California Uniform Trade Secrets Act

What Is California’s Trade Secrets Law?

California Uniform Trade Secrets Act

Trade secrets and other intellectual property can be extremely valuable to companies, particularly when those companies have competitors with similar products or services. That’s a major reason why companies will go to great lengths to ensure that their trade secrets and other IP assets remain confidential. If you are a business owner whose trade secret is being used without permission, you may be asking yourself, “What is California’s trade secrets law?” The good news is that California business owners can avail themselves of the California Uniform Trade Secrets Act (CUTSA) when their trade secrets have been misappropriated by a former employee, a competitor, or any other person or entity.

To learn more about California’s trade secrets law, keep reading.

California Uniform Trade Secrets Act Protects the Intellectual Property Rights of Businesses

The Uniform Trade Secrets Act (UTSA) gives owners of trade secrets a legal right to file a lawsuit in state court when their trade secrets have been stolen or misappropriated. California’s version of the Uniform Trade Secrets Act is codified in Cal. Civil Code § § 3426-3426.11.

California has a unique spin on the Uniform Trade Secrets Act that gives employers broader protection against theft or misappropriation of trade secrets by an employee. That’s because the California law explicitly states that an employer owns all trade secrets created by an employee within the scope of their employment. (There is an exception to this rule: when an employee creates the secret information on their own time and outside the scope of their employment, the employee may claim ownership of the information.)

The California UTSA also gives businesses a legal right to sue a rival company that uses a trade secret without authorization. Importantly, the standard of proof in these cases does not require plaintiffs to show that the defendant knew the information was a trade secret. Instead, all that is needed from plaintiffs is a showing that the defendant had reason to know or should have known that they might be using a trade secret.

What Is the Definition of a “Trade Secret” Under California Law?

Trade secrets are an important intellectual property right. But what exactly is a trade secret? The CUTSA defines a “trade secret” broadly to include just about any information utilized by a business, including “formulas, patterns, compilations, programs, devices, methods, techniques, and processes.”

All the following are examples of trade secrets that companies may need to protect against misappropriation:

  • Customer lists
  • Marketing strategies
  • Manufacturing processes
  • Computer software
  • Food recipes and formulas
  • Inventions without patents

How Do You Prove a CUTSA Claim?

Winning a CUTSA claim requires the plaintiff to prove two elements:

  1. That the information at issue was, in fact, a trade secret.
  2. That the information was misappropriated.

Proving the Information was a “Trade Secret”

As defined by the California Uniform Trade Secrets Act (CUTSA), a “trade secret” can be just about any piece of information that has value stemming from its secrecy. Basically, all that is necessary to establish the first element of a CUTSA claim is that (1) the information has independent value from the fact that it’s not known by others, and (2) the company has taken reasonable steps to protect the information.

When filing a lawsuit under the CUTSA, the plaintiff must name the confidential information at issue. The statute explicitly requires plaintiffs filing a CUTSA claim to “identify the trade secret with reasonable particularity” and disclose that information to both the court and the defendant. This runs the risk of making that secret information available to the general public, which is why many business owners choose not to file patent applications with the United States Patent and Trademark Office (USPTO) and instead rely on trade secret protections. It’s also a good reason why any business looking to file a trade secrets claim in California court should speak with a lawyer first. An experienced attorney can potentially help you obtain a protective order that seals the records and limits the public from seeing any proprietary information disclosed in the case.

Proving the Information was “Misappropriated”

For the second element under the CUTSA, a trade secret is “misappropriated” when it has been improperly acquired, used, or disclosed by the defendant. The most obvious examples of trade secret misappropriation involve theft or espionage. Even if the defendant was an employee granted access to the information, however, it may still qualify as misappropriation if the employee had a duty to maintain the secrecy of the information and subsequently breached that duty.

The plaintiff in a CUTSA action does not need to show that the defendant physically took the confidential information. For example, if a former employee remembers certain information and then uses or discloses that information without authorization, it may constitute trade secret misappropriation as set forth by the CUTSA. This is a major difference between the California Uniform Trade Secrets Act and other trade secret statutes that allow for ex-employees to claim that they cannot be expected to “wipe clean” their memories.

Federal Trade Secret Laws

Trade secret owners are already able to file suit in federal court under the Defend Trade Secrets Act (DTSA). For business owners in California and most other states, the Uniform Trade Secrets Act (UTSA) provides another option.

There is also a federal law that criminalizes the theft of trade secrets in certain circumstances. The Economic Espionage Act of 1996 makes it illegal for anyone to steal a trade secret and disclose it to a foreign entity. Violation of the statute is punishable by up to 15 years in prison and $5 million in fines. It should also be noted that there can be both a criminal prosecution under the Economic Espionage Act and a private civil action under the CUTSA.

Contact the Los Angeles Trade Secret Lawyers at Tauler Smith LLP

The Los Angeles trade secret lawyers at Tauler Smith LLP have experience filing CUTSA claims in California state courts. We understand the nuances of the law, and we know what is needed to help our clients prevail at trial. Call 310-590-3927 or email us to schedule a free consultation with a member of our intellectual property team.

Defend Trade Secrets Act

What Is the Defend Trade Secrets Act?

Defend Trade Secrets Act

Trade secrets protect the things that make a business unique, and trade secrets themselves are protected by both federal and state laws. California trade secret lawyers are often asked, “What is the Defend Trade Secrets Act?” The Defend Trade Secrets Act is a federal law that applies to any trade secrets related to products or services used in interstate commerce. The statute also applies to trade secrets used internationally. It is an important tool for anyone who needs to take legal action to protect their confidential or proprietary information.

To learn more about the Defend Trade Secrets Act, keep reading this blog.

Federal Law Protects Businesses Against Trade Secret Misappropriation

The federal Defend Trade Secrets Act was passed by the United States Congress and codified into law in 2016. The statute is an important tool in intellectual property claims, particularly for business owners who believe that an ex-employee or business competitor has used their trade secrets without authorization or permission. The idea behind the Defend Trade Secrets Act is that trade secret owners should have a way to safeguard their trade secrets against theft or misappropriation. For example, the Defend Trade Secrets Act makes it unlawful for an ex-employee to solicit their former employer’s customers.

Importantly, the Defend Trade Secrets Act does not preempt state laws. For example, a victim of trade secret theft in California may choose to file a lawsuit under the Uniform Trade Secrets Act (CUTSA). An experienced intellectual property lawyer can help you decide which statute and venue will be most favorable to your case.

What Is the Definition of “Trade Secret Misappropriation”?

The United States Patent and Trademark Office (USPTO) defines a “trade secret” as any information that has independent economic value because it is not generally known, has value to others who do not have access to the information, and is subject to efforts to maintain its secrecy.

Under the Defend Trade Secrets Act, protected information can include “all forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing.” The DTSA’s broad definition of “trade secret” gives businesses wide latitude when seeking legal protection for their proprietary information. For California business owners, it can sometimes be advantageous to file suit in federal court under the DTSA instead of suing in state court under the California Uniform Trade Secrets Act (CUTSA).

How Do You Establish a Violation of the Defend Trade Secrets Act?

Certain acts can give rise to a legal claim under the Defend Trade Secrets Act. These acts of misappropriation include the following:

  • Acquisition of a trade secret through improper means.
  • Disclosure of a trade secret by someone who used improper means to acquire the information.
  • Disclosure of a trade secret by someone who had reason to know that the information was acquired improperly.
  • Disclosure of a trade secret by someone who knew that the information had been acquired by accident or mistake.

If you believe that someone is using your trade secrets without authorization, the experienced Los Angeles trade secret attorneys at Tauler Smith LLP can assist you. Our California intellectual property team will evaluate the facts of your case and help you determine whether your legal claim should be filed under federal law or state law.

What Remedies Are Available to Plaintiffs in DTSA Cases?

One unique remedy available to plaintiffs in DTSA cases is civil seizure. This allows the court to order the seizure of property to prevent the dissemination of the trade secret at issue in the case. Moreover, this order may be issued prior to a resolution in the case, which means that courts can act quickly to stop a potential infringement of trade secrets while the matter is still being adjudicated. Civil seizure is only supposed to be an option for plaintiffs in “extraordinary circumstances.”

Additionally, the most common trade secret remedies available to plaintiffs in DTSA cases include the following:

  • Actual damages to compensate the plaintiff for trade secret misappropriation that has already occurred.
  • Exemplary or punitive damages if the trade secret was “willfully and maliciously misappropriated.”
  • An injunction to protect the trade secret.
  • Payment of a royalty to the plaintiff when future use of the trade secret is inevitable.
  • Attorney’s fees.

Trademark & Patent Claims

Additionally, trade secret claims filed under the Defend Trade Secrets Act may be accompanied by trademark infringement claims and patent infringement claims on related matters and/or IP assets. These other legal claims can provide plaintiffs in trade secret cases with additional remedies.

The Economic Espionage Act of 1996

The Defend Trade Secrets Act is a companion to the Economic Espionage Act, which imposes criminal penalties against individuals who reveal trade secrets to foreign entities, such as a foreign government, business, or agent. When someone commits trade secret theft in violation of the Economic Espionage Act, they may be prosecuted by the U.S. Department of Justice.

DTSA Exception for Whistleblowers

Congress made sure to carve out an exception for certain whistleblowers who reveal trade secrets to the government. That’s why the Defend Trade Secrets Act provides corporate whistleblowers with legal protection in the form of legal immunity from criminal prosecution. Whistleblowers are also immune from civil liability under either federal or state laws, if they meet certain conditions such as disclosing the trade secret to a government official.

Importantly, the Defend Trade Secrets Act also requires companies to let their employees know about these whistleblower immunity provisions. If a company fails to inform employees through employment manuals, policies, or contracts, then the company may no longer be eligible to pursue punitive damages and attorney’s fees if there is a DTSA lawsuit at a later date.

Contact the California Trade Secret Lawyers at Tauler Smith LLP

Tauler Smith LLP is a California law firm that helps business owners and individuals protect their intellectual property rights, including trade secrets. Our Los Angeles trade secret lawyers routinely represent both plaintiffs and defendants in U.S. District Court, and we know what it takes to win these cases. Contact us today by calling 310-590-3927 or sending an email.