Wenatchee Valley Business World

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Businesses can protect their trade secrets

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Washington’s Trade Secrets’ Act (Chapter 19.108 RCW) protects business trade secrets. In general, the Act protects information that is not known outside a particular business entity, which is subject to reasonable security measures to guard against release, is valuable, and is difficult for others to lawfully acquire or independently duplicate.

For example, the Act can apply to customer lists, marketing information, unpatented inventions, software, formulas and recipes, techniques, processes, and other proprietary business information.

The Act protects against the misappropriation of trade secrets, and defines “misappropriation“ as the acquisition of a trade secret by someone who knows or should know that the trade secret was acquired by theft, bribery, misrepresentation, or by breach or inducement of a breach of duty to maintain secrecy.

Misappropriation also includes the disclosure or use of a trade secret without proper consent. Thus, a former employee cannot disclose a former employer’s secrets to a rival. If this occurs, both the former employee and the rival could be subject to civil liability under the Act.

When a trade secret may be or has been misappropriated, Washington law allows for a court order (i.e. an injunction) to prevent disclosure or prevent further disclosure.

The law can also award the victim of a misappropriated trade secret money damages. Courts are to award money damages based on the injury that arose due to the misappropriation and/or an award based on the benefit the wrongdoer earned due to the wrongdoer’s misappropriation.

The Act also permits the award of punitive damages in egregious situations, which can be up to twice the amount of any money damages otherwise awarded. The Act further permits the victim to recover attorneys’ fees in the case of willful and malicious misappropriation.

A victimized business generally has three years to file suit to enjoin misappropriation or to seek money damages, commencing for the date the business discovered, or should have discovered, the misappropriation.

In addition to the Act, some businesses elect to further protect their trade secrets with nondisclosure agreements and/or covenants not to compete. Under these types of contracts, a person affiliated with the business (e.g., an employee, independent contractor, potential partner, or vendor) promises not to disclose or use trade secrets or other information. These contracts can be useful when a business looks to affiliate with outside vendors, hire key employees, or negotiate a potential sale or partnership.

Since the agreements are contractual, the business has more flexibility than under the Trade Secrets Act to protect information or otherwise control its use. These contacts can also include agreed damages provisions and legal fees and costs awards, even when innocent neglect caused the misappropriation of a trade secret, as opposed to based on an intentional act, as provided for in the Act.

 

Brian A. Walker represents businesses and individuals in commercial, business, employment, and real estate related litigation and transactions from the Wenatchee office of Ogden Murphy Wallace PLLC.