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Welcome to our May 2014 Newsletter!  Please take the time to read the article and contact us should you have any questions or concerns.

 

Law Offices of Salar Atrizadeh

Misappropriation of Trade Secrets

In general, companies maintain trade secrets that make up the underlying structure and mechanism of their products or services. Employees often have access to and work closely with trade secrets in the course of employment. This situation poses a potential risk when employees leave to work for a competitor. Specifically, it poses the risk that employees will disclose the trade secrets to competitors. A business may lose the value of its trade secrets (and products or services) if such a discrepancy occurs. Do your employees work closely with your company trade secrets? Are you looking to take the appropriate steps to protect trade secrets? If so, you should contact us in order to discuss the legal avenues and options.

 

A trade secret constitutes information that holds any economic value. It may include a formula, pattern, method, technique, program, device, or process that is not known to the general public. To be a trade secret, it must remain confidential. So essentially, part of the value is made up in the fact that it is a secret. That is, the owner of a trade secret must take reasonable steps to protect the secrecy of the information. California has adopted the Uniform Trade Secrets Act under Civil Code sections 3426 et seq. Under this body of law, any acquisition of a trade secret for improper means may qualify as misappropriation of a trade secret. Misappropriation of a trade secret also includes disclosure of valuable information without the consent of its owner.

 

Employers can take steps to protect their trade secrets in the event an employee moves to work for a competitor. For example, a non-compete clause that is incorporated into an employment agreement prohibits the employee from working for a competing firm. The enforceability of such an agreement depends on the jurisdiction. Often times, states will allow such an agreement if it is limited in scope, geography, and duration. In California, such agreements are typically not enforceable unless they are narrowly drawn to permit employees to continue working in their fields of expertise. On the other hand, a nondisclosure agreement is an effective method for protecting trade secrets. These agreements constitute an understanding whereby one party is required to not reveal the trade secrets of the other party.

 

Employers should protect their trade secrets from the inception. However, in the event of learning that an employee has already taken trade secrets to a competitor, the employer should act quickly and apply for an injunction. A court may grant the injunction to prohibit further violations. Hence, it is generally recommended to speak with an attorney at the onset of your business and prior to hiring employees.

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