Uniform Trade Secrets Act in Minnesota

Trade Secrets

The Uniform Trade Secrets Act (the “Act”) is codified in Minnesota Statutes Chapter 325C, sections 325C.01 to 325C.08. Sections 325C.01 to 325C.07 carry the operative law; section 325C.08 simply supplies the short title.

The Act defines two key terms. The first is “trade secret.” The Act gives examples of potential trade secrets, including a “formula, pattern, compilation, program, device, method, technique, or process.” Those categories are only examples. To actually qualify, your information must meet two conditions under Minn. Stat. § 325C.01, subd. 5: it must (i) derive independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and (ii) be the subject of efforts that are reasonable under the circumstances to maintain its secrecy. Both prongs matter. If you fail to guard the information, you can lose protection even when it has real economic value.

The Act also protects you in a common situation. The existence of a trade secret is not negated merely because an employee or other person acquired it without express or specific notice that it is a trade secret, so long as, under all the circumstances, that person knows or has reason to know that you intend or expect the secrecy of that type of information to be maintained. In other words, you do not forfeit protection simply because you never formally labeled a given item “secret,” as long as the circumstances put the person on notice that you expected secrecy.

Misappropriation and Defenses

The Act prohibits misappropriating a trade secret, and “misappropriation” is a defined term, not a loose one. Under Minn. Stat. § 325C.01, subd. 3, misappropriation means either (i) acquiring another’s trade secret when you know or have reason to know it was acquired by improper means, or (ii) disclosing or using another’s trade secret without consent where you used improper means to learn it, or knew or had reason to know that your knowledge of it was derived through improper means, acquired under a duty to maintain its secrecy, or obtained by accident or mistake. The knowledge element matters: a bare disclosure or use without consent is not, by itself, misappropriation.

The definition turns on “improper means,” which the Act separately defines in Minn. Stat. § 325C.01, subd. 2, to include theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means. This is the element that separates actionable misappropriation from lawful competitive discovery such as reverse engineering or independent development. You can establish misappropriation by, for example, showing that a defendant obtained your trade secret through improper means or under a duty to keep it secret and then used it, without consent, to develop a similar product.

If you are the one accused, several defenses follow from these definitions. You could show the information does not meet the definition of a “trade secret” because the owner did not make reasonable efforts to maintain secrecy. You could show that the statutory elements of misappropriation have not been met, for instance that you acquired the information properly and were under no duty of secrecy. And you could raise the three-year statute of limitations or preemption.

The limitations period is set by Minn. Stat. § 325C.06: an action for misappropriation must be brought within three years after the misappropriation is discovered or by the exercise of reasonable diligence should have been discovered. A continuing misappropriation constitutes a single claim, so the clock runs from that single point of discovery rather than resetting with each new use of the trade secret.

On preemption, Minn. Stat. § 325C.07 displaces conflicting tort, restitutionary, and other state-law civil remedies for trade secret misappropriation. That displacement has limits, though. It does not affect contractual remedies, other civil remedies not based on misappropriation, or criminal remedies, so a companion contract claim or a non-misappropriation civil claim can survive alongside your Act claim.

Potential Legal Consequences

There are a number of consequences for violating the Act in Minnesota. Many trade secret cases involve a request for injunctive relief to stop further use of the information. Under Minn. Stat. § 325C.02, actual or threatened misappropriation may be enjoined. In exceptional circumstances a court may condition future use on payment of a reasonable royalty, and in appropriate circumstances it may compel affirmative acts to protect a trade secret.

You may also be entitled to damages. Minn. Stat. § 325C.03 allows recovery of both the actual loss caused by the misappropriation and any unjust enrichment not already counted in the actual loss, or, in lieu of those measures, a reasonable royalty for the misappropriator’s unauthorized disclosure or use. And where the misappropriation is willful and malicious, the court may award exemplary damages of up to twice the compensatory award.

Case Law – Trade Secret Terms

Minnesota courts have clarified how the Act and its definitions apply. One of the earliest and most important decisions is Electro-Craft Corp. v. Controlled Motion, Inc., 332 N.W.2d 890 (Minn. 1983). The Minnesota Supreme Court identified two factors bearing on whether information is readily ascertainable: the time it would take to reverse engineer or otherwise discover the information, and the complexity and detail of the information.

Focusing on the “reasonable efforts” element, the court held there was no duty not to disclose unless the employer treated the information as secret and used reasonable efforts to maintain its secrecy. That element does not require absolute secrecy; only partial or qualified secrecy is required, so you can share information selectively and still hold a trade secret. The rationale is a clean-hands one: an employer cannot complain of an employee’s use of information the employer never treated as secret. The court also confirmed that the statutory “independent economic value” element carries forward the common law requirement of competitive advantage, and that you need not be the only party in the market. Several independent developers of the same information may each hold trade secret rights in it.

In 1985, the Legislature amended the trade secret definition to add the provision that a trade secret is not negated because a person acquired it “without express or specific notice that it is a trade secret,” so long as the person “knows or has reason to know that the owner intends or expects the secrecy . . . to be maintained.” Minn. Stat. § 325C.01, subd. 5. The amendment shifted the focus from whether express notice was given to whether the person knew secrecy was expected.

That shift matters for departing employees, but it has a limit. A person’s own general skill and knowledge is never a trade secret. As the U.S. District Court for the District of Minnesota put it, the concept of a trade secret “does not include [a] man’s aptitude, his skill, his dexterity, his manual and mental ability, and such other subjective knowledge as he obtains while in the course of his employment,” all of which remain the employee’s own property. LaserMaster Corp. v. Sentinel Imaging, 931 F. Supp. 628, 636-37 (D. Minn. 1996). General skills and knowledge acquired on the job are things a departing employee is free to take and use in later pursuits, especially where they do not take the form of written records, compilations, or analyses.

Software drew similar attention. In Jostens, Inc. v. National Computer Systems, Inc., 318 N.W.2d 691 (Minn. 1982), the Minnesota Supreme Court explained that “unique principles, engineering, logic and coherence in computer software may be accorded trade secret status,” while “[m]ere variations in general processes known in the field which embody no superior advances are not protected.” A trade secret may also arise from modifying and improving standard models until the result is unique in the industry, and generally known computer elements may gain protection from the nature of their particular combination.

Information that is “generally known” is not protected at all. Under Minn. Stat. § 325C.01, subd. 5, information qualifies only if it derives independent economic value from not being generally known to, and not being readily ascertainable by proper means by, others who can profit from it. A marketing plan is a good example of what can qualify: the statutory definition is deliberately non-exhaustive, and a confidential marketing plan fits as a compilation of business information, but only if it derives independent economic value from its secrecy and you keep it reasonably secret. A publicly known or loosely guarded marketing plan is not protected.

The same economic-value requirement means obsolete information cannot be a trade secret. As the Eighth Circuit noted, quoting the district court’s observation, “obsolete information cannot form the basis for a trade secret claim because the information has no economic value.” Fox Sports Net N., LLC v. Minnesota Twins P’ship, 319 F.3d 329, 336 (8th Cir. 2003). The District of Minnesota has since restated the point in the exact statutory terms, holding that information that has or will quickly become obsolete lacks the independent economic value to be considered a trade secret. Katch, LLC v. Sweetser, 143 F. Supp. 3d 854, 866 (D. Minn. 2015).

Case Law – Misappropriation

To prevail on a misappropriation claim, you must establish two things. First, the existence of a trade secret: information that derives independent economic value from not being generally known or readily ascertainable and that is the subject of reasonable secrecy efforts. Minn. Stat. § 325C.01, subd. 5. Second, misappropriation of that trade secret as defined in Minn. Stat. § 325C.01, subd. 3, meaning either an improper acquisition or an unauthorized disclosure or use coupled with the required knowledge.

Trade secret protection also coexists with federal patent law. In Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470 (1974), the U.S. Supreme Court held that state trade secret law is not preempted by the federal patent laws. The Court reasoned that the two regimes are complementary rather than in conflict: trade secret law encourages the development of items of lesser or different invention than would be accorded patent protection, and the Court rejected even partial preemption for clearly patentable inventions, so trade secret protection is available across the full range of subject matter. The decision rests on the patent laws; it did not decide copyright preemption of trade secret law.

Examples in the News

Trade secret law has also reached the international arena. In TianRui Group Co. v. International Trade Commission, 661 F.3d 1322 (Fed. Cir. 2011), the Federal Circuit held that although the misappropriation occurred abroad, a trade secret holder may block the importation of goods made using the misappropriated information through a Section 337 exclusion order from the International Trade Commission under 19 U.S.C. § 1337. This is federal import law, not the Minnesota Act. Its reach has limits: the remedy applies only to goods entering the U.S. market and requires proof of injury, or threatened injury, to a domestic industry, which can be shown even where no U.S. manufacturer is currently practicing the protected process. The Commission does not regulate purely foreign conduct and cannot stop the foreign-made goods from being sold abroad.

Conclusion

Federal law has continued to develop. The Economic Espionage Act (18 U.S.C. §§ 1831-1832) imposes criminal penalties for trade secret theft. The 2015 proposal for a federal civil remedy is no longer pending: Congress enacted it on May 11, 2016 as the Defend Trade Secrets Act of 2016, now codified at 18 U.S.C. § 1836(b).

Under that statute, if you own a misappropriated trade secret related to a product or service used in, or intended for use in, interstate or foreign commerce, you may bring a civil action in federal court. The federal remedies mirror much of the Minnesota Act: injunctive relief, damages for actual loss and unjust enrichment or, in lieu, a reasonable royalty, up to double exemplary damages for willful and malicious misappropriation, and attorney’s fees. A federal action must be brought within three years after the misappropriation is discovered or by reasonable diligence should have been discovered, with a continuing misappropriation treated as a single claim. Because that federal statute provides only that an owner of a misappropriated trade secret “may bring” a civil action, the federal remedy is optional rather than mandatory. The foundations of the Act and the Minnesota case law interpreting it remain central to how these disputes are decided.