Statute of Limitations for Trade Secret Claims

The legal system has many complexities, such as a requirement that plaintiffs not wait too long to file lawsuits in either California courts or federal court. This is one reason why it’s so important for any business owner with valuable intellectual property to have a solid understanding of California IP laws, including the statute of limitations for trade secret claims. The reality is that an individual’s failure to file their civil suit within a time period set forth by the applicable statute could bar them from ever getting compensation, even if their claim is valid. The best way to ensure that you do not miss the statute of limitations and lose you right to bring a lawsuit is to speak with a knowledgeable California trade secret lawyer as soon as possible.

To learn more about the statute of limitations for California trade secret claims, keep reading.

How Long Do You Have to File a Trade Secret Claim in California?

Under California law, anyone who wants to bring a trade secret claim must do so within three (3) years. Failure to take prompt action could permanently bar your claim and prevent you from getting any of the remedies available in trade secret litigation.

The critical factor here is determining exactly when that three-year period begins. The law requires plaintiffs to file their claims no later than three years after either of the following has occurred:

1. When the plaintiff actually learns about the defendant’s misappropriation of trade secrets.
2. When the plaintiff should have learned about the defendant’s misappropriation of trade secrets.

When Does the Statute of Limitations Start in California Trade Secret Lawsuits?

Most obviously, the clock starts ticking on the trade secret statute of limitations when the misappropriation is first discovered. Once the plaintiff has actual notice of trade secret misappropriation, they must bring a legal claim within three (3) years.

But what happens when the plaintiff does not have notice of trade secret misappropriation? There is another way for the clock to start: when the misappropriation should have been discovered. This potentially gives defendants in trade secret actions some possible defenses because courts will typically apply a looser standard of proof in circumstances where the plaintiff failed to exercise reasonable diligence to discover the trade secret infringement. If a business owner suspects or otherwise believes that their trade secret was stolen or disclosed to competitors, then the business owner may have a legal obligation to investigate. Moreover, that investigation should occur in a timely fashion. Failure to take prompt action to investigate could open the door for the defendant in a later trade secret action to seek dismissal of the case, particularly if the claim was filed more than three (3) years after the misappropriation began.

Courts will use a “reasonable person standard” in these cases to determine whether the plaintiff should have taken faster action to investigate the possible trade secret use. This means that the court will ask whether a reasonable person would have acted as the plaintiff did, or whether a reasonable person would have investigated their suspicions about trade secret theft.

Tolling the Statute of Limitations in California Trade Secret Cases

The three-year statute of limitations for trade secret claims filed under the California Uniform Trade Secrets Act (CUTSA) doesn’t necessarily run continuously. That’s because the statute of limitations can be tolled (temporarily stopped) in certain circumstances where the defendant leaves the state. This applies when a defendant is a California resident and then temporarily goes to another state with the expectation of returning later. It also applies when a defendant is a resident of a different state and has not yet entered the state of California. The idea behind this exception to the statute of limitations is that defendants should not be able to avoid communications or being served notice in a case where the plaintiff has limited time in which to file.

Importantly, the clock does not stop when there is more than one instance of a defendant misappropriating the trade secret. In a lot of trade secret cases, the defendant commits multiple violations by continuing to use or disclose the confidential information. Under California law, this does not affect the statute of limitations. The clock does not restart in trade secret claims each time the defendant commits another infringement. That’s because California courts have held that only the initial misappropriation triggers the statute of limitations, and each subsequent misappropriation is viewed as a related violation.

Free Consultation with Los Angeles Trade Secret Lawyers

Tauler Smith LLP is a California law firm that focuses on intellectual property law. We represent both plaintiffs and defendants in cases involving trade secret claims, and we regularly appear in federal and state courtrooms. One of our experienced Los Angeles trade secret attorneys will speak with you about your case and help you determine the appropriate steps to take. Call 310-590-3927 or email us to schedule a free initial consultation.