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Does intent matter in a trade secret misappropriation claim?

On Behalf of | May 23, 2023 | Intellectual Property

The Uniform Trade Secrets Act (UTSA) defines a trade secret as information like a formula, recipe, process, or program which is secret and of value to the owner. In order to qualify for protection, the owner must have taken reasonable steps to protect the secret. Examples could include keeping the formula in a lock box and only letting certain, higher-level employees have access to the information.

What happens if someone steals a trade secret?

The law provides protection against stealing a trade secret. In order to establish misappropriation, the trade secret holder would generally need to show the following three elements:

  • The secret qualifies for protection; and
  • The owner took steps to protect the secret; and
  • The secret was wrongly taken.

Wrongly taken can mean a breach of confidence or other improper means of taking the secret.

Does it matter if there was also malicious intent?

Like many things in the legal world, the answer is yes and no. As noted above, intent is not a key element to establish a claim, but it can play a crucial role in damages. This means it can impact the court’s determination of a monetary award for the victim.

How does intent impact damages?

The law provides that anyone who has “willfully and maliciously misappropriated” a trade secret is potentially subject to up to twice the actual damages, known as exemplary damages.

The use of this portion of the law is not always straightforward. A recent case, AgroFresh Inc. v. Essentiv LLC, highlights the complexity of these types of disputes. In this case, the court agreed that the malicious theft of a trade secret can justify an additional monetary award. Factors impacting whether such an award is appropriate include the duration of the misappropriation, awareness of injury to the trade secret holder, and attempts to “cover up” the wrongdoing. It is in the interest of public policy for the courts to consider these factors when making their determination. In this case, the court looked at the whole picture, including the award of additional punitive damages to punish the party responsible for the theft and deter future wrongdoing. Based on this analysis and the facts of this specific case, the court ruled against additional exemplary damages.

The important lesson: review not just the factors for misappropriation but also the potential for intent and the facts of the case that can impact its application to help better ensure your business gets the full compensation allowed by the law.