Trade Secrets Practice | Lipton, Weinberg & Husick

Ask a knowledgeable layperson to define “Intellectual property” he or she typically lists patents, trademarks, and copyrights. A fourth type of intellectual property, “trade secrets,” should not be ignored. Trade secrets consist of any idea, process, formula or other information that a company or individual wishes to protect from infringement (i.e., from being stolen) by maintaining it as a secret. Lawyers will tell you that to maintain trade secret protection, you must keep it secret. For some companies, that is not a problem. The Coca Cola Corporation, for example, has maintained the secrecy of its Coke formula for over a hundred years. For others, trade secret protection simply does not work. Disclosure of the “secret” process, idea or information is critical to their business model. Such companies seek patent, copyright or trademark protection.

Unlike its patent, trademark and copyright brethren — creatures of federal law — trade secret protection is controlled by state law. Until recently, this meant that the law of trade secrets was a patchwork of judge-made law (“common law”), which differed from state to state. The situation, however, has changed for the better. During the past 20 years, Pennsylvania (in 2004) and a majority of other states have adopted the Uniform Trade Secrets Act (“UTSA” or “Act”), which has added predictability to how trade secrets are treated under the law, making it a much more valuable tool for intellectual property protection, particularly for businesses involved in inter-state commerce. See 12 Pa. C.S.A. § 5301


The UTSA has standardized the definition of trade secret, the factors related to misappropriation of trade secrets, and the available remedies for violation of the Act. Under the Pennsylvania Act, a trade secret consists of “information, including a formula, drawing, pattern, compilation including a customer list, program, device, method, technique or process that derives independent economic value… 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.” Importantly, for businesses in Pennsylvania, the definition includes customer lists, which in some states are not considered trade secrets. Customer lists are frequently at the center of disputes between former employees and employers so the Pennsylvania UTSA provides businesses with another tool to defend their ownership rights so long as the lists are maintained in secrecy.

The Act requires that a trade secret be “subject of efforts that are reasonable under the circumstances to maintain its secrecy.” So, if you have a customer list or any other type of trade secret you must use reasonable efforts maintain its secrecy. This means that access to the secret must restricted in a guarded location.

The UTSA provides remedies for the aggrieved party, including money damages and injunctions. Money damages may consist of defendant’s unjust enrichment or plaintiff’s lost profits. Alternatively, the UTSA also provides for reasonable royalties. In addition, punitive damages may be awarded for willful and malicious misappropriation. Under the Act, the prevailing party may also be awarded attorneys’ fees. Finally, the UTSA provides criminal penalties and makes obtaining trade secrets “willfully and maliciously” through a computer or computer system a second-degree felony. See 18 Pa. C.S.A. § 3930

 

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