Best Defenses to Trade Secret Claims

California and federal trade secret laws are supposed to protect businesses against the unlawful acquisition, use, or disclosure of their proprietary information. But these legal protections can also open the door for the filing of bad faith claims by business owners who may have a grudge against a former employee or a competing company. If you are being sued for trade secret misappropriation, it is important that you speak with an attorney who understands both state and federal intellectual property law and who can advise you on the best defenses to trade secret claims.

To learn about the best defenses that may be available in your California trade secret case, keep reading.

What Defenses Are Available in California Trade Secret Cases?

One of the main ideas behind trade secret laws is that businesses should have a way to prevent others from disclosing and/or using their confidential information. In fact, these laws are so robust and plaintiff-friendly that plaintiffs are often able to win and collect substantial monetary damages. This is one reason why any defendant in a trade secret action should be represented by an experienced California trade secret lawyer who can raise strong defenses on their behalf.

These are just a few of the possible defenses in a California trade secret case:

1. The information was not a “trade secret.”
2. The information was not misappropriated.
3. The defendant had whistleblower immunity.
4. The statute of limitations expired.

The Information Was Not a “Trade Secret”

The federal Defend Trade Secrets Act (DTSA) defines a trade secret as information that is valuable because it cannot be readily ascertained through proper means. A potential defense available in federal trade secret claims filed under the DTSA is that the information was “readily ascertainable” through lawful means. For example, the defendant may be able to show that they acquired the data in material that was published online or in books. This would mean that the information was not confidential since it was, by definition, generally available to others. This exact defense is not available in claims filed under the California trade secrets statute because the California Uniform Trade Secrets Act (CUTSA) defines a trade secret more broadly. But it is still possible for a defendant in a CUTSA action to argue that the information does not qualify as a trade secret because it was “generally known to the public.”

A related defense that may be an option in some California trade secret cases is that the plaintiff failed to take sufficient steps to protect their proprietary information. Both the DTSA and the CUTSA require plaintiffs to make reasonable efforts to ensure that their information remains confidential. When the business owner fails to do at least the bare minimum to maintain the secrecy of the information (e.g., imposing restrictions on which employees can potentially access it), then it may not qualify as a “trade secret” under the law.

The Information Was Not Misappropriated

Even if the plaintiff establishes that the information at issue in the case qualifies as a trade secret, the defendant may be able to argue that there was no misappropriation because the information was lawfully acquired. Under both the California Uniform Trade Secrets Act (CUTSA) and the federal Defend Trade Secrets Act (DTSA), a person or entity is liable for trade secret misappropriation only if the information was acquired through “improper means.” This typically means actions such as theft, espionage, misrepresentation, bribery, or breach of a duty to maintain the secrecy of the information. By contrast, a good example of a lawful action to acquire trade secrets is reverse engineering of a formula or recipe by a rival company. Since this information would have been discovered through publicly available means, it does not violate trade secret law.

The Defendant Had Whistleblower Immunity

When Congress passed the Defend Trade Secrets Act (DTSA), they included provisions that explicitly protect individuals who reveal trade secrets in certain situations. For example, a whistleblower who discloses confidential information to a government official while reporting illegal activity by their employer would be immune from prosecution and from civil liability in a trade secret lawsuit. The same is true for a whistleblower who discloses proprietary information to an attorney in the context of reporting unlawful actions by their employer.

The Statute of Limitations Expired

Defendants in some trade secret cases may be able to raise a defense that the statute of limitations for filing a trade secret claim has expired. In California trade secret actions, the plaintiff has just three (3) years to bring a lawsuit, and the clock starts as soon as the plaintiff has either actual notice of the misappropriation or constructive notice of the misappropriation. (“Constructive notice” means that the plaintiff had reason to investigate and should have discovered the trade secret theft or use.)

Contact the Los Angeles Trade Secret Litigation Attorneys at Tauler Smith LLP

If you have been accused of misappropriating a company’s trade secrets by disclosing information to a competitor or using information without permission, you are going to want a skilled attorney assisting you. The Los Angeles trade secret attorneys at Tauler Smith LLP have extensive experience representing defendants in California trade secret lawsuits, and we are prepared to help you raise strong defenses to win at trial or get the claim dismissed before trial.

Call us at 310-590-3927 or email us to schedule a free consultation.