What Is Trade Secret Litigation?

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Article By: Marc Newman

A Leading Commercial Litigation Attorney in Michigan

What Is Trade Secret Litigation?

Published on: June 28, 2020

trade secret litigation
Trade secrets are an important part of any business. Some companies even take extreme measures to protect their trade secrets.

For example, rumor has it that KFC moves its secret original recipe to a secure location via armored car and motorcade when it has to update its
security systems. And Coca-Cola supposedly keeps its formula in a safe to which only two people know the combination.

You have rights when it comes to your trade secrets. However, to preserve your rights, you have to be vigilant in securing your secrets. A trade secret attorney can help you protect your secrets and enforce them through litigation if necessary.

What Is a Trade Secret?

A trade secret is a type of intellectual property. It is something that is not widely known outside the company that makes your product or service unique. It is valuable because it allows you to set your service or product apart from others.

Trade secrets can include things like:

  • Formulas and recipes;
  • Patterns and designs;
  • Special techniques;
  • Processes and methods;
  • Client lists and other compilations;
  • Research and development information;
  • Devices or inventions; and
  • Algorithms.

You generally protect your trade secrets through secrecy rather than patents, trademarks, or copyrights. For your trade secret to be protectable, you must be able to demonstrate two things:

  • Your secret has economic value as a result of it not being generally known or readily ascertainable by others who can derive economic value from it; and
  • You made reasonable efforts under the circumstances to keep it a secret.

That second requirement puts a burden on businesses to affirmatively safeguard their trade secrets. If someone can show that your secret was widely shared or not appropriately secured, then you won’t be able to protect your secret when a rival company starts to use it.

How to Protect Your Company from Trade Secret Infringement

It is essential for businesses to consciously and consistently take steps to protect their trade secrets.

The best way to avoid trade secret litigation is to use contracts to protect your trade secrets. You should require anyone who has access to your secrets to sign an appropriate contract promising not to disclose them. The type of agreement you need depends on the type of trade secret and the person being bound, but common agreements include:

  • Nondisclosure agreements,
  • Confidentiality agreements,
  • Noncompete agreements, and
  • Nonsolicitation agreements.

Apart from these agreements, you should also secure your secrets as much as possible by:

  • Disclosing trade secrets only on a need-to-know basis;
  • Making confidentiality expectations clear when you disclose a secret;
  • Keeping documents secure;
  • Have measures for protecting trade secrets that are distinct from how you protect other company information;
  • Making sure you have good physical and electronic security; and
  • Conducting employee trainings on confidentiality.

A trade secret attorney can advise you on how to protect your secrets and help you prepare binding confidentiality agreements. They can help you prevent trade secret infringement and avoid litigation down the line.

What to Do in Case of Trade Secret Infringement

Despite your best efforts, your trade secrets can become exposed. If this occurs, you may need to initiate trade secret litigation.

Michigan law protects trade secrets under the Michigan Uniform Trade Secrets Act, which is mostly identical to the Uniform Trade Secrets Act. The Act prohibits misappropriation of trade secrets.

A person is not permitted to acquire a trade secret by “improper means,” which includes:

  • Theft,
  • Bribery,
  • Misrepresentation,
  • Breach of a duty to maintain secrecy;
  • Inducement of a breach of a duty to maintain secrecy; and
  • Espionage through electronic or other means.

You can sue someone for misappropriation if they:

  • Acquire a trade secret knowing or having reason to know it was acquired by improper means;
  • Disclose or use a trade secret after gaining knowledge of it by improper means;
  • Disclose or use a trade secret when they know or should know that the person they got it from either acquired it by improper means or had a duty to keep it secret; or
  • Disclose or use a trade secret that they knew or should know was acquired by accident or mistake (unless they materially change their position before learning of the error).

Your trade secret litigation lawyer can review the facts with you and determine whether you have a case.

Remedies for Trade Secret Infringement

If someone misappropriates a trade secret, you can seek an injunction and damages.

An injunction can prohibit future use of a trade secret for a particular period of time. If complete prohibition is not practical, an injunction can require payment of a royalty for some period of time to compensate for use of the secret.

A court can also award damages to compensate for both actual losses and unjust enrichment. Unjust enrichment damages are based on the value the defendant gained from misappropriating your trade secret. This means that you don’t necessarily have to prove you suffered an actual loss to get damages for trade secret infringement.

Contact an Experienced Litigation Attorney

If you need help preparing confidentiality agreements, advice on protecting your trade secrets, or representation in trade secret litigation, contact the Miller Law Firm today. We have experience litigating a wide range of commercial disputes, including those with hundreds of millions of dollars at stake. We can tackle even the most complex trade secret litigation issues. Give us a call or contact us online to learn how we can help your business.

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