Protecting your business’ trade secrets

FAQs on trade secret misappropriation in Oregon, explained

Keeping your trade secrets yours alone is integral to your business' success. Yet many businesses do not know how to effectively protect trade secrets, or the legal options available if a former employee or rival business misappropriates a trade secret.

This article provides basic guidance on protecting trade secrets. For more information or information specific to your individual concern, contact an Orgeon business law attorney to discuss your options.

What is a trade secret?

Oregon has adopted a version of the Uniform Trade Secrets Act (UTSA), and defines a trade secret as information that "derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use."

In other words, trade secrets are confidential company information that gives you a competitive edge.

Oregon's Uniform Trade Secret Act (OUTSA) notes that drawings, cost data, customer lists, formulas, patterns, compilations, programs, devices, methods, techniques and process all may qualify as a trade secret. The most important part of a trade secret is, unsurprisingly, that it is secret and you make efforts to keep it so.

The majority of states, including California and Washington, have adopted some version of the UTSA.

How do I protect trade secrets?

It is against the law to misappropriate trade secrets. Misappropriation occurs through the appropriation, use or disclosure of a trade secret without express or implied authorization. Businesses and individuals who violate the law are subject to civil litigation for damages, injunctions against using trade secrets, and attorney fees.

Fortunately, there are ways to proactively protect your trade secrets through nondisclosure agreements and noncompetition agreements.

How can nondisclosure agreements and non-competition agreements help?

Nondisclosure agreements (NDAs), also known as confidentiality agreements, are contracts (or provisions in a broader contract, such as an employment agreement) that prevent the disclosure of a company's trade secret. A business must make efforts to keep trade secrets secret in order to enjoy legal protection, and an NDA is one of the easiest ways to demonstrate those efforts. Employees, vendors, and customers are examples of categories or persons involved in your business whom you may want to have sign an NDA.

Noncompetition agreements can also prevent former employees from using trade secret information to work for a rival business or to create their own start-ups using trade secrets derived from their time employed with you.

While the concepts behind these agreements are straightforward, the intricacies involved in the actual contract terms and provisions can be complex and have developed along with statutory and case law. Standardized contracts, inadequate or unenforceable provisions, and not accounting for foreseeable future conflicts can result in future disputes and potential litigation.

Is litigation an option?

Litigation is rarely the first choice of any business. However, if a former employee or rival company has misappropriated a trade secret, your business may be at risk. You have until three years after discovering the trade secret misappropriation (or three years after you should have known) to commence litigation.

A preliminary injunction can prevent another party's use of a trade secret once a case is filed, and it can often be the most cost effective way to prevent damage to your business early in a case. With a preliminary injunction, the court can order the offending party to cease using your trade secret until the conclusion of the case.

At trial, the court or jury will decide whether your trade secret was misappropriated (liability) then money damages and a permanent injunction stopping the use of the trade secret.

For answers to additional questions

Businesses looking to protect their trade secrets or concerned about the misappropriation of a trade secret should speak to an experienced business litigation law firm about their situation and legal options.

This area of the law can be complex. Proper contract drafting and appropriate enforcement techniques are highly dependent on individual circumstances. If you are looking to protect or enforce an existing contract regarding your trade secrets, contact Chenoweth Law Group, P.C.