One of the greatest threats to a company’s prosperity stems from the trade secrets that separate it from industry competitors. Whether that involves grandma’s pie recipe, a key software innovation or the formula to Coca Cola, trade secrets provide businesses an edge that directly relates to profitability. Protecting trade secrets has proven to be difficult in the information age and San Francisco area companies may consider a recent lawsuit filed in the U.S. District Court in New York as an example.
The Chicago-based Opternative company recently filed suit against Warby Parker for allegedly usurping a trade secret while the pair were in negotiations. Opternative, which developed an Internet-based test for eyeglass prescriptions, claims that Warby violated a nondisclosure agreement and gained access to an app under false pretenses. The suit also states that Warby filed for a patent regarding the technology after learning the trade secret from Opternative. This case highlights just how delicate and easily company secrets can be pilfered and Californians should take heed.
California trade secret law
Like many states, California has enacted laws to protect vital information. The California Uniform Trade Secrets Act (UTSA) provides companies with civil recourse if it takes reasonable action to protect the information and it holds a value because of its very secrecy. That definition can be applied quite broadly in California courts. For instance, customer lists memorandum, meeting minutes and other things that are considered private and valuable may also be protected under the UTSA.
California trade secret law protects businesses and entrepreneurs
The way that California deals with violations of the UTSA goes to the nature of protection it affords companies and entrepreneurs. Information that is acquired by what the court calls “misappropriation” can be actionable. The basic idea is that the trade secret or valuable private information was taken or conveyed to others by some improper means. That could include hacking, physical removal, verbal communication or violating a nondisclosure agreement as Opternative’s suit claims.
Penalties for trade secret misappropriations
There are two basic actions that the victim of trade secret theft can pursue. The first involves gaining an injunction over the thief that prevents them from disclosing or utilizing the information. That can help prevent the victim from suffering financial loss. The second method would be to file a civil lawsuit such as Opternative did. Penalties for the thief’s “unjust enrichment” can be recovered along with potential punitive damages. In some cases, the outfit that developed the trade secret may be entitled to ongoing royalties as well.
The need to put security measures to place to protect trade secrets has never been higher. At Fergus, A Law Office, based in San Francisco, we help businesses and entrepreneurs protect and assert their trade secrets rights.