What is Trade Secret Misappropriation?

traverselegal - March 22, 2012 - Misappropriation of Trade Secrets, Trade Secrets

The Uniform Trade Secrets Act (UTSA) defines misappropriation as follows:

Section 1.2: “Misappropriation” means:

(i) acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or
(ii) disclosure or use of a trade secret of another without express or implied consent by a person who
(A) used improper means to acquire knowledge of the trade secret; or
(B) at the time of disclosure or use, knew or had reason to know that his knowledge of the trade secret was
(I) derived from or through a person who had utilized improper means to acquire it;
(II) acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; or
(III) derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use; or
(C) before a material change of his [or her] position, knew or had reason to know that it was a trade secret and that knowledge of it had been acquired by accident or mistake.

Most states have adopted the Uniform Trade Secrets Act in total or with minor changes.  As such, in order to sustain a cause of action for trade secret misappropriation, you meet the statutory elements required.  This requires an understanding of what constitutes “improper means,” which is defined as theft, bribery, misrepresentation, breach or inducement of breach of a duty to maintain secrecy, or espionage through electronic or other means.  Therefore, an employer seeking a trade secret misappropriation lawsuit against an ex-employee can show, for example, that the ex-employee stole its trade secret on the way out the door.  Likewise, a third party who acquires or uses the trade secret information may also be liable if it knew or had reason to know of the theft.  Each matter has facts specific to the misappropriation, but a plain reading of the statute will help determine if you have a valid trade secret misappropriation lawsuit.

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This page has been written, edited, and reviewed by a team of legal writers following our comprehensive editorial guidelines. This page was approved by attorney Enrico Schaefer, who has more than 20 years of legal experience as a practicing Business, IP, and Technology Law litigation attorney.