Trade Secrets: What Employees Need to Know
Any employee or prospective employee who may have access to an employer’s valuable and confidential information should have some familiarity with trade secrets law. Neither employee s nor employers should be cavalier about how trade secrets may arise in the course of employment.
BackgroundTrade secrets are distinct from patents, copyrights, and trademarks since they are not protected by government registrations. Because of this, trade secrets must be protected by the company and the way they are used, safeguarded, and disclosed.
Trade secrets issues of course still frequently arise in *classic* situations (e.g., customer lists used by insurance agents, the Kentucky Fried Chicken recipe, etc.). But trade secrets can be abstract and intangible, as well: processes, algorithms, data, or other technical information.* Increasingly, breaches can be hard for employers to detect and monitor.
In the context of employment negotiations, trade secrets require attention to, among other things, confidentiality and non-compete provisions.
In the U.S., the federal Economic Espionage Act (*EEA*) provides trade secret protections and criminal remedies where misappropriation implicates a foreign government or agents.* As in most other states, Connecticut trade secrets law is a combination of statutory and common law. Further, the US 2016 Defend Trade Secrets Act creates a federal cause of action for trade secret appropriation but for the most part mirrors state laws.
CUTSA: Connecticut Uniform Trade Secrets ActThe Connecticut Uniform Trade Secrets Act (Conn. Gen. Stat. ** 35-50 to 35-58 (2011)) adopts the model UTSA with a few modifications.* CUTSA broadly protects information that may be considered commercially sensitive, i.e. information is that is known exclusively by the employer that has been generated by the employer or those on its behalf.* In fact, CUTSA specifically expands the UTSA definition of trade secret to include drawings, cost data, and customer lists.
CUTSA provides remedies for *misappropriation* (acquisition of trade secrets) by *improper means* defined in the statute.* Likewise in this respect, Connecticut goes beyond UTSA: in Connecticut, *improper means* includes searching through the trash.
CUTSA is a civil statute only, meaning it does not provide criminal remedies.* That said, CUTSA does have *teeth*:* it allows for equitable relief and actual *damages* in addition to exemplary damages (capped at twice actual damages).
CUTPA: Connecticut Uniform Trade Practices ActThis is a consumer and trade protection statute that can be implicated in the context of trade secrets.* CUTPA prohibits* "unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce."* "Unfair" is not defined in CUTPA.*
Connecticut courts generally rely upon the "Cigarette Rule" in considering whether an act is "unfair".* This rule accounts for three factors: (1) whether the practice or method offends public policy or "some established concept of fairness'; (2) whether it is unethical or unscrupulous; and (3) the extent to which the practice causes injury to consumers.* In tandem with statutory and common law protections, CUTPA is an important tool for employers.
Common LawConnecticut courts apply the Restatement (Second) of Torts Section 757. *(For the uninitiated: I know you really want to hear about 19th century English case law or the treatment of trade secrets under Roman law. More on that later.* For now: *Restatements* refers to a series of treaties on various legal subjects that provide guidance to lawyers and judges.* They do not state the law in any jurisdiction; some adopt Restatements, and others reject or modify them.)
The common law / Restatement (Second) is similar in scope to CUTSA.** But the Restatement (Second) limits its protections to secrets that are currently being used.* It also likewise provides protections against the use and appropriation of trade secrets but that depends on the circumstances.* An employee*s liability under the common law approach depends upon the nature of the information, when and how the information is acquired, and the intended use of the information.
Federal Defend Trade Secrets ActThe most significant impact of the 2016 legislation is that it creates a federal cause of action for trade secret claims that formerly had to be brought in state court.* *There are some substantive differences with state law, most significantly that the Act provides an*ex parte*seizure procedure available in "extraordinary circumstances."* This is a powerful tool for aggrieved parties, and thus far courts have indicated parties seeking an ex parte remedy need to make a detailed showing that the statute's requirements are satisfied.