secret information misappropriated and
the USTA preempting you from other
lawsuits is to use all the techniques we
have previously described in this series to
side step this issue: keep as much of your
business information providing a competitive advantage as is possible strictly
confidential so it is classified as a trade
secret. But of particular note, having
all your non-disclosure/confidentiality
agreements in place that you normally
use to protect trade secrets will be very
useful in showing that the misappropriated information was at least confidential
per a contract agreement. The UTSA
generally excludes claims to breach of
contract, giving you the opportunity to
add clauses in your agreements to the
effect that any non-public information
is confidential, with a time-limit as to
how long the information is to be held in
confidence. Doing so may keep the door
open for you to make breach of contract
and theft of information claims even in
pro-UTSA preemption states, rather than
leave you with only a trade secret misappropriation claim to pursue.
The types of contract claims that
you may want to look over to base a
lawsuit if such business information is
taken include conversion, breach of duty
of loyalty, tortious interference with a
contractual relationship, tortious interference with business expectancy, unfair
competition, and breach of fiduciary
duty. On the bright side, the burden of
proof for such actions is often lower
than trade secret cases, where you must
show what specific information qualifies
as a trade secret, rather than information
misused in breach of contract. However,
you may want to evaluate the misappropriated information carefully before disclaiming it as not being a trade secret in
public record.
Conversion generally refers to some-
one treating your property as theirs, in-
cluding property that accidentally comes
into their hands, or intentionally giving
the impression the property belongs to
them. To establish conversion, general-
ly you will need to show that harm was
done by use, disclosure, or possession of
the information, and that the informa-
tion was obtained improperly to advance
a competing business. In KF Jacobsen v.
Gaylor an employee of Jacobson was accused of “exercised control over copied
information … in a manner inconsistent
to Jacobsen’s rights as the owner of the
information,” i.e., he copied document
and took them with him after leaving the
company. The United States Districts
Court of Oregon found that the conversion suit for the “taking, retaining,
and disclosing” the non-trade secret
“confidential and proprietary information” was not preempted by a claim to
misappropriation of trade secrets under
Oregon’s UTSA. However, the court
specified that conversion covered “
chattel or tangible property,” and the issue
of whether intangible electronic forms
of information are to be so treated was
not addressed.
Breach of duty of loyalty generally re-
fers to a corporate fiduciary or employee
use of company information, assets or
business opportunities for personal gain
(i.e., in a conflict of interest). Examples
that may enter the realm of confidential
information including soliciting business
from an employer’s clients prior to leav-
ing the employer to start a competing
business, and misappropriating or dis-
closing confidential information. Breach
of fiduciary duty generally follows the
same fact pattern, but limited to fiducia-
ries of the company who are expected to
maintain a greater degree of good behav-
ior than employees.
Tortious interference with a contractual relationship relates to intentionally damaging a contractual business
relationship, which generally requires a
showing of that the defendant knew of
the contract and intentionally acted improperly resulting in harm to the plaintiff. Tortious interference with business
expectancy is similar, but relates to non-contractual business relationships (e.g., a
contract being negotiated, a prospective
business relationship or economic advantage). Misappropriation of confidential
information generally is a basis for establishing the defendant acted improperly in
these types of suits. However, depending
upon the court, there can be odd exceptions such as a case in Virginia where
reconstituting, from memory, a confidential client list to solicit business was not
deemed improper. Unfair competition
claims may also be asserted for wrongly
interfering with prospective or existing
business relationships, such as using confidential information to get the business
of your existing or potential clients, as
well as for passing off your goods as being theirs.
In the scenario that you are considering to pursue a non-trade secret cause of
action, consider the financial cost-benefit
analysis of whether financial losses occurred that may be recovered, as well
as whether an injunction against use or
dissemination of the misappropriated
information are available in your state.
Given the legal uncertainties noted above,
whether you want to be the case that sets
precedent after many appeals needs to be
thought through.
So, it’s sort of a free-for-all when it
comes down to deciding whether or not
there are some state causes of action
other than trade secret misappropriation
available to protect your confidential information. But, the mere fact you know
this will impress the hell out of any lawyer you talk to about your case. That by
itself has a certain value … in terms of
comic relief anyway. CW
What do you
do if someone
misappropriates
information that is
not deemed a trade
secret? Depending
on what state in the
U.S. has jurisdiction,
you may have
some options. ”
