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Frequently Asked Questions
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.
How does PA Define a True "Secret"?
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.
Note the quality of information: it's not any "formula, drawing, pattern, or method," etc. Rather, it must be information that's "not generally known" such that others can derive "economic value from its disclosure." Just targeting a worker for taking a spreadsheet upon separation is not necessarily enough, depending what information populates the spreadsheet.
But note the second part of the definition: the owner must make "reasonable" efforts to maintain secrecy of the information.
What's "Reasonable" Effort?
This is where many claims to protect information fall flat. The Act requires "reasonable" efforts to maintain secrecy, which is a question of fact for a judge or jury. Disclosing the "secret" to even one person -- without first asking the person to keep the information private -- can take the information outside the scope of a "secret."
For example, in Pauwels v. Deloitte LLP, No. 22-21-cv, 2nd Cir, Court of Appeals (Oct. 6, 2023), the creator of a spreadsheet formula -- for picking stocks -- found himself out of luck for trade secret protection, after he shared the information with two others, without having first asked them to protect the information. Thus, the court denied the stock picker any protection or remedy (either equitable or legal) for his trade secret. However, however, he did hav a claim for "unjust enrichment" for another's use of the information for profit.
All that said, what are clear cut examples of "trade secrets"?
What are Some Actual Clear-Cut Examples?
Here is a partial list of items statutorily deemed "trade secrets":
Customer Lists
The Act expressly defines "Customer lists" as trade secrets. However, a Pittsburgh lawyer will note the qualifier. In particular, the "secret" must not be generally known. Hence, a customer list derived purely from the phone book will face skepticism from the legal system. See Brubaker Kitchens, Inc. v. Brown. There, 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. This means, the the information must not be publicly available, etc. Examples of publicly available information includes information downloadable for free online, for dissemination to employees.
Plus, common place information fails to meet the definition. For examples, a company's training procedure, though unique, could be commonsense oriented. Thus, information about such procedure will fail to garner trade secret protection.
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. Our civil litigation lawyers also see non-compete agreements that contain a "trade secret" clause. These are often blended (or buried) within the rest of the agreement.
Recipes
Trade secret protection exists for Coca Cola's formula. On other hand, no protection will exist for a common cooking recipe, even it's a "secret" to many. Further, the owner of a true trade secret must take reasonable steps to safeguard the information and keep it confidential. Thus, a business may not sit back and expect the courts to claw back information carelessly disseminated into the purview of others.
For the text of PA's trade secret statute, click here. Contact an experienced Pittsburgh lawyer in Pennsylvania to learn more.
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. Plus, other could easily obtain the information at issue on their own.
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 "Misappropriation"?
What does it mean to "misappropriate" a trade secret? The Uniform Trade Secret Act, 12 Pa. C.S. § 5302 ("the Act") definition section explains "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 misappropriation under the Act? The Bar Association describes the remedies as follows:
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 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.
Can the Owner of the Trade Secret Seek Punitive Damages?
Yes. A claim pursuant to the trade secret Act in Pennsylvania can include a claim for punitive damages.
What Other Claims Can Be Brought?
A claim for theft of trade secrets is often bundled with other civil claims, such as 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.
For example, in a recent case, --Bert Co. v. Turk, 298 A.3d 44 (Pa. 2023), one company (National Insurance Agency or FNIA -- poached the business of a competitor named Northwest, by soliciting Northwests to employees to work for FNIA and bring their customer lists. This embodied claims for not only trade secret theft, but also tortious interference with contract, which also allows a recovery for punitive damages. 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. For more, click here.
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 day the plaintiff knows -- or reasonably should have known through "reasonable diligence" -- his information had been misappropriated. The Act provides:
§ 5307 Statute of limitations.
An action under this chapter for misappropriation must be brought within three years after the misappropriation 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 State Follow the Uniform Trade Secret Act (UTSA)?
No.
New York and Massachusetts continue to apply their own common law to trade secret disputes. That said, 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:
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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.
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The medical profession,
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Hiring an employee from a fellow tech sector business, where the employee had enhanced technology used by the prior employer uses. Click here for an example involving Pittsburgh's PPG, and
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The sales industry, where exiting employees have access to customer lists that a prospective employer would want.
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What is the Current State of Trade Secret Law?
The Act does not replace -- and merely adds to -- common law protections of "secrets" at common law. For example, the Act leaves in place Pennsylvania's Inevitable Disclosure Doctrine (the "Doctrine"), which is a common law form of non-compete law, which applies in the absence of a written non-compete. Also note that the Federal Trade Commission (FTC) is about to do away with all types of non-competes, including those created via agreement or by common law.
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). Click here to learn more.
How to Select a Pittsburgh Lawyer?
The type of Pittsburgh 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. Each Pittsburgh attorney at our firm -- who focus on civil litigation, generally, and commercial disputes specifically -- can represent you in state and federal court, compulsory arbitration, and in AAA arbitration. Each may involve a trade secret, non-compete agreement, fraud, construction law, and 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?
Generally, no. Liability insurance only covers negligence. However, it is against public policy for insurance to cover intentional conduct, such as "theft." Thus, liability insurance will not likely cover a claim for theft of a confidential information -- or misappropriation of a trade secret.
Plus, people often turn to liability insurance provided through one's employer, as a work benefit, such as MetLife Legal. However, such employer-provided coverage will often excludes coverage for legal disputes between employers-employees, such as non-compete or trade secret issues of any kind, since the coverage is provided by the employer.
But the defendant in a trade secret action should at least try to determine if any of her general liability coverage in effect at the time of the "theft" will cover it, because the cost of defending such a claim -- without insurance paying defense costs -- can be significant.
How Do I Get a Rapid Response to My Trade Secret Question?
Our Pittsburgh attorneys are available to assist you in Pennsylvania. This is a highly specialized area of law, which few practitioners handle on a regular basis. Our a Pittsburgh lawyer at our firm charge a flat fee of only $200 to review the claim against you.
