Trade secret questions are among the legal concerns that should be addressed if you are planning to start a competing business after your non-compete clause expires. Your non-compete clause may have only lasted a year or two, but violations/misappropriations of trade secrets can be alleged at any time, and in some jurisdictions, trade secret claims have statutes of limitations that extend out to five years. So, while the party seeking to prevent competition cannot enforce a non-compete agreement/clause after it has expired, a trade secret claim might have a similar effect. That is, in trade secret litigation, the plaintiff has the option to seek an injunction from the court that temporarily prevents the new, competing business from operating. Even if that does not succeed, any litigation is expensive, and litigation costs might be enough to overwhelm a new business seeking to compete, causing it to fold.
So, what can be done? Here is some background information and a few thoughts on protecting yourself from trade secret claims as you start your competing business after your non-compete expires.
Background
Trade secrets can generally be defined as:
- Information or data
- That has “commercial value” because
- The information/data is “secret” and
- Where the owner of the information/data takes “reasonable measures” to keep the information/data secret
This definition is very broad and will include information/data like the contents of a customer or vendor supplier list. The reason is that there is “commercial value” in knowing the identity of consumers and their purchase histories. There is a competitive advantage to having such knowledge. The same is true for sources of goods and materials and other information like processes, techniques, formulas, plans, practices, and more.
Often, a trade secret claim is based on a person taking the alleged trade secrets in a physical manner, like on paper or in an electronic format. Note, however, that a physical taking of an alleged trade secret is NOT necessary. In some cases, it CAN be enough to allege that the trade secrets were “in a person’s head.”
Methods of responding to trade secret claims
From the foregoing definition, there are several methods of competing against a former employer while responding to and avoiding trade secret claims. Generally, you should expect potential trade secret litigation, you should prepare for it financially and emotionally, plan on transparency, and respond to trade secret claims accordingly. There are several steps to take. These include documenting that aspects of your business plan/model are not “secret.” If the data/information/process is known publicly, there is no “secret” for a trade secret claim. If customers and/or vendors are a likely source of a trade secret claim, be sure to document that you located customers/vendors “from the internet” or some other public source of data, likewise with a business method, formula, etc. Be prepared to identify a public source — a report, a public presentation, a patent application, etc. — for those methods, formulas, etc. Why? If a trade secret claim is alleged, you want your trade secret lawyers to respond — in detail — to the claims before litigation is started. Such will also be the basis for your legal defense if trade secret litigation is filed.
Contact The Trade Secret Attorneys At Revision Legal
For more information, contact the experienced Trade Secret Lawyers and Litigators at Revision Legal. You can contact us through the form on this page or call (855) 473-8474.
