Trade Secrets Violation

Violation of Trade Secrets can have Severe Civil or Criminal Consequences

  • 499(C) P C California Penal Code imposes criminal charges on the act of stealing “Trade Secrets”. In a simple vocabulary, a trade secret is valuable, novel information of a business that keeps its preciousness for not being known to the public (such as an Italian Restaurant's “secret recipe” for its sauce).

Stealing trade secrets can also be a federal crime. Violation of Section 1832 is a serious criminal act that may cause serious penalties. Knowingly stealing trade secrets may be punishable to maximum of 10 years in federal prison plus fines. The fines also can be severe.

What is the trade secret law in California?

The Uniform Trade Secrets Act (UTSA) has been adopted by California. This act gives owners of trade secrets who have been violated (misappropriated or stolen trade secrets) a legal right to file a lawsuit in state court. California's version of the Uniform Trade Secrets Act has been codified in Cal. Civil Code § § 3426-3426.11.

Is stealing trade secrets a civil or criminal case?

Generally speaking, Trade secret cases are adjudicated (brought) in civil court, but there are certain times where stealing protected information would be escalated to a criminal matter. According to the Economic Espionage Act of 1996, stealing trade secrets can be prosecuted both as a state and federal crime.

 Not everything that a business owner or company claims to be secret is “Trade Secret”. A trade secret must have to be confidential, so it retains its Value. The information cannot be open to the public, or to be searchable or accessible as general knowledge. Absolute and exclusive secrecy is not needed, but some degree oof confidentiality to retain the value of the company's trades is required. If another company has in good faith access to the information and they both keep it secret, it is not a violation of trade secret.  To be considered a “Trade secret” , that secret must be valuable. But what if others just discovered the “product secrets”. For example:

Sometimes secrets are discovered through “Reverse Engineering”.  Reverse engineering or “back engineering” is a process in when software, technologies, machines, aircraft, architectural structures or other products are being deconstructed to extract technology or design information from them. For the most part, reverse engineering involves deconstructing individual components of larger products. Reverse engineering in some incidences but not always are considered the violation of “Trade Secrets”.

Reverse engineering is a violation of trade secret only if it was obtained by dishonest or unfair means.

If reverse engineering is established to be dishonest and unfair, those in violation can be convicted to theft, bribery misrepresentation breach, inducement of breach of duty to maintain secrecy.

The company owning the trade secret must exercise reasonable efforts to maintain secrecy. If the owner or company discloses information to those under no obligation to keep the trade secret, the company has not exercised reasonable secrecy. The mere intention that information remains guarded is not enough and it must be practiced.

Some of the work that a company can and should take to maintain the trade valuable information are as follow: Training employees: Requiring confidential agreements, Marking documents as confidential.

Implementing physical security measures and more.

California UTSA (Uniform Trade Secret Act) emphasizes a trade secrete to have “Commercial Advantage” Or “Commercial Value” or “Economic Value”. Such Value must be meaningful when defendant is trying to use it. The trade secret must possess some Novelty. It can not be a “Common Knowledge”. It can't be obvious. It can't be available to the public or general market; it can't be the principles of existing scientific principles or technology.

Whether you or your company is being accused of “stealing trade secrets” or you are concerned to protect them, you may contact our office to receive a consultation regarding your case.

The above information is general and does not relate to your particular case. It is not considered legal advice and does not create attorney-client relationship. For further information and for your initial free case evaluation and consultation contact the attorney's office.

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