Legal Protection for Valuable Non-Secret Information
In some situations, unauthorized use or disclosure of non-secret information may be actionable, even though the conditions for trade secret protection have not been satisfied, and courts have recognized the need for protection of information about one’s business whether or not it constitutes a trade secret and held that one who, for the purpose of advancing a rival business interest, procures by improper means information about another’s business is liable to the other for the harm caused by his possession, disclosure or use of the information.
In one case, the court found that the defendant’s acquisition of face towel designs, production methods, and costs by misrepresenting themselves as potential buyers amount to misappropriation, even though the information was publicly available in an expired patent. The court noted that the “essence of [this trade secret] action is … breach of faith,” and recognized that the defendants had a duty not to use information acquired during a confidential relationship to the detriment of the disclosing party. In another case where the purported secret information was, in fact, disclosed in publicly available patent filings, the court nonetheless held that the defendants “could not avoid its obligation of confidence due to the availability of lawful means of obtaining the concept when those means were not employed.” Defendants have also failed in their attempts to save the time and expense of developing information that was publicly available, and thus not a trade secret in the traditional sense, by gaining the confidence of another party to learn various manufacturing processes and marketing methods.
The Uniform Trade Secrets Act does not cover non-secret information; however, common-law remedies may nonetheless still be available in states which have followed the Uniform Act. In addition, companies may rely on contracts, rather than the common law, to protect information that does not quality as a trade secret from disclosure by employees or other business partners. However, the efficacy of such an agreement is far from clear and courts will often refuse enforcement based on public policy reasons, particularly concerns that the agreement may prevent the party who is to be bound from practicing his or her trade or profession. For example, an employee may sign an agreement that obligates him or her to maintain the confidence of specified information. If that information subsequently enters the public domain through no fault of the employee a court is unlikely to enforce the agreement against the employee after the employment relationship terminates if by so doing it will restrict the former employee’s ability to engage in his or her chosen profession by using the information that is now no longer eligible for trade secret protection. Of course, the court may also overturn the agreement based on the fact that since the information is now known generally the company would no longer be subject to harm from the former employee’s use of such information. In addition, agreements to refrain from disclosing non-secret information may be treated as a non-competition agreement and thus subject to stringent requirements with respect to reasonableness of duration and geographic scope.
The content in this post has been adapted from material that will appear in Technology Management and Transactions (Fall 2008) and is presented with permission of Thomson/West. Copyright 2008 Thomson/West. For more information or to order call 1-800-762-5272.