What are the Elements of a Trade Secret Misappropriation Claim?
The elements of a trade secret misappropriation claim are: (1) a trade secret existed; (2) the trade secret was acquired through a breach of a confidential relationship or discovered by improper means; and (3) use of the trade secret without authorization from the plaintiff.
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Whether a Trade Secret Existed?
A trade secret is information which derives independent economic value from being not generally known or readily ascertainable through proper means. What qualifies is defined expansively and any form or type of information can suffice so long as: (1) the owner of the trade secret has taken reasonable measures under the circumstances to keep the information secret; and (2) the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, another person who can obtain economic value from the disclosure or use of the information.
The burden on a business to keep its secret confidential operates on a sliding scale with how important the secret is. Expectedly, the more valuable and confidential the secret, the more safeguards will be needed to be reasonable.
Most of the dispute in misappropriation claims center around this first element. Often, the best defense to misappropriation claim is showing that there never was a trade secret to misappropriate in the first place.
Improper Acquisition
Generally, misappropriation of a trade secret happens in 2 basic ways: where the secret is acquired through improper means, or where someone with authorized access breaches confidence by sharing the secret with an unauthorized party or using it beyond the scope of their authorization. Both scenarios, if proven, will satisfy this second element.
Under the applicable statutes, “improper means” includes things such as theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, to limit use, or to prohibit discovery of a trade secret, or espionage through electronic or other means. However, the term does not include reverse engineering, independent derivation, or any other lawful means of acquisition.
Use of the Trade Secret Without Authorization
While improper acquisition is an element of a trade secret misappropriation claim, the cause of action does not accrue until the defendant actually uses the trade secret. One caveat is that a plaintiff whose trade secret has been improperly accessed by the defendant can get a preliminary injunction to stop the defendant from using the trade secret when the defendant is merely in a position to use such. Thus, the standard for injunctive relief is lower than that for monetary damages—the latter requiring actual use.
Any business seeking to protect its trade secret should be aware of what trade secret status protects and how to reasonably ensure this protection is afforded.
For more information on trade secrets and intellectual property in general, see our trade secret services practice page.
Klemchuk PLLC is a leading IP law firm based in Dallas, Texas, focusing on litigation, anti-counterfeiting, trademarks, patents, and business law. Our experienced attorneys assist clients in safeguarding innovation and expanding market share through strategic investments in intellectual property.
This article is provided for informational purposes only and does not constitute legal advice. For guidance on specific legal matters under federal, state, or local laws, please consult with our IP Lawyers.
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