Trade Secrets and Noncompete Blog : Non-Compete Lawyer & Attorney : Epstein Becker Green Law Firm : Trade Secrets & Confidentiality Agreements

Last year, the Gonzaga Law Review published an exhaustive study of federal court trade secret litigation. This week, it published a companion study of state appellate court decisions involving trade secrets during the period between 1995 and 2009.

Among the state study’s more interesting findings are these:

• “In the vast majority of trade secret cases, the alleged misappropriator was someone the trade secret owner knew. Specifically, the alleged misappropriator was an employee or a business partner 93% of the time in this state study.”
   
• “both the state and federal studies confirm that confidentiality agreements with employees and business partners are the most important factors” when courts decide whether a trade secret owner took reasonable measures to protect the purported trade secrets.
   
• “Of the varied subject matter that can qualify as a trade secret, two categories comprise the vast majority (94%) of trade secrets litigated in state courts: internal business trade secrets (i.e., customer lists and internal business information) and technical trade secrets (i.e., formulas, technical information, and software or computer programs). Internal business trade secrets were litigated in 70% of state cases, and technical trade secrets were litigated in 36%.”
   
• “About half of all state appellate cases are heard in only five states: California (16%), Texas (11%), Ohio (10%), New York (6%), and Georgia (6%).” 
   
• “State courts appear to be a tougher venue for trade secret owners who are suing business partners than for those suing employees – trade secret owners won 42% of the time on appeal when the owner sued an employee, but only 34% when the owner sued a business partner.”

The study is well worth reading for anyone who follows this area of the law.
 

A new study of federal court trade secret litigation confirms that the number of lawsuits involving alleged trade secret misappropriation continues to grow exponentially. According to the study, which was published in the Gonzaga Law Review on March 17, 2010, the number of federal court “trade secret cases doubled in the seven years from 1988 to 1995, and doubled again in the nine years from 1995 to 2004.”

Other interesting findings in the study include the following:

• “In over 85% of trade secret cases, the alleged misappropriator was someone the trade secret owner knew – either an employee or a business partner.”

• The usage of confidentiality agreements significantly increases the likelihood that a court will find that a trade secret owner took reasonable measures to protect the purported trade secrets.

• The Northern District of Illinois (i.e., Chicago) handles the largest number of trade secret lawsuits, and “Courts applied the laws of Illinois, California, or New York in almost 30% of trade secret cases.”

• When seeking injunctive relief, owners of trade secrets had a much higher rate of success against employees (about whom extensive pre-filing investigations can be done) than against a business partner (with respect to which the trade secret owner may have only limited information).

• Similarly, trade secret litigation against employees is “much more likely to conclude early in the litigation” than is trade secret litigation against a business partner.

For anyone interested in this area of the law, the study is well worth reading.