Misappropriation of Trade Secrets

Oct 2016 | Business

In Washington, owners of trade secrets may rely on two laws to protect those secrets. The Uniform Trade Secrets Act, RCW 19.108 (“State Act”), is a state law based on a national model law that has been adopted in 47 states. The other, the Defend Trade Secrets Act, 18 U.S.C. §§ 1831–1839 (“Federal Act”), is a federal law that became effective May 11, 2016.

A trade secret is defined as information, including a formula, pattern, compilation, program, device, method, technique, or process that: (a) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and (b) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

Under both acts, misappropriation happens when a trade secret has been: (a) acquired by a person who knows or has reason to know that the trade secret was acquired by improper means; or (b) disclosed without express or implied consent by a person who:

  1. Used improper means to acquire knowledge of the trade secret; or
  2. At the time of disclosure or use, knew or had reason to know that his or her knowledge of the trade secret was (A) derived from or through a person who had utilized improper means to acquire it, (B) acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use, or (C) derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use; or
  3. Before a material change of his or her position, knew or had reason to know that it was a trade secret and that knowledge of it had been acquired by accident or mistake.

Both acts authorize a trade secret owner to seek damages and enjoin conduct if trade secrets are misappropriated. The State Act provides that a party may be awarded double damages and attorneys’ fees if the misappropriation was malicious. Under the Federal Act, on the other hand, exemplary damages and attorneys’ fees may only be recovered if the parties had a written agreement that included notice that trade secrets may be disclosed without liability when the disclosure is to a government official or attorney as part of a report or investigation of a violation of a law, or when filing a lawsuit under seal. The Federal Act does not affect contracts in place before May 11, 2016, unless the contract is amended, at which time it must be updated to include the required notice. If the required notice is not included, damages may still be recovered under the Federal Act, but not exemplary damages or attorney fees.

Claims under both acts must be brought within 3 years of when the misappropriation was or reasonably could have been discovered.

If you have questions about how these laws affect your business, contact Greg Haffner at Curran Law Firm, P.S.—Experienced, dedicated, and responsive legal representation located in South King County.