Whether a plaintiff must present evidence and prove that a stolen trade secret has been or is being used depends on whether the plaintiff is suing under common law theories or under versions of the Uniform Trade Secrets Act (“UTSA”). To date, 47 states and the District of Columbia have adopted a version of the UTSA. See information page here. Most states have adopted the USTA virtually without change; but there are some important variations state-to-state.

In states that have adopted the UTSA, like Michigan, proof of USE (or disclosure) of a trade secret is not necessary. See, for example, Erlich Protection Systems, Inc. v. Flint, Case No. 345323 (Mich. App. November 7, 2019) (unpublished). In that case, the defendant tried to defend against a trade secret misappropriation claim by arguing that there was no proof at trial that he had used the trade secret. The court rejected the claim noting that use of the trade secret was not an element that had to be proven under the Michigan Uniform Trade Secrets Act. See MCL 445.1901 et seq.

To prove trade secret misappropriation under the UTSA, only three elements are required. They are:

• That the plaintiff owned information or data or something that would qualify as a “trade secret” under the Act
• That the owner took “reasonable” steps to keep the information or data secret and
• That the defendant wrongfully took or has possession of the information or data

Note that possession of the information or data can be in a physical form (like papers and documents), in an electronic format (such as computer devices) or in a non-tangible form (such as in a person’s memory).

States that have not adopted the UTSA, like New York, protect trade secrets through application of case law and common law doctrines. In general, “trade secrets” are defined in the same manner as they are defined under the UTSA. That is, trade secrets are some sort of information and data that gives a business a competitive advantage in the marketplace. However, the standard for proving theft or misappropriation of trade secrets is higher. The key differences are that:

• The trade secret must be obtained through some relationship of trust, through fraud or some other improper means and
• That the trade secret must be used or disclosed

An employment relationship is an example of a “relationship” of trust. Mere possession of a trade secret is not sufficient under the common law.

The relief that a plaintiff can seek for trade secret misappropriation is generally the same under both the USTA and common law. Under either, a plaintiff may obtain injunctive relief such as a court order ordering the defendant to cease and desist use of the trade secret and/or return of any physical or electronic data or information. A plaintiff may also obtain money damages and, in some cases, punitive damages.

If you have questions about protecting your trade secrets or if you need to initiate trade secret litigation, contact the trade secret lawyers at Revision Legal at 231-714-0100.

The DTSA: Federal Uniformity and Its Limits

Congress enacted the Defend Trade Secrets Act in 2016, creating for the first time a federal civil cause of action for trade secret misappropriation. 18 U.S.C. § 1836. The DTSA was modeled on the UTSA and similarly does not require proof of use as an element of misappropriation—acquisition by improper means or disclosure without authorization is sufficient to state a claim. The DTSA also introduced a new remedy: a court may issue an ex parte seizure order directing the U.S. Marshal to seize property necessary to prevent the propagation or dissemination of a trade secret. This remedy is reserved for extraordinary circumstances but is more powerful than a standard temporary restraining order because it requires no notice to the defendant.

One important feature of the DTSA is its immunity provision. Under 18 U.S.C. § 1833(b), a whistleblower who discloses a trade secret in confidence to an attorney, government official, or court in connection with a lawsuit is immune from DTSA liability. Employers must include a notice of this immunity in any confidentiality or nondisclosure agreement signed after the DTSA’s effective date; failure to do so forfeits the right to recover exemplary damages and attorneys’ fees in any DTSA action against the employee.

Distinguishing UTSA and Common Law States

New York remains one of the few jurisdictions that has not adopted the UTSA, relying instead on common law trade secret doctrine. New York courts apply the Restatement (First) of Torts § 757 framework, which requires proof that: the plaintiff owned a trade secret; the defendant used or disclosed the secret; and the defendant learned of the secret through a confidential relationship or by improper means. Use or disclosure is an affirmative element under New York law—mere possession is not sufficient.

For businesses headquartered in UTSA states but with operations or employees in New York, the choice of law question can determine whether a misappropriation claim survives dismissal. UTSA states’ choice-of-law rules generally apply the law of the state with the most significant relationship to the parties and the conduct at issue. If the misappropriation occurred in New York, New York common law may govern even if the employer is incorporated elsewhere.

Injunctive Relief: The Real Goal in Most Trade Secret Cases

For most businesses pursuing trade secret claims, money damages are secondary to the primary objective: stopping the misappropriation before it causes irreparable competitive harm. Courts evaluating motions for preliminary injunction under Winter v. Natural Resources Defense Council, 555 U.S. 7 (2008), look at: likelihood of success on the merits; likelihood of irreparable harm absent an injunction; balance of the equities; and public interest. Trade secret cases are among the categories where courts most frequently find irreparable harm—once a trade secret is disclosed, the competitive advantage it protected is typically gone forever.

The absence of a use requirement under the UTSA and DTSA strengthens preliminary injunction motions. A plaintiff who can demonstrate that the defendant has acquired trade secrets through improper means does not need to show that the defendant has already used or disclosed them. The court can enjoin threatened future use and disclosure based on the acquisition alone—a head-start injunction that is a powerful tool in cases where a former employee has taken confidential files but has not yet started competing.

Practical Steps: Protecting Trade Secrets Before Litigation Arises

• Classify information by sensitivity level and implement access controls limiting trade secrets to employees with a need to know.
• Use watermarked, tracked copies of sensitive documents to establish provenance if a leak occurs.
• Conduct exit interviews with departing employees and have them certify in writing that they have returned all confidential materials.
• Include DTSA immunity notices in all NDAs and confidentiality agreements as required by 18 U.S.C. § 1833(b).
• Monitor for unusual file access or bulk downloads in the weeks before an employee’s departure—this is the most common pattern in insider-threat misappropriation cases.
• Act quickly when a potential misappropriation is discovered; preliminary injunction motions become harder to win if the plaintiff waits months before filing.

If you believe a former employee or business partner has misappropriated your trade secrets, or if you want to build a comprehensive trade secret protection program, contact the trade secret lawyers at Revision Legal at 231-714-0100.