Source: http://www.jdporterlaw.com/business-law/trade-secret-misappropriation-claims-california/
Timestamp: 2019-04-21 03:04:45+00:00

Document:
While trade secret law is primarily state law and, thus, can vary from state to state, 47 states have adopted the Uniform Trade Secrets Act, a suggested uniform framework for trade secret statutes. Accordingly, due to adoption of the act, almost all states have some consistency between their trade secret laws. However, because each state’s courts can interpret their trade secret laws differently, some amount of variation still exists between states. This article discusses trade secret misappropriation claims in California.
See Cal. Civ. Code § 3426.1(d). Due to its broad definition, a trade secret can take many forms including formulas, plans, designs, patterns, supplier lists, customer lists, financial data, physical devices, processes, and computer software. Indeed, the trade secret definition is so broad that it includes almost anything that is created or acquired by a business that confers a competitive advantage and is kept secret by its owner.
Importantly, a trade secret will lose its status if it is not subject to reasonable efforts to maintain its secrecy. Whether a trade secret owner engaged in reasonable efforts is determined on a case-by-case basis and depends on a cost-benefit analysis for each circumstance. In general though, it is well established that if an owner discloses the trade secret to others who have no obligation to protect the trade secret’s confidentiality, or if the owner otherwise publicly discloses it, the trade secret right will be extinguished. See Altavion, Inc. v. Konica Minolta Systems Laboratory Inc., 226 Cal.App.4th 26, 57 (Cal. Ct. App. 2014).
See Cal. Civ. Code § 3426.1(b). At its simplest, misappropriation of a trade secret can be accomplished in two ways. First, a trade secret can be misappropriated directly if the person used improper means to acquire it. Second, a trade secret can also be misappropriated if a person discloses a trade secret that he knew was acquired by improper means or had reason to know had been acquired by improper means.
Accordingly, a person can be liable for trade secret misappropriation even if that person was not the one who improperly acquired it. Disclosing a trade secret that was improperly acquired by someone else can still give rise to liability.
See Cal. Civ. Code § 3426.1(a). Thus, where an individual obtains a trade secret by theft, fraud, bribery, industrial espionage, breaching a confidentiality agreement, or inducing somebody else to breach a confidentiality agreement, the trade secret will have been obtained by improper means and misappropriation of a trade secret will likely have occurred.
While California’s substantive trade secret laws are similar to other states, California has unique procedural requirements with respect to actually litigating trade secret misappropriation claims.
In any action alleging the misappropriation of a trade secret under the Uniform Trade Secrets Act (Title 5 (commencing with Section 3426) of Part 1 of Division 4 of the Civil Code), before commencing discovery relating to the trade secret, the party alleging the misappropriation shall identify the trade secret with reasonable particularity subject to any orders that may be appropriate under Section 3426.5 of the Civil Code.
The primary purposes of this requirement are to promote well-investigated claims, dissuade the filing of meritless trade secret complaints, protect against plaintiffs using the discovery process to obtain a defendant’s trade secrets, help frame the scope of discovery during litigation, and assist defendants in forming complete and well-reasoned defenses such that they do not have to wait until the eve of trial to effectively defend against such claims. See Perlan Therapeutics Inc. v. Superior Court (NexBio, Inc.), 178 Cal.App.4th 1333, 1343 (Cal. Ct. App. 2009).
Importantly, failure to make a reasonable disclosure of the trade secrets in dispute can ultimately result in dismissal of the action. See Imax Corp. v. Cinema Technologies, Inc., 152 F.3d 1161 (9th Cir. 1998) (dismissing trade secret misappropriation claims where the plaintiff failed to adequately disclose the trade secrets in dispute after being ordered multiple times to do so). Further, a defendant in a trade secret misappropriation action may refuse discovery requests related to the trade secret until the plaintiff complies with § 2019.210.
Determining whether a claimant has complied with § 2019.210 and adequately identified the trade secret with reasonable particularity is up to the trial court. Accordingly, whether a plaintiff’s disclosure is adequate is determined based on the specific circumstances of each case. See Perlan Therapeutics Inc. v. Superior Court (NexBio, Inc.), 178 Cal.App.4th 1333, 1343 (Cal. Ct. App. 2009).
If a defendant believes a plaintiff’s disclosure is inadequate, the defendant will likely want to file a motion to force the plaintiff to give an adequate disclosure before responding to the plaintiff’s discovery requests.
In an action under [the CUTSA], a court shall preserve the secrecy of an alleged trade secret by reasonable means, which may include granting protective orders in connection with discovery proceedings, holding in-camera hearings, sealing the records of the action, and ordering any person involved in the litigation not to disclose an alleged trade secret without prior court approval.
Thus, where confidential trade secrets are being disclosed between the parties, a party may want to move for a protection order to prevent the trade secret from being publicly disclosed.
Thus, where California law is applicable, an employee hired by an employer to develop an invention or to develop trade secrets within the scope of employment has no ownership interest in those trade secrets; instead, the employer owns them. See Cappa v. Crosstest, Inc., A113327 (Cal. Ct. App. Mar. 28, 2008).
(10) whether the principal is or is not in business.
– Second, other factors California courts consider are whether there was an agreement between the employer and the person; how their working relationship was categorized in that agreement; whether the employer has the ability to discharge the person “at will”; whether the person has the ability to set her own hours; and any other factors that weigh on the degree of control the employer exercised over the person.
See id. In general, the more control and authority the employer exercises over the person more likely it will be found that the person is an employee and acting under the control of the employer. While no factor is dispositive in itself, the main thrust of the analysis is how much discretion the person has in determining how to perform the work she has been hired for.
Damages and remedies obtainable in a trade secret misappropriation claim include an injunction to prevent the offending activity; damages for actual loss caused by the misappropriation; damages for unjust enrichment not reflected in actual loss calculations; and, where actual damages are not provable, the court may order payment of a reasonable royalty for the time period the use of the misappropriated trade secret could have been prevented. See Cal. Civ. Code §§ 3426.2, 3426.3.
Additionally, if it is found that the trade secret was misappropriated willfully and maliciously, the court may award exemplary damages up to twice the amount of the underlying damages. See Cal. Civ. Code § 3426.3.
Attorneys’ fees and costs may also be awarded to the plaintiff where willful and malicious misappropriation occurs or, conversely, where it is determined that plaintiff filed the action in bad faith. See Cal. Civ. Code § 3426.4.
Notably, a continuing misappropriation constitutes a single claim such that a claim will begin to accrue when the misappropriation was discovered or should have been discovered, and not each time the trade secret is used. That is, the first discovered or discoverable misappropriation of the trade secret commences the running of the limitations period. See id.; Glue-Fold, Inc. v. Slautterback Corp., 82 Cal.App.4th 1018, 1024-26 (Cal. Ct. App. 2000).

References: § 3426
 v. 
 § 3426
 § 3426
 v. 
 v. 
 § 2019
 § 2019
 v. 
 v. 
 § 3426
 § 3426
 v.