lawyer

The type of lawyer handling trade secret disputes involves something called "civil litigation," to be contrasted with other kinds of law, such as criminal defense, or family law or estate planning, or corporate organization and planning. We have a group of attorneys who focus on civil litigation, generally, and commercial disputes specifically, in state and federal court, compulsory arbitration, and in AAA arbitration, involving trade secrets, non-competes, fraud, mechanic's liens, construction law, and more.

 

Rapid Response Line  

Our experienced attorneys are available to assist you in any trade secrets matter in Pennsylvania. This is a highly specialized area of law, which few practitioners handle on a regular basis. Our experienced Pittsburgh lawyers remain available to provide a free price quote to assist in your trade secrets matter in Pennsylvania.

 

412.780.0008





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