Handling Trade Secret Misappropriation By Former Employees

Building a successful business from scratch can be hard, especially in a competitive market like California. So it can be devastating when a former employee walks away with your business’s confidential information, particularly trade secrets that give you a competitive edge, and misappropriates this information. Whether it is a marketing strategy or client list, the theft or misappropriation of this information can threaten your company’s future. If a former employee has misappropriated your trade secrets, it is crucial that you understand your rights and take prompt action.

What Is a Trade Secret?

First, it is crucial to note that not all confidential information is considered a trade secret. A trade secret is an idea, formula, pattern, physical device, process, or compilation of information that gives your company a competitive edge in the marketplace. Trade secrets include, among others, customer lists, marketing strategies, recipes and formulas, and manufacturing processes. Unlike patents, trademarks, and copyrights, which are registered with the government, all you need to do to enjoy trade secrets is ensure the information is not generally known and take reasonable efforts to maintain the confidentiality of the information.

What Is Trade Secret Misappropriation?

Trade secret misappropriation occurs when someone improperly attains, discloses, or uses confidential business information to gain a competitive edge. Often, this involves current or former employees who have access to sensitive company information, such as client lists, marketing strategies, and product formulas. Misappropriation can arise when an employee takes this information to a competitor or shares the information without authorization.

What Are the Signs of Trade Secret Theft?

It may not be obvious that a former employee has stolen or misappropriated trade secrets. Therefore, knowing the red flags to look out for is crucial. The following are some of the signs of trade secret misappropriation;

• Customers are being poached in unusual patterns
• Competitors mirroring pricing or specifications
• A competitor suddenly mimics your approach
• Data or internal documents accessed or downloaded shortly before an employee resigns

How to Handle Trade Secret Misappropriation

If you believe a former employee is wrongfully using your company’s trade secret, you can seek an injunction stopping the employee from continuing to use the information. You may also be eligible to seek damages for the misappropriation. Under the California Uniform Trade Secrets Act (CUTSA), if a business owner can prove trade secret misappropriation, they may be entitled to substantial monetary damages, including any profits the defendant made from the misappropriation. Notably, the court may award double the damages if it is determined that the trade secret misappropriation was malicious or willful.

The law regarding trade secret misappropriation can be complex. For this reason, if you are a business owner dealing with a trade secret dispute, it is best that you seek the help of a qualified business litigation attorney. A skilled attorney can assess your case and help you understand your rights and options. They can help you determine the best way to proceed.

Contact Us for Legal Help

If you believe a former employee has misappropriated your company’s trade secret, contact our experienced business litigation attorneys at SAC Attorneys LLP for help understanding your legal rights and options.