Under common law, the key issue in a trade secret case was whether there was intent to keep information secret. This changed when Minnesota became the first state to adopt the Uniform Trade Secrets Act in 1980, after the Uniform Law Commission approved the Act in 1979.
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The Uniform Trade Secrets Act (the “Act”) is codified in Minnesota Statutes in Chapter 325C. There are two key terms defined within the Act—the first being “trade secret.” The Act gives examples of potential trade secrets, including a “formula, pattern, compilation, program, device, method, technique, or process.” Under the law, a trade secret must have independent economic value from not being “readily ascertainable” by others. It must also be the subject of reasonable efforts designed to “prevent the unauthorized disclosure of the information.”One of the key differences in Minnesota is that a trade secret is not negated because an individual acquires it without notice it is a trade secret if the employee knew or had reason to know the owner intended the information remain secret.
Misappropriation and Defenses
The Act prohibits misappropriating trade secrets, meaning that a person cannot acquire a trade secret by improper means or disclose or use a trade secret without consent. Minn. Stat. A plaintiff can establish misappropriation by, for example, showing a defendant gained access to a trade secret and used it in developing a similar product. An employee accused of misappropriating a trade secret could show the information does not meet the definition of a “trade secret” because the employer did not make reasonable efforts to maintain secrecy. Another defense could be showing that the elements of misappropriation under the Act have not been met. Finally, there could be a defense if the three-year statute of limitations has run or if common law claims for tort or restitution are preempted.
Potential Legal Consequences
There are a number of consequences for a violation of the Act in Minnesota. Many trade secret cases will involve a request for injunctive relief to prevent further use of the information. A plaintiff may also be entitled to damages for losses from misappropriation, unjust enrichment, or royalty damages. For example, showing lost net profits can generally prove loss damages or unjust enrichment if the misappropriating party gained net profits through its actions. In cases of willful or malicious misappropriation, exemplary damages may be awarded.
Case Law – Trade Secret Terms
Courts have helped clarify how the Act and its definitions are applied in Minnesota. One of the earliest decisions to have an impact was Electro-Craft Corp. v. Controlled Motion. The court looked at two factors to decide whether information was readily ascertainable: (1) the time and expense to discover the information and (2) the complexity or detail of the information. Focusing on the “reasonable efforts” element, the court found there was no duty not to disclose a trade secret unless the employer treated the information as confidential and used reasonable efforts to maintain secrecy. In response, the legislature amended the statute to add a provision regarding knowledge of intent information is kept secret, as opposed to express notice it is a trade secret. An example of the “readily ascertainable” standard after this amendment comes from the federal district court, which has held that specific knowledge or skill is not a trade secret.
Jostens, Inc. v. National Computer System, Inc. was another important early case regarding the trade secret definition. The court ruled that “unique principles” are possible trade secrets as opposed to variations on established practices. Courts have also delved further into the idea that information that is “generally known” is not protected as a trade secret.
Minnesota courts have looked closely at the “independent economic value” element of the trade secret definition. The Act institutes the common law requirements that a trade secret provide a “competitive advantage” for the owner. An example of the type of information that is protected under the Act in Minnesota is a marketing plan. The definition has also been interpreted to hold that obsolete information does not have independent economic value.
Case Law -Misappropriation
For misappropriation, the key term is “improper means,” defined as including “theft, bribery, misrepresentation, breach or inducement of breach of a duty to maintain secrecy.” The elements a plaintiff must establish for a successful claim are:
- The existence of a trade secret
- The disclosure of the secret
- The existence of a confidential relationship that gives rise to a duty to not disclose the secret
- Either intent to disclose or a probability that the information will be disclosed.
One important issue that remains in question is the reach of the misappropriation definition when an employee misappropriates a trade secret and is acting within the scope of their employment. Finally, an important federal case is Kewanee Oil, in which the Supreme Court ruled that federal patent or copyright law does not preempt state trade secret laws.
Examples in the News
The usual example of trade secret misappropriation would be similar to the case of an Intel employee who stole trade secrets allegedly worth over $200 million. Minnesota companies have not been immune to this type of theft; a vice president of St. Jude Medical Center was recently found guilty of stealing trade secrets in Ramsey County Court.
However, trade secret cases are not strictly limited to employees stealing company information, as large corporations have also been found guilty of stealing trade secret information from smaller companies. For example, in 2013 Minnesota-based Best Buy Co., Inc. was hit with a $27 million jury verdict after being accused of stealing trade secrets from a California software firm. Trade secret law has also being extended to the international arena. A 2011 case found that although the use of trade secret information outside the U.S. did not violate trade secret law, a trade secret holder may block the importation of goods made using the information.
Trade secrets are especially vulnerable in the digital age, as President Barack Obama recently noted in an editorial in the Wall Street Journal. Currently, the only federal law on trade secrets—the Economic Espionage Act—focuses on criminal penalties, but in 2015 a proposal was presented in Congress that would create a private civil cause of action for misappropriation. While the foundations of the Act and the case law that has developed with it will still be important in deciding cases within Minnesota, it seems apparent that trade secret protection will be undergoing changes at the federal level within the next few years.