Is Proof of USE Necessary for a Claim of Trade Secret Misappropriation?

By John DiGiacomo

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 November 7, 2019) (unpublished).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.

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