Trade secrets are important and valuable
assets for any business. In general, a trade secret is information that the
owner has taken “reasonable measures” to keep secret and that has
commercial value from the fact that information is secret. The information/data
can relate to almost anything including information about
Finances like the company’s profit and loss
statements
Costs, expenses, revenue, and profit
Business methods, processes and procedures
Scientific and technical matters
Formulas
Designs
Programs and codes
And more
A trade secret can even be something as
mundane as a customer list, again, as long as some efforts are made to keep the
list confidential and there is some commercial value to the list derived from
it being confidential.
Legally, trade secrets are protected under
state and federal statutes. Most states have enacted variations on the uniform
Trade Secrets Act. See, e.g., Mich. Comp. Laws §
445.1901 et seq. At the federal level,
trade secrets are protected by the Defend Trade Secrets Act which is similar to
the uniform Act. See 18 U.S.C. § 1831 et seq.
Under federal and state law, owners of trade
secrets may sue to protect the trade secret from misappropriation. Money
damages are available as are various levels of injunctive relief. At the
federal level, if severe and willful enough, a defendant can face criminal
penalties.
Legally, trade secrets are also protected
under state and federal tort law. This is important for two reasons. First,
suing under tort law gives owners of trade secrets a second cause of action
that may enhance the money and punitive damages that can be obtained. Under
some statutory and common law schemes, a different set of damages may be
obtained under the tort regime. Likewise, enhanced damages may be easier to
obtain under tort law.
Second, if a governmental agency or
state-owned entity is involved, then suing for tort damages may allow owners of
trade secrets to overcome the doctrine of sovereign immunity. In general, under
longstanding law, governments are immune from being sued. However, this
doctrine, called “sovereign immunity,” can be waived and, both the
federal government and the various state governments have, by statute, waived
sovereign immunity in many types of circumstances. The most common
circumstances where sovereign immunity has been waived are circumstances where
a tort has been committed. A “tort” is some violation of a private
right or injury caused by one person/entity against another that is not merely
a breach of contract. Car accidents are common examples; some driver of a
vehicle has behaved negligently and caused a crash that injured another. The
wrongdoer committed a “tort.”
The waiver of sovereign immunity in
circumstances of tort is important because, otherwise, victims of torts caused
by government employees could not sue for compensation. An example might be
something like a car wreck caused by a police officer driving a police car
while on duty. Police departments are, of course, governmental departments.
Without waiver of sovereign immunity, the victim of the crash would not be able
to sue.
In general, governments have NOT waived
sovereign immunity with respect to protecting trade secrets. Thus, imagine that
you are bidding for a government contract to provide marketing services to a
state-owned university. As part of the bid process, your company provides the
university officials with copies of documents containing your trade secrets
which are promptly disclosed to all of your competitors (who are also bidding
for the same work). Naturally, you would be very upset. As it turns out, your
company cannot sue for trade secret misappropriation under the relevant trade
secret laws because of sovereign immunity. But, your company CAN sue under tort
law because, often, the state government has enacted law waiving immunity for
torts. As a case example, see Board of Regents v.
One Sixty Over Ninety, LLC, 830 SE 2d 503 (Georgia App. 2019). In that
case, the court held that the Georgia Trade Secrets Act, based on the uniform
Trade Secrets Act, did not contain an express waiver of sovereign immunity and
also did not waive the state’s sovereign immunity by implication. However, the
court held that a violation of the Georgia Trade Secrets Act “…
constitutes a tort under Georgia law.” (p. 510).
If you have questions about protecting your
trade secrets or if you need to initiate or defend trade secret litigation,
contact the trade secret lawyers at Revision Legal at
231-714-0100.
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