Business Litigation | Intellectual Property

Trade Secret Litigation

Rhode Island trade secret attorney Eric Renner - Renner Law works closely with clients to protect valuable and confidential business information as a trade secret. To do so, Renner Law focuses on developing trade secret protection and litigation strategies designed to maximize Renner Law's Rhode Island and Massachusetts clients' profitability. Additionally, Renner Law counsels and represents clients with respect to the proper use and enforcement of Non-Disclosure Agreements in order to protect and deter against misappropriation of information covered under the NDA as a trade secret.

What is a Trade Secret?

A trade secret may consist of any information that is valuable to a business because it provides that business with a competitive advantage. This valuable business information can take many forms, including a formula, pattern, compilation, program, device, method technique or process, that derives economic value from not being not being known by others and is the subject of reasonable efforts to maintain its secrecy. The key inquiries as to whether a business's nonpublic information will be considered a trade secret are (1) whether the information has economic value to the business and (2) whether the business has used reasonable efforts to maintain its secrecy.

The Defend Trade Secrets Act of 2016 & Other Federal Law Protection of Trade Secrets

The Defend Trade Secrets Act of 2016 (DTSA) is an amendment to the Economic Espionage Act (EEA) (18 U.S.C. § 1831, et seq.) that creates a federal private cause of action for trade secret misappropriation. The DTSA, passed by Congress in April 2016 and effective May 11, 2016, authorizes a trade secret owner to file a civil action in federal court seeking relief for trade secret misappropriation related to a product or service used in or intended for use in interstate or foreign commerce. The EEA, as amended by the DTSA, defines trade secrets and misappropriation consistent with the Uniform Trade Secrets Act (UTSA), which has been adopted in some form by most states. Available remedies under the DTSA include:

An injunction to preserve evidence and prevent trade secret disclosure, provided that it does not: prevent a person from entering into an employment relationship, and that conditions placed on such employment are based on evidence of threatened misappropriation and not merely on the information the person knows; or otherwise conflict with an applicable state law prohibiting restraints on the practice of a lawful profession, trade, or business.

Damages measured by: actual loss and unjust enrichment, to the extent not accounted for in actual loss calculation; or a reasonable royalty for the unauthorized disclosure or use of the trade secret.

Exemplary damages up to two times the amount of the damages for willful and malicious misappropriation. Reasonable attorneys' fees for the prevailing party if: the misappropriation claim is made in bad faith; a motion to terminate an injunction is made or opposed in bad faith; or the trade secret was willfully and maliciously misappropriated.

(18 U.S.C. § 1836(b)(3)).

Unlike the UTSA, the DTSA allows a trade secret owner to seek an ex parte seizure order to prevent dissemination of the trade secret, and includes specific provisions designed to prevent abuse of the seizure authority (18 U.S.C. § 1836(b)(2)).

The DTSA provides criminal and civil immunity under federal and state law for employees, consultants, and contractors who make disclosures to government authorities or attorneys regarding a suspected violation of law or in a complaint or other court filing made under seal. Employers must notify these individuals about the DTSA whistleblower immunity in any contract regarding the use of trade secrets or confidential information entered into or modified after the effective date of the DTSA. Employers that fail to provide notice forfeit the right to recover attorneys' fees and exemplary damages against those individuals. (18 U.S.C. § 1833(b).)

The statute of limitations for a claim under the DTSA is three years from the date of discovery of the misappropriation (18 U.S.C. § 1836(d)).

Until the DTSA, trade secret misappropriation was governed by state law (see below). The DTSA supplements but does not preempt state law (18 U.S.C. § 1836(f)).

In addition to the DTSA, the EEA, 18 U.S.C. § 1831, et seq., makes misappropriation of a trade secret a federal crime. Whether the beneficiary is a foreign government, agent or instrumentality (economic espionage) or a third party (theft of trade secret), the deceptive obtaining, duplication, receiving, or buying of a trade secret related to or included in a product owned by another is a criminal act subject to fine and/or imprisonment.

Finally, the federal Trade Secrets Act, 18 U.S.C. § 1905, provides protection with respect to the federal government's handling of trade secret information. Under the federal Trade Secrets Act, the federal government and its agencies and employees may not publish, divulge or disclose trade secret information unless authorized to do so by law (e.g., by the Freedom of Information Act).

State Law Protection of Trade Secrets

As noted above, prior to the DTSA, trade secret protection was generally provided for through various trade secret laws enacted at the state level. Rhode Island is one of the many states that has adopted a version of the model UTSA. The Rhode Island Trade Secrets Act, §§ 6-41-1 et seq., prohibits the misappropriation of trade secrets. In Rhode Island, “misappropriation” generally refers to the acquisition of a trade secret by someone who knows or has reason to know that the trade secret was acquired by improper means. Examples can include theft, bribery, misrepresentation, breach or inducement of a breach of duty to maintain secrecy. Additionally, misappropriation includes the disclosure or use of a trade secret without consent by someone who used improper means to acquire knowledge of the trade secret – for example, a former employee who gives company secrets to a competitor.

Massachusetts has not adopted a version of the model UTSA. Instead, trade secrets are protected by a blend of Massachusetts statutory and common law. Under the Massachusetts Trade Secret Protection Act, M.G.L. Chapter 93, § 42, a defendant may be held liable for certain acts towards another person or corporation’s trade secret including embezzlement, theft, unlawful taking, concealment, copying, fraud or deception. Trade secret misappropriation may also be remedied under the Massachusetts Consumer Protection Act addressing unfair trade practices, M.G.L. Chapter 93A. Finally, Massachusetts also has a criminal statute that punishes trade secret misappropriation, M.G.L. Chapter 266, § 30(4).

Under the Rhode Island Trade Secrets Act, a person or entity that misappropriates a trade secret can be prevented from disclosure by court order – an injunction. This is true for both actual or threatened misappropriation. In exceptional circumstances, an injunction may condition future use upon payment of a reasonable royalty for no longer than the period of time for which use could have been prohibited. An example of an exceptional circumstance is where a theft is so egregious that the court order would be meaningless. Additionally, a trade secret victim may be entitled to monetary damages measured by the actual loss caused by the misappropriation or the profits (or “unjust enrichment”) acquired by the trade secret thief. If the misappropriation is deemed willful and malicious, a Rhode Island court can award punitive damages up to twice the amount of any award. Attorney fees will also be awarded in willful and malicious misappropriation situations or if a claim is brought in bad faith.

Similarly, under the Massachusetts Trade Secret Protection Act, courts may double the amount of damages found at trial. A trade secret owner may also obtain injunctive relief. Various forms of relief are also available under the Massachusetts Consumer Protection Act, including injunctive relief, double or triple damages, attorneys’ fees and costs.

Strategies to Protect Trade Secrets

Apart from litigation, Renner Law works with clients to actively prevent misappropriation or even incidental disclosure of clients' trade secrets. After identifying key business information, Renner Law works with clients to develop a comprehensive trade secret protection strategy to keep this information out of competitors' hands. When dealing with third parties, Renner Law assists clients in protecting misappropriation of trade secrets through the use of Non-Disclosure Agreements. While trade secret information cannot be put back into the bag once disclosed, a proper NDA will make it easier to hold those accountable for misappropriation.

Renner Law serves trade secrets clients throughout Rhode Island and Massachusetts from its Providence, Rhode Island offices. Call (401) 404-5251 or contact Renner Law online today.