Trade secrets: Protect sensitive business information in Massachusetts

In the business world, information is everything. If rival companies acquire key information regarding a unique process, ingredient or product, your business can lose its competitive advantage.

Noncompetition agreements are one way of protecting your business from losing the proprietary information that gives it a leg up in the marketplace. Yet, noncompetes can only prevent former employers from competing with your business for a limited period of time, and over a limited geographic distance. What's more, even the limited protection noncompetes offer may soon be a thing of the past: Governor Patrick recently announced his support for a measure that would make noncompetition agreements unenforceable in Massachusetts.

Trade secret law is another tool businesses can use to protect their intellectual property. And, unlike noncompetes, there are indications that Massachusetts lawmakers may soon be embracing legislation that strengthens the utility of trade secrets protections.

When information qualifies as trade secret, damages, injunctive relief can remedy misappropriation

A trade secret is information; it could be a formula, pattern, method or process. It could be certain manufacturing details, for instance, or a customer list, if the list cannot be pieced together from other sources that are generally available.

To qualify as a trade secret, the holder of the information must derive actual or potential economic value from the information not being generally known, and from it not being easily ascertainable. In addition, the information must be the subject of reasonable efforts to maintain its secrecy; in other words, the holder of the potential trade secret must take steps to protect it.

The type of efforts that must be undertaken to keep information secret in order for it to qualify for trade secret protections vary based on the circumstances. If the pertinent information is a line of computer code, keeping it behind a firewall would be one example. Requiring employees with access to the information to sign a nondisclosure agreement would be another example.

If a piece of information qualifies as a trade secret, and the trade secret holder has taken reasonable steps to protect it, the trade secret holder has a legal claim against those who have misappropriated - wrongly acquired - the information.

There are ways a competitor can legally acquire a trade secret, for example, by reverse engineering it (i.e., legally acquiring an item and figuring out how it works), arriving at it independently, or taking advantage of an inadvertent disclosure by the trade secret holder.

When a trade secret is acquired through improper means like a breach of confidence or industrial espionage, the trade secret holder has a misappropriation claim for monetary damages under the Massachusetts Trade Secrets Act, as well as injunctive relief (a court order that can force the competitor to cease using the trade secret).

Massachusetts law may soon become more favorable to trade secret holders. The Uniform Trade Secrets Act was introduced in the Massachusetts legislature in 2013; Massachusetts is one of only four states that have not yet adopted some version of the Uniform Trade Secrets Act. If the UTSA becomes law in Massachusetts, it has the potential to increase the damages available to those who have had their trade secrets misappropriated by authorizing exemplary damages.

Contact a Massachusetts business torts attorney about your trade secret issues

If you believe your trade secret may have been wrongfully acquired by a competitor, or if you need help ensuring that your proprietary information can qualify for trade secrets protections, get in touch with a Massachusetts business torts attorney. Your attorney can give you the legal tools to defend the confidential information your business relies on.