When an employment/independent contractor relationship ends, there are certain considerations on next steps for both the company and individual. We talked earlier about non-competes and the implications of the same. Another issue that often arises is what to do with the information an employee/independent contractor gains from the company. This information can constitute a “trade secret” and is provided extra protection under Minnesota law.
A “trade secret” is statutorily defined under Minnesota law as a “formula, pattern, compilation, program, device, method, technique, or process” that meets both of the following:
(i) derives 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) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
In lay terms, what does that mean? The formula for Coca-Cola would be a “trade secret”. The method that Coca-Cola is made would likely be a “trade secret”. Both of these provide independent economic value to The Coca-Cola Company from not being known by its competitors. Presumably, The Coca-Cola Company takes precautions to make sure that its employees do not divulge either the formula or method of producing Coca-Cola to The Coca-Cola Company’s competitors (i.e. Pepsi). Requiring employees to sign confidentiality agreements, prohibiting employees from bringing the formulas home, and marking such documents as “CONFIDENTIAL” would be reasonable protective efforts that the courts would examine to determine whether The Coca-Cola Company should be afforded “trade secret” protection.
On the other hand, which stores Coca-Cola is sold to likely would not be considered a “trade secret”. Such information is rather easily ascertained by walking into different stores to see if they sell Coca-Cola.
The distinction between whether information is considered a “trade secret” or just confidential is factually intensive and often highly contentious if litigation ensues. As discussed in a subsequent post, the classification of information as a “trade secret” provides significant benefit and protections to the company.
If you need to protect your “trade secret” information or have been alleged to have misappropriated “trade secret” information, reach out so we can discuss your path forward.
“MISAPPROPRIATION” OF “TRADE SECRET” CLAIM.
Now that you know what a “trade secret” is, what does “misappropriation of trade secret” mean? The Minnesota Legislature has provided rather specific definitions of “misappropriation” and the implications of bringing such a claim.
“Misappropriation” is statutorily defined as:
(i) acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or
(ii) disclosure or use of a trade secret of another without express or implied consent by a person who
(A) used improper means to acquire knowledge of the trade secret; or
(B) at the time of disclosure or use, knew or had reason to know that the discloser’s or user’s knowledge of the trade secret was
(I) derived from or through a person who had utilized improper means to acquire it;
(II) acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; or
(III) derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use; or
(C) before a material change of the discloser’s or user’s position, knew or had reason to know that it was a trade secret and that knowledge of it had been acquired by accident or mistake.
“Improper means” is defined as: “theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means.”
Why is this important? To help employees/independent contractors most effectively provide services for the company and benefit to the company and its customers, individuals are often provided access to “trade secrets”. Recognizing the balancing act between protecting “trade secrets” and providing employees/independent contractors with the information necessary to succeed, the Legislature has recognized that such information should not be improperly utilized to the detriment of the company. And if it is, the company may bring a claim.
In addition to the monetary damages recoverable for such misappropriation, the company can also obtain injunctive relief (meaning that the court will prevent the employee from utilizing such information). The court can impose “exemplary damages” which are up to twice the amount of damages awarded to the company as well as attorneys’ fees and costs for bringing a successful claim. (It is important to note that if a company brings a misappropriation claim in bad faith, the former employee/independent contractor may also be awarded attorneys’ fees).
Given the recoverable damages, when an employee/independent contractor leaves the company with any company information, significant consideration must be given as to whether a misappropriation of trade secret claim exists. Let us know if we can help.