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

On Monday, January 9, 2012, Governor Chris Christie signed into the law the New Jersey Trade Secrets Act (NJTSA, http://www.njleg.state.nj.us/2010/Bills/S2500/2456_R1.HTM), the Garden State’s version of the Uniform Trade Secrets Act (UTSA). New Jersey, thus, becomes the forty-seventh state to adopt some form of UTSA. While the New Jersey Act will promote some level of uniformity in the approach to trade secrets issues, New Jersey specific changes to the uniform act promise that this statute will build upon, rather than depart from, New Jersey’s common law tradition of protection of trade secrets and other valuable business information.

Some New Jersey specific points in the legislation:

• The definition of “trade secret” under NJTSA is broader than under UTSA, as NJTSA incorporates the broader protections of New Jersey common law principles;

• NJTSA supplements, rather than displaces, New Jersey common law, as the statute states that the rights, remedies, and prohibitions under NJTSA “are in addition to and cumulative of any other rights, remedies, or prohibitions provided under common law or statutory law of this State”;

• NJTSA prohibits acquisitions of the trade secrets of another by “improper means,” and contains definitions of that term and “proper means” not found in UTSA;

• NJTSA makes mere or threatened acquisition by improper means of another’s trade secret actionable, and enjoinable, even if there is no concomitant likelihood of disclosure to or use by third party.

These NJTSA-specific provisions combine with UTSA’s allowing for recovery of attorneys’ fees and punitive damages to provide the holders of trade secrets a powerful new tool in New Jersey. Those who helped frame, over a multi-year time period, the bill as adopted in New Jersey included its sponsors, employer groups, and the New Jersey Law Revision Commission and its legal advisors, including the author of this post.
 

A recent Alabama Court of Appeals case, Jones v. Hamilton, Case No. 2081077 (January 22, 2010), illustrates how a failure to take reasonable steps to maintain the confidentiality of documents and information will result in the loss of trade secret status.

In Jones, the parties' trade secret dispute centered on the alleged misappropriation of confidential and sensitive documents that were left in an unmarked cardboard box for at least a week in the backseat of a company-owned car to which various company employees had access. The documents were not marked "confidential," and the keys to the vehicle were either kept "on a peg" or in the front of an office where they were widely accessible. Even though there was no evidence that anyone other than the defendant accessed the vehicle or the documents without authorization, "[t]he documents were left vulnerable to whomever chose to enter or to drive the vehicle."

Based on this vulnerability, the Court held that the documents were not "trade secrets" within the meaning of Alabama's version of the Uniform Trade Secrets Act and that the defendant therefore was not guilty of trade secret misappropriation. In reaching its conclusion, the Court did not focus on the sensitivity of the documents; rather, by itself, the company's failure to take reasonable steps to ensure the security of the documents precluded them from qualifying as trade secrets.

Hence, this case illustrates the importance of taking reasonable steps to protect the secrecy of alleged trade secrets. Although what is "reasonable" will vary depending on the circumstances, the bottom line is that if a company hopes to protect documents or information as a "secret," they need to be treated as such.

A recent article in Lawyer USA discusses how litigation over noncompetition and nonsolicitation agreements has been on the rise in recent years. Currently, when employers’ most valuable assets are their people and ideas, and the spread of technology has lead to increased concerns regarding theft of confidential information, employers have dramatically stepped up their use of noncompetition agreements to limit what departing employees can do.