What things should an Employer Consider when Drafting a Complaint & Asserting Cause of Action when it comes to litigating for trade secret misappropriation and/or breach of a restrictive covenant? Here are eight considerations for causes of action against the employee, including:
1. Misappropriation of Trade Secrets (under both the Defend Trade Secrets Act of 2016 and State Law)
2. Breach of Duty of Loyalty & Breach of Fiduciary Duty
3. Breach of Contract
4. Tortious Interference with Contract
5. Unfair Competition
6. Computer Fraud & Abuse
7. Conversion-and-
8. Tortious Interference with Prospective Business or Contractual Relations.
Before we delve into the discussion in this post, it is crucial to mention that an employer should be cautious not to give away sensitive employer information when drafting and selecting appropriate causes of action against the employee. While each of the considerations outlined above will be discussed in an independent blog post, the key idea is to review each and provide a few tips on how an employer can maintain as much confidentiality as possible when making restrictive covenant and trade secret misappropriation claims.
With that, let us dive right into the first cause of action.
Misappropriation of Trade Secrets (under both the Defend Trade Secrets Act of 2016 and State Law)
By definition, trade secret misappropriation entails the improper access and acquisition of trade secrets considered legally protected. You are welcome to read our blog post Misappropriation, as Defined under the DTSA & UTSA and learn more about the legal definition of the term “misappropriation” and eventually “trade secret misappropriation.” Definitively, every employer should assert a cause of action for trade secret misappropriation following a finding that an employee has, without prior permission or approval, accessed and obtained the employer’s sensitive, proprietary, and confidential information. Although they formidably transcend in statute and not common law, both the federal and state law apply to trade secret misappropriation claims.
Trade Secret Misappropriation Claims under the Defend Trade Secrets Act (DTSA) of 2016
Pursuant to 18 U.S.C. § 1836, an employer has the chance to assert a cause of action under the DTSA. Although significantly different from state laws, the potential cause of action provided by the DTSA to employers is generally the same as the one provided under state statutes crafted pursuant to the UTSA (the Uniform Trade Secrets Acts). For instance, in line with the DTSA’s statute of limitations, misappropriations can only be alleged on or after May 11, 2016, when this federal statute became effective. Furthermore, pursuant to 18 U.S.C. § 1836(b)(1), only trade secrets associated with a service or product intended for use or used in foreign or interstate commerce are applicable to the DTSA.
Trade Secret Misappropriation Claims under State Law
As obvious as it would sound, determining whether a trade secret statute (UTSA model) has been enacted in one’s state. Based on the UTSA model, such trade secret statutes have been enacted in most states. This implies that the legal framework applied in asserting a trade secret misappropriation claim is supplied by these state statutes. Thus, at the outset of drafting a cause of action, it is crucial for employers to determine whether secret trade statutes have been enacted in their states.
After that, an employer should be able to evaluate whether improper means were used to access and obtain the information in question and whether such information qualifies to be considered a trade secret. Please, also feel free to read our post Statutory Definitions & Types of Info Considered Trade Secrets for details on what information qualifies as a trade secret and statutory definitions on the same. One important thing to note is that the law has a narrow and specific definition of the type of information that qualifies as a legally protected trade secret and which an employer endorses to be enforced in a given restrictive covenant agreement.
Finally, employers should also evaluate the types of behavior considered by their secret trade statutes as improper means “of obtaining trade secrets and/or confidential information.” Provided that the employer satisfies these requirements and determines all the possibilities discussed in relation to the federal law and state statutes, then the court may also grant reasonable attorney’s fees, double monetary damages, and injunctive relief for specifically threatened misappropriation for such malicious and willful offense(s).
In Part V of this series, we shall move the discussion forward and hammer on “Breach of Duty of Loyalty & Breach of Fiduciary Duty,” which is the second consideration when one wishes to assert a cause of action for a trade secret misappropriation and/or a breach of a restrictive covenant/agreement.
In the meantime, stay tuned for more legal guidance, training, and education. In the interim, if there are any questions or comments, please let us know at the Contact Us page!
Always rising above the bar,
Isaac T.,
Legal Writer & Author.