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Trade Secrets

Monday, 23 January 2017

by Staff, Spaulding Law

Many businesses have their own “secret sauce” that sets them apart from other companies called a trade secret. This could be an actual product or formula, or it could be the processes, methods, and techniques used by the company. Information is likely to be considered a trade secret if it is:

• Known only by employees and others involved in the business;
• subject to reasonable efforts to maintain the secrecy of the information;
• not readily ascertainable by proper means;
• difficult for others to duplicate independently; and
• it has independent economic value.

In an effort to create fair play and protect trade secrets, the Uniform Trade Secrets Act was created. Utah is one of many states that have adopted this legislation. Utah’s specific trade secret law is available at https://le.utah.gov/xcode/Title13/Chapter24/13-24.html.

Utah’s law refers to the theft of trade secrets as misappropriation. Misappropriation refers to the acquisition of a trade secret by someone who knows or has reason to know that the trade secret was acquired by improper means or disclosure without consent of the company (express or implied) by a person who 1) used improper means to obtain the information or 2) received the information properly but had a duty to maintain its secrecy. Utah law defines improper means as: theft, bribery, misrepresentation, breach or inducement of a breach of duty to maintain secrecy, or espionage through electronic or other means.

Companies threatened or actually harmed by trade secret theft may seek relief through an injunction (a judicial action that restrains a person from starting or continuing an action). The injunction may be terminated when the trade secret has ceased to exist, but the injunction may be continued for an additional reasonable period of time in order to eliminate any commercial advantage that otherwise would be derived from the misappropriation. In exceptional circumstances, an injunction may condition future use upon payment of a reasonable royalty for no longer than the period of time for which use could have been prohibited.

On top of an injunction, a victim of trade secret theft may seek damages for misappropriation. This can include actual losses as well as the benefits/profits (or “unjust enrichment”) acquired by the trade secret thief through the misappropriation. If willful and malicious misappropriation exists, some courts can award damages two or even three times the amount of the actual losses plus the unjust enrichment.

A business does not have an unlimited amount of time to bring a claim. Time restrictions may vary by state. An action for misappropriation in Utah must be brought within 3 years after the misappropriation is discovered or, by the exercise of reasonable diligence, should have been discovered.

This information is made available by Spaulding Law for educational purposes only and not to provide legal advice. By using this website, you understand that there is no attorney-client relationship between you and Spaulding Law, unless you have entered into a separate representation agreement. This information should not be used as a substitute for competent legal advice from a licensed professional attorney.

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