As reported in Beverage Daily, the Oregon Attorney General filed a petition to compel 5 Hour Energy to turn over its formula in a connection with a multi-state investigation into the energy drink’s safety and advertising.
In general, trade secrets are information, formulas, or patterns that 1) derive independent economic value from not being generally known and 2) are the subject of efforts reasonable to maintain their secrecy.
5 Hour energy claims it has complied with Oregon’s request by disclosing the ingredients in the drink, but refuses to turn over the exact amount of each ingredient fearing the release would damage its business. Trade secret cases can often place a business’ core product in the center stage and risk an entire business model.
If you are facing trade secret litigation, or would like to learn how to protect your trade secrets, contact Revision Legal today at 855-473-8474.
The 5-Hour Energy case illustrates a dilemma that businesses with highly valuable trade secret formulas can face: government investigations may compel disclosure of the very information the business has worked hardest to protect. Most businesses are familiar with the risk of trade secret theft by competitors. Far fewer have thought carefully about what happens when a government agency demands their formula, source code, manufacturing process, or other core trade secret in connection with a regulatory investigation or consumer protection proceeding.
The federal Defend Trade Secrets Act (DTSA), 18 U.S.C. § 1836 et seq., enacted in 2016, provides a federal civil cause of action for trade secret misappropriation. Under the DTSA, a trade secret is information—including formulas, patterns, compilations, programs, devices, methods, techniques, or processes—that (1) derives independent economic value from not being generally known to, and not being readily ascertainable by proper means by, persons who can obtain economic value from its disclosure or use; and (2) is the subject of reasonable measures to maintain its secrecy.
Michigan’s Uniform Trade Secrets Act, MCL §§ 445.1901 et seq., provides a parallel state law cause of action. The Michigan statute defines a trade secret similarly to the federal definition, requiring both independent economic value from secrecy and reasonable efforts to maintain that secrecy. Michigan courts have applied this definition broadly to protect a wide range of business information, including customer lists, pricing data, manufacturing processes, and product formulas.
One of the most important—and most frequently overlooked—elements of trade secret protection is the requirement that the owner take reasonable measures to maintain the secrecy of the information. No matter how valuable a formula or business process may be, it will not qualify for trade secret protection if the owner has not taken appropriate steps to keep it secret. In the 5-Hour Energy case, the company’s resistance to disclosing its specific ingredient ratios reflected an awareness that those exact proportions were the core of its competitive advantage.
Reasonable measures to maintain trade secret secrecy typically include:
When a government agency demands trade secret information in connection with a regulatory investigation, businesses have legal tools to resist or limit that disclosure. Most government disclosure regimes include provisions for protecting confidential business information. Under the Freedom of Information Act (FOIA), 5 U.S.C. § 552, Exemption 4 protects “trade secrets and commercial or financial information obtained from a person [that is] privileged or confidential.” Businesses that submit trade secret information to federal agencies can request confidential treatment under the agency’s FOIA regulations to prevent disclosure to third parties in response to FOIA requests.
When compelled disclosure is unavoidable, businesses can negotiate for protective orders that limit who may view the disclosed information, prohibit use of the information outside the investigation, and require the agency to return or destroy the information at the conclusion of the proceeding. Experienced trade secret counsel can identify these protective mechanisms and deploy them to minimize the risk of competitive harm even when some disclosure is required.
When trade secret misappropriation occurs—whether through theft by a competitor, breach by a former employee, or unauthorized disclosure—swift legal action is essential. Under the DTSA and Michigan’s Uniform Trade Secrets Act, a trade secret owner can seek injunctive relief to prevent actual or threatened misappropriation, and damages including the owner’s lost profits, the misappropriator’s unjust enrichment, and reasonable royalties as an alternative measure of damages. In cases of willful misappropriation, exemplary damages up to two times the actual damages and attorney’s fees may also be available.
Contact Revision Legal today if you are facing trade secret litigation, need to establish a trade secret protection program, or are concerned about a government investigation that may implicate your confidential business information. Our attorneys have experience on both sides of trade secret disputes and understand how to protect your most valuable competitive assets.
The most common source of trade secret theft is not industrial espionage—it is employee departures. When a high-level employee with access to trade secrets leaves to work for a competitor, or worse, to start a competing business, the risk of trade secret misappropriation is significant. Studies have found that a substantial percentage of departing employees take confidential information with them, whether through downloads to personal devices, forwarding of emails to personal accounts, or simply the knowledge retained in their memory.
Preventing trade secret theft by departing employees requires a combination of legal and operational measures. On the legal side, requiring employees to sign comprehensive confidentiality and non-disclosure agreements, combined with appropriately tailored non-compete agreements where legally permitted, creates enforceable legal obligations. On the operational side, monitoring for unusual data access or download activity in the period leading up to an employee’s departure, conducting thorough exit interviews, requiring return or destruction of all company materials, and promptly terminating access to systems are all essential steps. When evidence of misappropriation is found, our trade secret attorneys move quickly to obtain emergency injunctive relief before the confidential information can be shared with or used by a competitor. Contact Revision Legal if you are concerned about trade secret exposure from an employee departure.
Trade secret protection requires both legal tools and operational discipline. The most comprehensive NDA is useless if the company does not actually treat its information as confidential in practice. Courts look at the totality of the company’s conduct—not just the existence of a signed agreement—when evaluating whether information qualifies for trade secret protection. Building a culture of confidentiality, backed by appropriate legal agreements and security protocols, is the most effective way to ensure that your most valuable business information is protected under both state and federal trade secret law. Contact Revision Legal today to discuss your trade secret protection program.
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