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Frequently Asked Questions - FAQs

Pennsylvania's Uniform Trade Secrets Act (UTSA) defines "trade secret" as follows: 

"...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."

 

What are Some Clear-Cut Examples Where UTSA Protection Exists?

Here is a partial list of examples: 

Customer Lists

The DTSA expressly protects customer lists, as something the owner/employer developed from its own efforts.  However, a customer list derived purely from the phone book, trade journals, or other public sources may not garner protection.  See Brubaker Kitchens, Inc. v. Brown. 

Training Manuals

The Act specifically lists "programs," such as training seminars provided to employees. But the information must not be publicly available online, for example, as that would give competitors free access to discover it. 

Recipes

Coca Cola famously decided against seeking patent protection for its secret formula for Coke™.  Patent protection expires after 20 years, but once patented, absolute secrecy of the idea no longer matters. Instead, Coca Cola decided to treat its formula as a trade secret, a right that never expires, unless Coca Cola fails to take reasonable steps to safeguard the information and keep it secret. 

What Makes Information and Financial Data Unique? 

In Oceanic, Inc. v. Shields, a 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 true "secrets."  The reasoning?   The court found that the information (an infomercial) lacked economic value.  

Contrast the above with B & B Microscopes v. Armogida.  There, the U.S. District Court for the Western District of Pennsylvania decided developments of a PICS System (for use by forensic labs, allows for the automatic detection and identification of the presence of sperm in a sample placed under a microscope) constituted a trade secret.

 

What Is Theft or "Misappropriation"?

The Uniform Trade Secret Act, 12 Pa. C.S. § 5302 ("the Act") defines "misappropriation" as follows:

(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...

 

What Protections and Recoveries Exist in PA?

What protections and remedies exist for trade secret theft under the Act? These include:

• • • A restraining order (or injunction) to stop further sharing of the information, 
    • Money damages for the lost profit or business opportunity,
    • Punitive damages (not to exceed twice the actual damages), in the even of willful or malicious conduct, and, 
    • Attorney fees and costs of prosecution.   

 

What Other Claims Can Be Brought?

A worker who has access to the employer's trade secrets might also have the ability to inter with the employer's contracts with customers.  Taking the customer list -- and customers -- to another employer, can also expose the worker for a claim of breach of fiduciary duty or tortious interference with contracts, which allow for an award for punitive damages of up to nine times the amount of compensatory damages.  Bert Co. v. Turk, 298 A.3d 44 (Pa. 2023). On appeal, the PA Supreme court upheld a jury verdict of $2.8M for punitive damages, as not exceeding a ratio of 9:1 when compared to actual damages caused by each Defendant.  

 

Time period to Bring Suit:

How Long Does a Trade Secret Last?

Unlike a patent, a trade secret can last forever. However, Pennsylvania imposes a three (3) year statute of limitations, which starts running the moment the plaintiff knows -- or reasonably should have known through "reasonable diligence" -- his information had been stolen. The Act provides:

§ 5307 Statute of limitations.
An action . . . must be brought within three years after the [theft] was discovered or by the exercise of reasonable diligence should have been discovered.

 

However, if trade secret protection exists via contract, then a party has the four year statute of limitations to sue for breach of contract. In fact, via contract governing use of trade secrets, the parties can limit or extend the deadline to file suit to protect secrets.

 

Can the Owner of a "Secret" Waive His Rights to It?

Yes. A defense of waiver exists for any claim stemming from the Uniform Trade Secret Act, 12 Pa. C.S. § 5302 ("the Act").  But what about sharing the confidential information with the government, pursuant to regulatory oversight requirements?  For more, click here.

 

Do All States Follow the Uniform Trade Secret Act (UTSA)?

Most do.  While New York and Massachusetts rely on their judge-made law (or "common law"), all other states have adopted some version of the UTSA. 

 

What Business Sectors Typically See Wars Over "Secrets"?

It's common for people to use the Act to protect their "industry turf," regardless of whether the information at issue constitutes a secret.  Common sectors of business where this occurs include:

• • • • The insurance industry, where insurance agents are unhappy and break off to form an entity that competes with their former insurance company employer. Click here for more.
      • The medical profession,
      • Hiring an employee from a fellow tech-sector business. Click here for an example involving Pittsburgh's PPG,  and
      • The sales industry, where exiting employees have access to customer lists that a prospective employer would want.

Has the Number of Trade Secret Claims Increased? 

Yes.  Though the Federal Trade Commission's ban on noncompetes has failed, the popularity of noncompete enforcement is at an all-time low. Instead, we are seeing businesses pivot to sue outgoing employees for contrived trade secret violations in lieu of noncompete enforcement. 

 

What is the History Of This Area of Law in PA?

Before a Pittsburgh lawyer at our firm defines "trade secret," let's briefly look at how the law has evolved in Pennsylvania. First, the Pennsylvania Bar Association (click here) 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.

 

Is There a Federal Claim For Violation of Trade Secrets?

Yes.  In 2016, the United States Congress passed -- and President Obama signed into law -- the Defend Trade Secrets Act (DTSA), which is very similar to PA's DTSA, but the federal version creates jurisdiction in federal courts. Click here to learn more.  

 

Can the Owner of a "Trade Secret" Get Insurance on the

Value of It, if Stolen or Shared?

Yes.  Click here for more information about obtaining insurance to compensate the owner of the trade secret for (1) the value of the secret and (2) legal costs to litigate the claim.

 

Is There Liability Insurance For Thief  Trade Secrets?