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What Happens if a Trade Secret is Leaked?

On Behalf of | May 2, 2023 | Business

It is essential that you keep your company’s trade secrets protected. If you discover that your trade secrets have been leaked, you may need to take legal action to recover the damages you have suffered. You may be able to take several different actions to protect your interests when your trade secrets have been leaked. You may decide to pursue a lawsuit against the leaker. To do so, you will need to determine the monetary amount of damages your company suffered if you plan to pursue this type of claim. The skilled intellectual property attorneys atAU LLC are prepared to help you understand all of your legal options and move in the direction you choose.

Types of Trade Secret Leaks

The first step in knowing what steps to take is pinpointing how the link occurred. There are two main types of trade secret leaks. The first type of leak is an intentional leak. When there is an intentional leak, an external entity may maliciously hack your system for information. In other cases, an internal resource misappropriates confidential information. IT and cyber technologies can address many of these types of leaks. However, even with high-quality tools and cybersecurity services that monitor information flow and safeguard the IT systems, access by unauthorized users can and does happen.

Ignorant Trade Secret Leaks

Confidential information may not be managed or marked as such when there is a lack of awareness related to trade secrets. For example, an employee may not know what information qualifies as core assets. It is important that employees know what information can be shared, when it can be shared, and with whom. These types of leaks can usually be addressed through internally focused measures, such as enacting a trade secret protection policy, employee training, and procedures for managing confidential information.

Leaks By Employees or Business Partners

Inevitable trade secret leaks happen during the usual course of doing business. While engaging in day-to-day business,  sharing information, including trade secrets and confidential information, will occur. Engaging in business involves building relationships and trust. Business partners change over time, however, as do their agendas. The same can happen with third-party business partners. Doing business can include formal meetings and casual conversations that are off the record.

Pursuing Breach of Contract Claim Over Leaked Trade Secrets

You may be able to pursue a breach of contract claim if the person who let the trade secrets leak has signed a nondisclosure clause. If this occurs, you can pursue whatever remedies the contract designates. For example, suppose an employee took home confidential information from their job in violation of their employment contract after signing a contract that protects trade secrets. In that case, you can pursue damages for breach of contract.

Additionally, if an employee enters a company’s system and downloads or prints out copies of confidential files, doing so would violate a nondisclosure clause. Further, the acquisition alone can constitute misappropriation, even if the employee does not disclose or publish the trade secrets.

How the Law Protects Trade Secrets

Most states have adopted the Uniform Trade Secret Act (UTSA), creating a significant amount of uniformity among state laws on trade secrets. Under the UTSA, trade secrets have three basic characteristics. The trade secret is a secret that confers a competitive advantage to its owner, and it is subject to reasonable efforts to maintain its secrecy. Trade secret law prohibits the misappropriation of trade secrets.

Misappropriation of trade secrets means acquiring a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means. Misappropriation can also mean disclosure or use of a trade secret of another without express or implied consent by a person who used improper means to acquire knowledge of the trade secret or knew or had reason to know that the knowledge was:

  • Derived from or through a person who has utilized improper means to acquire it;
  • Acquired under the circumstances giving rise to a duty to maintain its secrecy or limit its use; or
  • Derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use;

Remedies for Leaked Trade Secrets

Generally, you only have three to five years to pursue a lawsuit for trade secret misappropriation. The precise timeline depends on the state’s laws where you file the claim. When a court finds that the defendant has misappropriated your trade secret, it can impose several different remedies. In most cases, the statute of limitation period for a trade secret claim runs from the time you discover the misappropriation or the time by which you should have discovered it through the exercise of reasonable diligence. When pursuing a legal claim, you can seek injunctive relief, damages, and attorneys’ fees and costs.

Injunctive relief involves a court ordering the defendant to stop violating your rights and take active steps to preserve the secrecy of your information. The court can stop the defendant from publishing someone’s trade secret if it finds that the publication amounts to misappropriation. Damages can include all the financial losses you have suffered from the misappropriation, including the profits the defendant derived from it. The defendant can be required to pay a royalty to the trade secret owner. When the defendant acted willfully or maliciously, the court can require the defendant to pay additional punitive damages.

Taking Action Quickly By Contacting a Skilled Attorney

If you suspect or know that your trade secret has been leaked or may be leaked in the near future, it is imperative that you act quickly. Your company’s sensitive information getting out can cause significant damage. Acting quickly by contacting an experienced attorney can help you review your options and take affirmative steps to protect and enforce your legal rights. The attorneys atAU LLC have successfully represented clients in trade secret lawsuits throughout the United States. We will fight for you and your rights. Contact AU LLC to schedule an initial consultation and learn more about our reputable law firm dealing with trade secret issues.