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San Francisco Business Lawyer on Employees’ Rights and Obligations Regarding Trade Secrets

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In What Trade Secrets Are and How To Protect Them, the San Francisco Business Lawyers of Judd Law Group outlined basic trade secrets law concepts that every executive, investor, recruiter and attorney should know. In this post, Judd Law Group discusses the primary legal rights and obligations that owners and users of trade secrets should be aware of.

A trade secret is broadly defined as

  • Any information that has potential economic value
  • For which reasonable efforts to maintain its secrecy have been maintained.

The owner of a trade secret may file a lawsuit to obtain legal relief from the person who stole or improperly used the trade secret. The following legal remedies may be available:

  •  Injunction – The primary form of trade secrets relief is a court order that requires or prohibits certain acts. Preliminary injunctions may be ordered to provide interim relief during the legal proceedings. For example, the court may order the defendant to not use the allegedly misappropriated information during the lawsuit. A permanent injunction may issue at the completion of the proceeding. For example, the court may order the defendant to not use the trade secret so long as it remains secret.
  • Royalties – in exceptional cases, where it would be unfair to issue a permanent injunction, a court may issue an order allowing the defendant to continue to use the trade secret, so long as he pays the owner a reasonable amount for use of the trade secret
  • Damages for actual losses – a judgment for actual costs, such as some or all of the R&D costs expended to develop the trade secret, or the loss of a contract or client
  • Damages for unjust enrichment – a judgment for any windfalls the defendant obtained from possessing the secret
  • Punitive damages – an amount sufficient to punish and deter a defendant who obtained the trade secret through fraud, or willful and malicious acts, and/or
  • Attorney’s fees – a judgment to reimburse the owner of the trade secret for some or all of the attorneys fees the spent to enforce his legal rights, typically awarded in cases where punitive damages are appropriate.

In addition to a civil complaint, the owners of trade secrets may also bring criminal complaints to state or federal prosecutors against the persons responsible for misappropriating the secrets. If successfully prosecuted, criminal defendants face significant fines and, possibly, imprisonment. Persons convicted under the federal Economic Espionage Act (EEA), face the possibility of fines, imprisonment, and-court awarded monetary damages. Violations of the EEA may be punishable by imprisonment of up to ten years and fines of up to $5,000,000, however, individuals may be punished only by imprisonment and corporations may be punished only by fine. If a trade secret violation involves state law, different criminal penalties may apply. In California, trade secrets violations may be punished by a maximum prison sentence of one year and a maximum fine of $5000 under California Penal Code section 499c.

Employees and former employees accused of trade secrets misappropriation have well-established rights and protection under the law. In California, although trade secrets statutes apply, any agreement that prevents or unduly inhibits a former employee from being able to perform the same work for a different employer – even for a competitor – is unenforceable. In order to enforce trade secrets agreements in such instances, former employers must prove that the restriction imposed by the agreement is limited to a “reasonable” period of time and geographic area, and does not prohibit the employee from engaging in too many types of occupations or businesses.

If your business obtains economic value from proprietary information, it is essential that you take reasonable means to keep that information secret. Lawyers who specialize in trade secrets can help you devise and implement simple, cost-effective means to ensure that your proprietary information enjoys the protection of state and federal trade secrets laws. If you are sued, or believe that someone has wrongly obtained or disclosed your trade secret information, contact a trade secrets lawyer immediately to obtain advice about what you should do to enforce your rights and comply with your obligations.

The San Francisco Business Lawyers of Judd Law Group advise businesses and individuals about their rights and obligations regarding trade secrets, among other things. Do not hesitate to contact Judd Law Group if you have questions about your rights and obligations regarding trade secrets and proprietary business information.
Jeffrey M. Judd
222 Sutter Street, Suite 600
San Francisco, CA 941208