Anything But Uniform:
A State-By-State Comparison
of the Key Differences of the
Uniform Trade Secrets Act
Sid Leach
Snell & Wilmer LLP
AIPLA Annual Meeting
Washington, D.C.
October 23, 2015
Uniform Trade Secrets Act
• Completed by the Uniform Law
Commissioners in 1979
• Based upon “the commercial importance of
state trade secret law to interstate business”
and a finding that uniform trade secret
protection was “urgently needed.”
• Three main goals –
•
•
•
uniform definition of a “trade secret”
uniform definition of “misappropriation”
uniform statute of limitations (3 years)
Uniform Trade Secrets Act
“States without the UTSA now depend on the common law to resolve
disputes over misappropriation of trade secrets. This creates great
uncertainty for industry, particularly for companies that conduct
business in more than one state, since the courts in different
jurisdictions have made conflicting decisions on trade secret issues.”
“Under the common law, some fundamental concepts are disturbingly
unclear -- including the precise definition of a ‘trade secret,’ and the
question of rights and equitable relief for businesses whose secrets
have been improperly obtained and used.”
“Litigation over trade secrets frequently involves parties from more
than one state. Variations in state law have created confusion about
which law should be applied, and encourage litigants to ‘forum shop’
- looking for the most favorable jurisdiction. Adoption of the UTSA by
all states would eliminate these problems.”
Uniform Trade Secrets Act
• According to the Uniform Law
Commissioners website, it has been
enacted in 47 states
• Three states are listed as not having
enacted the UTSA:
•
•
•
New York
Massachusetts
North Carolina
Uniform Trade Secrets Act
• Massachusetts – HB 32 introduced in the state
legislature (Massachusetts already has a statute
governing trade secrets - Mass. Gen. Laws Ann.
ch. 93, § 42)
• New York – SB 3770 introduced in the state
legislature (only common law jurisdiction
remaining)
• North Carolina – enacted the North Carolina
Trade Secrets Protection Act in 1981 (uses some
language from the UTSA but is substantially
different)
Uniform Trade Secrets Act
This might lead one to conclude that the
law is uniform in 47 states.
If you came to that conclusion, you would
be mistaken.
My test for uniformity: Can you give legal
advice to a client without knowing what
state law applies, and not expose yourself
to the risk of a malpractice claim.
Uniform Trade Secrets Act
One reason for nonuniformity -- there
is not one uniform act – there are two.
Uniform Law Commissioners amended the
language of the uniform act in 1985
•
“In lieu of damages measured by any other
methods, the damages caused by
misappropriation may be measured by imposition
of liability for a reasonable royalty for a
misappropriator's unauthorized disclosure or use
of a trade secret.”
Uniform Trade Secrets Act
Some states enacted the 1979 version,
and the state legislatures did not enact
the 1985 amendments:
Washington
Alaska
Arkansas
Connecticut
Indiana
Louisiana
Uniform Trade Secrets Act
Some states enacted language from both
the 1979 version and the 1985 version
Illinois (injunction 1979 version; damages &
preemption 1985 version)
Michigan (injunction 1979 version; damages &
preemption 1985 version)
Uniform Trade Secrets Act
In many states, the state legislatures:
• made substantive changes in the
language of the statute;
• did not enact sections of the uniform
act; or
• enacted additional statutory provisions
Uniform Trade Secrets Act
“Typically, when a Legislature models a
statute after a uniform act, but does not
adopt the particular language of that
act, courts conclude the deviation was
deliberate and that the policy of the
uniform act was rejected.”
K.C. Multimedia, Inc. v. Bank of America Technology & Operations, Inc.,
171 Cal. App.4th 939, 956, 90 Cal. Rptr.3d 247, 259 (Ct. App. 2009)
(citation and internal quotes omitted).
Uniform Trade Secrets Act
When a provision is absent from the
version of the uniform trade secrets act
enacted in a state, it “suggests that the
legislature intentionally omitted it.”
Orca Communications Unlimited, LLC v. Noder, 236 Ariz. 180, 184, 337
P.3d 545, 549 (2014).
Uniform Trade Secrets Act
EXAMPLE: I will give a dollar to the first
person who already knows without
looking it up and can tell me who was
the 21st President of the United States?
Is this a trade secret in Arizona? – No.
Is this a trade secret in California? – Yes.
Is this a trade secret in Alabama? – No,
(and for different reasons from Arizona)
Arizona definition of a trade secret:
"Trade secret" means information, including a formula,
pattern, compilation, program, device, method, technique, or
process, that:
(i) 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,
and
(ii) is the subject of efforts that are reasonable under the
circumstances to maintain its secrecy.
California definition of a trade secret:
"Trade secret" means information, including a formula,
pattern, compilation, program, device, method, technique, or
process, that:
(i) derives independent economic value, actual or
potential, from not being generally known to the public or
to other persons who can obtain economic value from its
disclosure or use, and
(ii) is the subject of efforts that are reasonable under the
circumstances to maintain its secrecy.
California definition of a trade secret:
The California legislature deleted the “not readily
ascertainable” requirement from the definition of a “trade
secret” because the legislature thought it would muddy the
meaning of the term, and invite parties to speculate on the
time needed to discover a secret.
The effect of that deletion is “to exclude from the definition
only that information which the industry already knows, as
opposed to that which the industry could easily discover.”
ABBA Rubber Co. v. Seaquist, 235 Cal. App.3d 1, 21, 286 Cal. Rptr. 518 (1991)
(emphasis added).
California definition of a trade secret:
Therefore, under California law, information
can be a trade secret even though it is
readily ascertainable, so long as it has not
yet been ascertained by others in the
industry.
ABBA Rubber Co. v. Seaquist, 235 Cal. App.3d 1, 21, 286 Cal. Rptr. 518 (1991)
(emphasis added).
Alabama law - trade secret is information that:
“a. Is used or intended for use in a trade or business;
“b. Is included or embodied in a formula, pattern, compilation,
computer software, drawing, device, method, technique, or
process;”
“c. Is not publicly known and is not generally known in the
trade or business of the person asserting that it is a trade
secret;”
“d. Cannot be readily ascertained or derived from publicly
available information;”
“e. Is the subject of efforts that are reasonable under the
circumstances to maintain its secrecy; and”
“f. Has significant economic value.”
Uniform Trade Secrets Act
EXAMPLE: Your client has a secret
computer program that was taken by a
former employee. Although the
computer program does not display a
notice of copyright or have any other
proprietary or confidential markings, all
employees know it is a trade secret.
You could file suit in Idaho or in Nevada.
Which state should you choose?
Idaho definition of a trade secret:
The Idaho legislature enacted a statutory definition for a
“computer program,” and included that term in the list of
information that may constitute a protectable “trade secret.”
The definition of a “computer program” for purposes of the
Idaho Trade Secrets Act includes the requirement that the
computer program:
“Has prominently displayed a notice of copyright, or other
proprietary or confidential marking, either within or on the
media containing the information.”
Uniform Trade Secrets Act
In Alabama, a defendant can move for
summary judgment on grounds that the
information is not a trade secret because it
could be readily ascertained or derived from
publicly available information, even if the
defendant actually obtained the information
from the plaintiff.
In New Jersey, a defendant cannot defend on
grounds that proper means to acquire the
trade secret existed at the time of
misappropriation.
Uniform Trade Secrets Act
Under the USTA, trade secret information must
not be generally known or readily
ascertainable.
In Nebraska, information is not a trade secret if it
is known, or if it is ascertainable. Nebraska
eliminated the word “generally” before known,
and eliminated the word “readily” before
ascertainable. Thus, if information is
ascertainable in Nebraska, it is not a trade
secret, even if the information is not readily
available.
Uniform Trade Secrets Act
California, Oregon and Illinois eliminated the
requirement that the information not be readily
ascertainable.
Under the Colorado statute, information must be
“secret and of value” and the owner “must have
taken measures to prevent the secret from
becoming available to persons other than those
selected by the owner to have access thereto
for limited purposes.”
Uniform Trade Secrets Act
In North Carolina, information must derive
“independent actual or potential commercial
value from not being generally known or readily
ascertainable through independent
development or reverse engineering by
persons who can obtain economic value from
its disclosure or use.”
Documents in Publicly Available Trash
The Connecticut statute defines “improper
means” to explicitly include “searching through
trash.”
Alabama defines improper means to include:
“[o]ther deliberate acts taken for the specific
purpose of gaining access to the information of
another by means such as electronic,
photographic, telescopic or other aids to
enhance normal human perception, where the
trade secret owner reasonably should be
able to expect privacy.”
Documents in Publicly Available Trash
“[I]t is rather difficult to find that one has taken reasonable
precautions to safeguard a trade secret when one leaves it
in a place where, as a matter of law, he has no reasonable
expectation of privacy from prying eyes.”
Frank W. Winne & Son, Inc. v. Palmer, No. 91-2239, 1991 WL 155819, at *4
(E.D. Pa. Aug. 7, 1991).
“In this case, there are disputes of fact as to whether
AlphaMed adequately protected the secrecy of its
documents, either by shredding them, not placing them in
publicly available trash, not freely disseminating them,
requiring confidentiality agreements, or any other
reasonable means.”
Alphamed Pharmaceuticals Corp. v. Arriva Pharmaceuticals, Inc., No. 03-20078CIV, 2005 WL 5960935, at *4 (S.D. Fla. Aug. 24, 2005)
Uniform Trade Secrets Act
Under the North Carolina statute, the existence of
a trade secret is not negated merely because
other people have independently developed the
same information.
Under the Nevada statute, the existence of a
trade secret is negated if the information is
generally known or readily ascertainable by
proper means “by the public or any other
persons…”.
Uniform Trade Secrets Act
South Carolina enacted an additional provision:
A trade secret may consist of a simple fact, item, or
procedure, or a series or sequence of items or
procedures which, although individually could be
perceived as relatively minor or simple, collectively can
make a substantial difference in the efficiency of a
process or the production of a product, or may be the
basis of a marketing or commercial strategy. The
collective effect of the items and procedures must be
considered in any analysis of whether a trade secret
exists and not the general knowledge of each individual
item or procedure.”
Uniform Trade Secrets Act
Minnesota enacted an additional provision
providing that the existence of a trade
secret is not negated merely because an
employee is not given express or specific
notice that information is a trade secret if
under the circumstances the employee
should know it is a secret.
Uniform Trade Secrets Act
Prior to the USTA, courts followed the
Restatement (First) of Torts §757,
which provided six factors to consider in
determining whether information is a
“trade secret”.
The USTA was intended to replace these
“disturbingly unclear” six factors with a
statutory definition of a “trade secret”.
Uniform Trade Secrets Act
However, courts in many USTA states still
consider the six factors in the Restatement
(First) of Torts §757 in determining
whether information is a “trade secret.”
E.g., Network Telecommunications, Inc. v. Boor-Crepeau, 790 P.2d 901, 903 (Colo. Ct.
App. 1990); ConAgra, Inc. v. Tyson Foods, Inc., 342 Ark. 672, 677, 30 S.W.3d 725,
729 (2000); Powercorp Alaska, LLC v. Alaska Energy Authority, 290 P.3d 1173,
1187 & n.47 (Alaska 2013); Enterprise Leasing Co. v. Ehmke, 197 Ariz. 144, 149
n.6, 3 P.3d 1064, 1069 n.6 (Ct. App. 1999); Basic American, Inc. v. Shatila, 133
Idaho 726, 735, 992 P.2d 175, 184 (1999); Liebert Corp. v. Mazur, 357 Ill. App.3d
265, 276-77, 827 N.E.2d 909, 921-22 (2005); Optic Graphics v. Agee, 87 Md. App.
770, 591 A.2d 578, 585 (1991); Secure Energy, Inc. v. Coal Synthetics, LLC, 708 F.
Supp.2d 923, 926 (E.D. Mo. 2010).
Uniform Trade Secrets Act
EXAMPLE: Your client has to file an
answer in Iowa to a complaint alleging
trade secret misappropriation. Your
client tells you he had consent to use
the information.
You file an answer denying the
allegations of the complaint. Your
malpractice insurance carrier faints
when it learns what you did. Why?
Uniform Trade Secrets Act
Under the USTA, the definition of
“misappropriation” includes the requirement
that the use or disclosure was “without
express or implied consent”
Thus, under the USTA, it is generally the
plaintiff’s initial burden to show that the use
of the information was without the trade
secret owner’s express or implied consent,
because it is an element of the claim.
Uniform Trade Secrets Act
The Iowa legislature eliminated “without
express or implied consent” from the
definition of “misappropriation”
The Iowa legislature enacted a statute
making implied or express consent a
defense.
Under Iowa law, you must allege express or
implied consent as an affirmative defense.
Uniform Trade Secrets Act
New Jersey enacted a different definition of
“misappropriation,” and eliminated from the
definition any provision concerning a trade
secret acquired by accident or mistake.
Under the Alabama statute, the owner of a
trade secret has no recourse against
someone who innocently learns of a trade
secret.
Uniform Trade Secrets Act
Virginia and Wisconsin modified the definition of
“misappropriation” to include disclosure or use of
a trade secret of another without express or
implied consent by a person who acquired the
trade secret by accident or mistake.
They eliminated the requirement in the uniform act
that (a) the person “knew or had reason to know”
that the information was a trade secret, and (b)
that knowledge of it was acquired by accident or
mistake, and (c) that this occurred before a
material change in the person’s position.
Uniform Trade Secrets Act
Nevada modified the definition of “improper
means” to limit any breach of a duty to
maintain secrecy to a “willful” breach or
“willful” inducement of a breach.
Thus, a breach of a duty to maintain secrecy
that was not willful is not misappropriation
under Nevada law.
Uniform Trade Secrets Act
Virginia enacted a definition of “improper
means” that includes “use of a computer or
computer network without authority.”
Georgia, Illinois, Texas, Oregon, and New
Jersey enacted statutes explicitly stating
that reverse engineering is not improper
means.
Damages Measured by Reasonable Royalty
The states that enacted the 1979 version
do not have a statutory provision for
damages measured by a reasonable
royalty.
Connecticut, Indiana, Louisiana,
Arkansas, Washington, and Alaska
Damages Measured by Reasonable Royalty
Under the 1985 version of the USTA, a
plaintiff can elect for reasonable royalty
damages in any case.
California, Georgia, Illinois and Indiana
only allow a reasonable royalty as the
measure of damages if neither actual
loss nor unjust enrichment are provable.
Damages Measured by Reasonable Royalty
Virginia allows damages to be measured
by a reasonable royalty only “[i]f a
complainant is unable to prove a greater
amount of damages by other methods
of measurement”
And under those circumstances, the
statute provides that a reasonable
royalty must be the exclusive measure
of damages.
Damages Measured by Reasonable Royalty
Wisconsin allows damages to be
measured exclusively by the imposition
of liability for a reasonable royalty only if
the complainant cannot by any other
method of measurement prove an
amount of damages which exceeds the
reasonable royalty.
Damages Measured by Reasonable Royalty
In Montana, a reasonable royalty can be
the measure of damages for a
misappropriator’s unauthorized use of a
trade secret, but not the
misappropriator’s disclosure.
Damages Measured by Reasonable Royalty
Oregon modified the damages provisions
to say that “a complainant is entitled to
recover damages adequate to
compensate for misappropriation.”
The statute sets a reasonable royalty as
the floor for a damages award,
providing that damages “shall not be
less than a reasonable royalty for the
unauthorized disclosure or use of a
trade secret”
Damages Measured by Reasonable Royalty
Ohio adopted modified language
providing that a court may impose “a
reasonable royalty that is equitable
under the circumstances considering
the loss to the complainant, the benefit
to the misappropriator, or both.”
Uniform Trade Secrets Act
EXAMPLE: Your client has a trade secret
that was misappropriated by a
competitor. It is a compelling case of
willful and malicious misappropriation.
You could file suit in Arkansas, Nebraska,
or in Mississippi. Which state should
you choose?
Uniform Trade Secrets Act
Arkansas eliminated the exemplary
damages provision from the statute
enacted in that state.
Exemplary or punitive damages are not
recoverable under the Arkansas Trade
Secrets Act.
Jenkins v. APS Insurance, LLC, 2013 Ark. App. 746, 431 S.W.3d 356,
363 (Ct. App. 2013).
Uniform Trade Secrets Act
Nebraska did not enact the provision of
the USTA allowing for exemplary
damages.
Nebraska did not enact the provision of
the USTA allowing for attorneys fees.
Uniform Trade Secrets Act
The USTA permits exemplary damages,
but limits the amount to twice the amount
awarded as compensatory damages.
Mississippi enacted the provision allowing
for exemplary damages, but the
Mississippi legislature eliminated any limit
on the amount of exemplary damages
that may be awarded.
Uniform Trade Secrets Act
The USTA provides for exemplary damages up to
2 times actual damages.
Arkansas, Louisiana, Nebraska & Michigan – no
exemplary damages
Colorado – 1 times actual damages
Virginia – no more than 2 times or $350K
Ohio – 3 times actual damages
Mississippi, North Carolina, Missouri, Montana &
Vermont – no limit
Uniform Trade Secrets Act
The USTA allows exemplary damages for “willful
and malicious misappropriation.” The USTA
does not define “willful and malicious.”
Pennsylvania enacted a statutory definition of
“willful and malicious,” which is defined to mean
“[s]uch intentional acts or gross neglect of duty
as to evince a reckless indifference of the rights
of others on the part of the wrongdoer, and an
entire want of care so as to raise the
presumption that the person at fault is conscious
of the consequences of his carelessness.”
Uniform Trade Secrets Act
Some states enacted statutory language different
from the USTA “willful and malicious” standard.
Nevada – “if willful, wanton or reckless
misappropriation or disregard of the rights of the
owner of the trade secret exists.”
South Carolina - “[u]pon a finding of wilful, wanton,
or reckless disregard of the plaintiff's rights.”
Missouri - if the misappropriation is “outrageous
because of the misappropriator’s evil motive or
reckless indifference to the rights of others.”
Uniform Trade Secrets Act
The case law is split concerning the burden of
proof required to show exemplary damages.
Trandes Corp. v. Guy F. Atkinson Co., 996 F.2d 655,
666 (4th Cir.1993) (Maryland law) (clear and
convincing); Centrol, Inc. v. Morrow, 489 N.W.2d
890, 896 (S.D. 1992) (clear and convincing); Zawels
v. Edutronics, Inc., 520 N.W.2d 520, 523-24 (Minn.
App. 1994) (preponderance of the evidence).
In Texas, the statute provides that the burden of
proof is by clear and convincing evidence.
Uniform Trade Secrets Act
The USTA provides for an award of attorneys fees:
1. a bad faith claim of misappropriation
2. willful and malicious misappropriation
3. motion to terminate injunction made or
resisted in bad faith
Uniform Trade Secrets Act
North Carolina & Virginia allow attorneys fees
under more limited circumstances (not when a
motion to terminate an injunction is made or
resisted in bad faith)
South Carolina allows attorneys fees if “willful
misappropriation exists.” (need not be malicious)
Vermont awards attorneys fees to prevailing party
Idaho, Missouri & Nebraska – not allowed
Alaska did not enact USTA attorneys fee provision
Attorneys Fees in Alaska
Alaska is the only state that follows the English
Rule that the prevailing party is generally entitled
to an attorneys fee award. The state courts
adopted a rule for awarding fees.
In diversity cases in federal courts in Alaska, the
Alaska state rule is applied and awards of
attorney’s fees are routinely granted. This
includes trade secret cases governed by state
law.
Alaska Rent-A-Car, Inc. v. Avis Budget Group, Inc., 738 F.3d 960, 973-74 (9th
Cir. 2013), cert. denied, 134 S.Ct. 644 (2013).
Uniform Trade Secrets Act
Alabama allows attorneys fees if a claim of
misappropriation is made or resisted in bad
faith.
California & New Jersey allow attorneys fees and
expert witness fees
Montana allows attorneys fees and “reasonable
costs”
Pennsylvania allows attorneys fees and “expenses
and costs”
Uniform Trade Secrets Act
The USTA does not define “bad faith.” California
case law defined “bad faith” to require objective
speciousness of the plaintiff’s claim, as opposed
to frivolousness, plus the plaintiff’s subjective
bad faith in bringing or maintaining the claim.
“An objectively specious claim is one that is
completely unsupported by the evidence or one
that lacks proof as to one of its essential
elements.”
JLM Formation, Inc. v. Form Pac, No. C 04–1774 CW, 2004 WL 1858132, at
*2 (N.D. Cal. Aug. 19, 2004).
Uniform Trade Secrets Act
“Subjective misconduct exists where a plaintiff
knows or is reckless in not knowing that its claim
for trade secret misappropriation has no merit.”
“A court may determine a plaintiff’s subjective
misconduct by examining evidence of the
plaintiff’s knowledge during certain points in the
litigation and may also infer it from the
speciousness of a plaintiff’s trade secret claim.”
JLM Formation, Inc. v. Form Pac, No. C 04–1774 CW, 2004 WL 1858132, at
*2 (N.D. Cal. Aug. 19, 2004).
Uniform Trade Secrets Act
California cases interpreting the meaning of “bad
faith” in the attorney’s fee provision have been
followed in other states.
Berry v. Hawaii Express Service, Inc., No. 03-000385 SOM/LEK, 2007 WL
689474, at *13-15 (D. Haw. March 2, 2007), aff’d, 291 Fed. Appx. 792 (9th
Cir. 2008).
Contract Materials Processing, Inc. v. Kataleuna GMBH Catalysts, 222 F.
Supp.2d 733, 744 (D. Md. 2002).
Degussa Admixtures, Inc. v. Burnett, No. 1:05–CV–705, 2007 WL 274219, at
*7 (W.D. Mich. Jan. 30, 2007), aff’d, 277 Fed. Appx. 530 (6th Cir. 2008).
Uniform Trade Secrets Act
New Jersey enacted a statutory definition of “bad
faith” that is different:
“For purposes of this section, ‘bad faith’ is that
which is undertaken or continued solely to
harass or maliciously injure another, or to delay
or prolong the resolution of the litigation, or that
which is without any reasonable basis in fact or
law and not capable of support by a good faith
argument for an extension, modification or
reversal of existing law.”
Uniform Trade Secrets Act
The USTA provides a 3-year statute of
limitations (enacted in 38 states – 80%
success rate).
2 years - Alabama
4 years - Maine, Nebraska, Ohio & Wyoming
5 years - Georgia, Illinois & Missouri
6 years - Vermont
Uniform Trade Secrets Act
Georgia and Tennessee adopted different
provisions concerning continuing
misappropriation by multiple persons.
Alabama, Pennsylvania and North Carolina
did not enact the provision in the uniform
act that a continuing misappropriation
constitutes a single claim for purposes of
the statute of limitations.
Uniform Trade Secrets Act
There is a split of authority concerning the statute of
limitations when the same defendant later commits
a second act of misappropriation.
In California, a claim concerning the second act of
misappropriation is barred, even if the first act of
misappropriation was relatively inconsequential.
Intermedics, Inc. v. Ventritex, Inc., 822 F. Supp. 634, 654 (N.D. Cal. 1993).
The Colorado Supreme Court disapproved of this
rule, and held that the correct approach is to
determine whether the second act of
misappropriation involves the same trade secret.
Gognat v. Ellsworth, 259 P.3d 497, 502-03 (Colo. 2011).
Preemption of Common Law
The USTA cannot replace the common law
with a uniform law of trade secrets unless
it preempts the common law. The uniform
act includes preemption language in
section 7.
Iowa did not enact section 7. As a result,
there is no preemption in Iowa.
New Mexico and Nebraska also did not
enact section 7.
Preemption of Common Law
In the states that enacted section 7, there is a
significant split of authority concerning the scope of
preemption.
A number of courts have held that the uniform trade
secrets act preempts common law tort claims
based upon misappropriation of confidential
information that does not rise to the level of a
“trade secret.”
Other states have held that there is no preemption of
common law claims based upon confidential
information.
Preemption of Common Law
New Jersey adopted a statute explicitly providing that
the remedies provided in the New Jersey Trade
Secrets Act “are in addition to and cumulative of
any other right, remedy or prohibition provided
under the common law or statutory law of this
State,” except that the New Jersey statute
supersedes conflicting civil remedies for
misappropriation of a trade secret.
Preemption of Common Law
There is a split among the states
concerning whether fraud claims are
preempted.
Compare Chatterbox, LLC v. Pulsar Ecoproducts, LLC, 2007 WL 1388183,
at *4 (D. Idaho May 9, 2007) (fraud claim not preempted), and Hecny
Transp., Inc. v. Chu, 430 F.3d 402, 404-05 (7th Cir. 2005) (fraud claim
not preempted), with Weins v. Sporleder, 605 N.W.2d 488 (S.D. 2000)
(fraud claim preempted), cert. denied, 531 U.S. 821 (2000).
Preemption of Common Law
There is a split among the states
concerning whether the common law
respondeat superior doctrine is displaced
by the uniform trade secrets act.
Compare Infinity Products, Inc. v. Quandt, 810 N.E.2d 1028, 1034 (Ind.
2004) (respondeat superior doctrine is displaced), with Newport News
Industrial v. Dynamic Testing, 130 F. Supp.2d 745, 751 (E.D. Va. 2001)
(respondeat superior doctrine is not displaced).
Uniform Trade Secrets Act
Section 8 of the USTA provides that the act shall be applied
and construed to effectuate its purpose to make the law
uniform.
Arizona, Georgia, Hawaii, Idaho, Illinois, Iowa, Minnesota,
North Dakota, Maine, New Mexico, Nebraska, Nevada,
New Jersey, Alabama, and North Carolina did not enact
section 8.
The Alabama Trade Secrets Act provides that it “should be
construed to be consistent with the common law of trade
secrets,” not the uniform trade secrets act.
Uniform Trade Secrets Act
In Georgia, a former employee is free to use any
customer information he may have committed to
memory.
Avnet, Inc. v. Wyle Labs., Inc., 263 Ga. 615, 437 S.E.2d 302 (1993).
In most states, a former employee cannot use
memorized trade secrets of his previous employer.
Burt Dickens & Co. v. Bodi, 144 Ill. App.3d 875, 882, 494 N.E.2d 817, 821 (1986)
(“It is well established that an employee breaches his confidential relationship
with his employer where he acts in a manner inconsistent with his employer’s
interest during his employment in that he surreptitiously copies or memorizes
trade secret information for use after his termination in the solicitation of his
employer’s customers.”).
Uniform Trade Secrets Act
In some states, the plaintiff only need establish
that it is in rightful possession of the trade
secrets that are the basis for the claim of
misappropriation.
Metso Minerals Inds. v. FLSmidth-Excel LLC, 733 F. Supp.2d 969, 972 (E.D. Wis.
2010) .
In North Carolina, the plaintiff must be the
owner of the trade secret.
N.C. Gen. Stat. § 66-153 (2015).
Other Conflicts in Case Law
Many states have adopted the inevitable
disclosure doctrine.
E.g., PepsiCo, Inc. v. Redmond, 54 F.3d 1262, 1269 (7th Cir. 1995).
California and Maryland have rejected the
inevitable disclosure doctrine.
Whyte v. Schlage Lock Co., 101 Cal. App.4th 1443, 125 Cal. Rptr.2d 277, 291
(2002); LeJeune v. Coin Acceptors, Inc., 381 Md. 288, 849 A.2d 451, 471
(Md. 2004).
Uniform Trade Secrets Act
As a result of:
1. State legislatures enacting different versions of the uniform act,
enacting modifications to the uniform act, rejecting portions of
the uniform act, and/or enacting additional statutory provisions.
2. Courts reaching conflicting decisions concerning preemption.
3. Courts interpreting their state statutes differently, or reaching
different results on areas not explicitly covered by the uniform
act.
The law of trade secrets now appears to be less uniform than it was
in 1979 before the uniform trade secrets act was proposed for
enactment in the 50 states.
Sid Leach
Snell & Wilmer LLP
One Arizona Center
400 East Van Buren
Phoenix, Arizona 85004-2202
Direct Line: (602) 382-6372
Email: sleach@swlaw.com
Firm Website: www.swlaw.com