Trade Secrets

What Constitutes “Trade Secrets” and What Are My Duties and My Employer’s Rights to Protect Them?

A “trade secret” is any information that:

Derives independent economic value—whether actual or potential—from not being generally known to and not being readily ascertainable by persons outside of the staff of the employer’s business except by proper means.

Is the subject of efforts made by the employer that are reasonable under the circumstances to maintain the secrecy of such information.

The only proper means for outsiders to obtain an employer’s trade secret would be a disclosure made with the express or implied consent of the employer by license, contract, or course of dealing or performance under a commercial transaction to which the employer was a party.

Unauthorized disclosure of a trade secret subjects the violator to liability for "misappropriation” of the trade secret. Not all disclosures rise to the level of misappropriation, but enough of them do so as to merit your careful attention to the law in the event you are contemplating the act of using the trade secret of a current or former employer for yourself or for the benefit of any third party.

The law subjects the violator to an award of three or four times the actual loss suffered by the employer for the misappropriation of the trade secret as well as an injunction to prevent both the further disclosure of the trade secret as well as anyone’s continued use of the trade secret for commercial gain. The prevailing party in any misappropriation action is liable for an award to reimburse reasonable attorney fees incurred in prosecuting or defending any action where the misappropriation was made in bad faith, a motion to terminate proceedings for an injunction is made or resisted in bad faith, or the misappropriation is found to have been “willful and malicious.”

Any action for misappropriation of a trade secret may be brought as late as four years after the misappropriation was discovered or by the exercise of reasonable diligence should have been discovered. A continuing misappropriation is treated as a single claim, meaning that the 4-year limitation period will not begin until the act of misappropriation is discontinued.

Employers routinely ask key executives, senior-level managers, sales, marketing, financial, technical personnel and engineers to sign confidentiality agreements not only to reconfirm the employee’s obligation to protect the employer’s rights in any trade secret but also to impose additional obligations that go beyond the limits of the law in terms of protecting the company’s proprietary information. A confidentiality agreement generally will define confidential information more broadly to include more than what the law already defines and safeguards as a trade secret.

Before signing a confidentiality agreement or considering the disclosure or use of any information that might remotely be considered to be a trade secret, you should consult an experienced employment lawyer to help you.

If you are in the Cleveland or Akron areas and would like to have an employment attorney help you with understanding your duties and options in this area of the law given your individual circumstances, contact us today to schedule an appointment at a time convenient to your schedule.