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Trade Secret Definition

What Is a Trade Secret?

Trade Secret Definition

It is vital for any business owner to know the answer to this question: “What is a trade secret?” Sometimes, a company’s intellectual property assets are valuable precisely because information about those assets is not generally known to the public. These are considered “trade secrets,” and both California and federal law afford businesses with legal protections for their trade secrets. These laws recognize that when a company loses its proprietary information due to theft or infringement, the results can be disastrous. The company may see its advantage over competitors in the marketplace disappear, leading to critical revenue losses. Worse yet, the company may lose its core technologies that help the business to survive. An experienced California intellectual property lawyer can protect you against this fate and help you take appropriate legal action in state or federal court.

To learn more about how trade secrets are defined under California law, keep reading.

How Does California Law Define a “Trade Secret”?

A trade secret has three main components:

  1. It gains value from not being generally known by the general public. This value can be actually realized, or it may be potential value.
  2. It has particular value to others who cannot acquire the information. (E.g., competing businesses.)
  3. Its secrecy has been maintained through reasonable efforts.

These aspects of a trade secret can make it a valuable intellectual property asset for many businesses. Where trade secrets differ from other types of intellectual property like patents, copyrights, and trademarks is that trade secrets are never formally registered with the government for protection. Another difference between trade secrets and other kinds of intellectual property is that trade secrets are, by definition, not publicly recognized.

CUTSA Definition of “Trade Secrets”

The U.S. Patent and Trademark Office (USPTO) defines a “trade secret” as a type of intellectual property. Federal lawmakers recognized the importance of protecting trade secrets in 2016 when they passed the Defend Trade Secrets Act (DTSA) and gave businesses and individuals a right to file a civil suit when their trade secrets are misappropriated. Under the DTSA, any information that derives independent economic value from the fact that it cannot be easily ascertained by others may qualify for protection as a trade secret.

The California Uniform Trade Secrets Act (CUTSA) defines a “trade secret” even more broadly as any information that is not generally known to others who might find it valuable. This means that there is no substantial limit to the types of information that may be protected under California’s trade secret law. Common examples of trade secrets include client lists, company financial data, internal forecasts and projections, advertising plans, designs and other technical plans, formulas, manufacturing techniques, and computer source code. One of the most famous examples of a trade secret is the formula for Coca-Cola.

Basically, if the information is the sort that a competitor would need to spend money or time to discover, then it probably qualifies as a trade secret. But if even one person outside the business already knows the information without it having been disclosed, then it might not be a trade secret.

Proving Trade Secret Misappropriation in California

Winning a trade secret claim requires the plaintiff to first establish that the confidential information at issue does, in fact, qualify as a trade secret. Next, the plaintiff will have to prove that the defendant misappropriated the data.

As set forth by California law, trade secret misappropriation can include any of the following acts involving confidential information:

  • Wrongful acquisition.
  • Wrongful use.
  • Wrongful disclosure.

A person or entity is deemed to have “misappropriated” a trade secret when they use illegal or improper means to acquire it. This can include theft, bribery, espionage, a misrepresentation, or a breach of duty to maintain the secret. In addition to prohibiting the illegal acquisition of a trade secret, the CUTSA also explicitly bars anyone from disclosing a trade secret without consent of the rightful owner, as well as prohibiting anyone from using a trade secret that was illegally acquired. This means that both the person who took or disclosed the trade secret and the person or company who later used the information may be liable under California trade secret law.

Contact the Los Angeles Trade Secret Lawyers at Tauler Smith LLP

If you are a business owner whose proprietary information was stolen by an ex-employee, disclosed to a competitor, or used by another company, then you may have a valid claim for trade secret misappropriation. Your best move now is to speak with a Los Angeles trade secret lawyer who has experience bringing these claims in California courts. The legal team at Tauler Smith LLP understands the nuances of both federal and state laws addressing trade secrets, and we know how to win trade secret litigation.

Contact us today by calling 310-590-3927 or sending an email.

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.

Copyright vs Trademark vs Patent

Copyright vs. Trademark vs. Patent

Copyright vs Trademark vs Patent

“Intellectual property” covers a wide range of business assets, such as books, screenplays, photos, movies, computer software code, inventions, and formulas. Copyrights, trademarks, and patents are the main types of intellectual property. Federal law provides strong protections for the creators of original works, inventors, and licensors of IP rights, but the law is complex. In fact, people often confuse copyright, trademark, and patent because each kind of intellectual property protects creators or licensors against unauthorized use or infringement by others, but they do so in different ways. If you are involved in an intellectual property dispute, you need to have a solid understanding of what the law says with respect to copyright vs. trademark vs. patent.

To learn more about the differences between copyright law, trademark law, and patent law, keep reading this blog.

What’s the Difference Between Copyrights, Trademarks, and Patents?

Intellectual property can be an extremely valuable business asset. That’s why it is important that only the rightful owner of the asset’s IP rights be allowed to exploit the intellectual property for profit, whether that involves selling it or licensing it. The three most common tools used to protect the intellectual property rights of certain types of assets are:

  1. Copyrights
  2. Trademarks
  3. Patents

Copyrights

As set forth in the Copyright Act of 1976, copyright protects original creative works like novels, songs, paintings, videos, photographs, drawings, clothing, jewelry, and even websites. Only the copyright holder may copy, sell, perform, or display the work for profit, or license the work to someone else for commercial reproduction, distribution, performance, or display.

When it comes to securing copyright ownership, the original creator of a work technically doesn’t need to do anything to acquire the copyright of that work. But there are a number of benefits only available to those who actually register their copyright with the U.S. Copyright Office. For example, if someone does infringe on your copyright, you will first need to file for copyright registration before you can bring a lawsuit in federal court to enforce your copyright. Additionally, copyright registration will probably make it easier for you to back up your case in court because there will be a public record of the copyright claim: all officially copyrighted works published after 1978 are deposited with the Copyright Office and entered into an online database.

Trademarks

While copyright applies to original works of authorship, a trademark covers unique words, phrases, slogans, symbols, and designs that can be used to identify a good, product, or service. A requirement for a company trademark is that the name or logo being trademarked should distinguish the product or service from any other products or services. For example, the product name for Coca-Cola is trademarked because it stands out from all other soft drinks on the market, and everyone who hears the name knows exactly what it refers to.

Just as with copyright law, a trademark does not actually have to be registered in order to get trademark ownership. Even without registering the trademark, you can still use common law to protect against trademark infringement by competitors who attempt to copy the look of your product and pass it off as their own. Just as with copyright law, however, official registration of your trademark comes with certain advantages, including the ability to file a lawsuit in federal court to enforce your trademark against unauthorized use.

To get trademark protection solely within your home state, or in the state where you conduct business, you must register with that particular state. To get federal trademark protection that crosses state boundaries, you must file a trademark registration application with the United States Patent and Trademark Office (USPTO). Once you’ve registered your trademark, you will be allowed to use the registered trademark symbol (®). Otherwise, you are limited to the common law trademark symbol (™).

Patents

Generally speaking, patent law protects inventors by giving them the exclusive right to make, use, copy, or sell their inventions or discoveries, or to license their inventions to another person or entity. Obtaining a patent can be extremely difficult, and it often requires the assistance of an experienced intellectual property lawyer.

Unlike with copyrights and trademarks, the only way to avail yourself of patent protection is to apply for and be granted a patent by the U.S. Patent and Trademark Office (USPTO), the same agency that handles trademark applications. Absent patent registration, the formula or process used in the invention may be considered a “trade secret.” The main advantage to obtaining a patent is that you can then sue anyone who infringes the patent by using or selling your invention without consent. But patent registration does come with a significant downside: you must publicly disclose the unique process or composition of your product. For certain companies that wish to maintain trade secrecy (e.g., pharmaceutical drug manufacturers), this can present a dilemma.

Contact the California Intellectual Property Lawyers at Tauler Smith LLP

If someone has infringed on your exclusive intellectual property rights, or if you have been accused of violating someone else’s intellectual property rights, your best move is to speak with a knowledgeable IP lawyer immediately. The California intellectual property attorneys at Tauler Smith LLP, with a main office in Los Angeles, are prepared to help you bolster your IP claim or build a strong defense against an accusation of copyright or trademark infringement. Call us now at 310-590-3927 or fill out the online contact form.