Effective October 1, 2018 the new Massachusetts Uniform Trade Secrets Act was enacted in Massachusetts (MUTSA) after almost two decades of review and analysis. Essentially it is very much the same as the national Uniform Trade Secrets Act, enacted by 48 other states in various forms (except the State of New York). So why is this BIG NEWS? Generally speaking, MUTSA protects such things as (1) a broader range of business confidential information (“BCI”), including BCI not currently used by its owner, negative information (i.e., what NOT to do), and BCI threatened to be used (i.e., inevitable disclosure) where use is unavoidable. This broad new act is now the law in Massachusetts.
So how can a business owner protect their “trade secrets” from misappropriation under MUTSA? Let’s take a look at three (3) key statutory definitions which form a baseline for discussion. Generally speaking, they are:
“PERSON” includes a natural person, various entities (e.g., corporations, partnerships, joint ventures), government agencies or subdivisions, estates, trusts or any other legal or commercial entity.
“MISAPPROPRIATION” is (a) an act of acquisition of a trade secret by someone who knows (or has reason to know) that it was acquired by improper means, or (b) an act of disclosure or use of a trade secret without the owners express or implied consent when then (i) used improper means to obtain same, or (ii) at the time of misappropriation knew or had reason to know it was derived from improper means or had a duty to limit the disclosure at said time under the circumstances (either because it was limited by the confidential relationship or knew or had reason to know it was acquired by accident or mistake from another who had misappropriated same). Finally, misappropriation can be based on “inevitable disclosure” based on release of BCI in a specific employment situation.
“TRADE SECRETS” means BCI, regardless if it is fixed in a tangible form or thing, such as formulas, patterns, compilations, programs, devices, methods, techniques, strategy, processes, customer lists, inventions, and all types of company data, etc. that AT THE TIME of the misappropriation (1) provided an economic advantage (actual or potential (new)) for it being kept a secret, and (2) the owners efforts to protect the trade secrets were “reasonable under the circumstances” (e.g., reasonable notice to prevent misappropriation).
Conversely speaking, trade secrets DO NOT INCLUDE information such as discovery of BCI by independent invention, reverse engineering, legally licensed information, public observation, or known from public literature, etc.
With these three (3) definitions (for discussion purposes only), an owner can get a baseline to determine if their particular facts and circumstances need to be investigated further. The new law allows injunctions based on threatened or actual use of a trade secret that may include reasonable royalties or affirmative acts to be taken, damages based on actual loss, unjust enrichment, reasonable royalties, or exemplary damages for willful or malicious misappropriation that can be up to twice the regular damages [i.e., 3X]. Finally, attorneys’ fees and costs can be awarded to the prevailing party (1) if they made or defend in bad faith a trade secrets claim, or (2) for willful or malicious misappropriation. A key element of discovery under MUTSA is that the plaintiff must identify the trade secret with “sufficient particularity under the circumstances”.
As the owner or a manager of your company, how should you think about your BCI systems in light of the new MUTSA? My basic recommendations are as follows:
- Identify how your trade secret systems actually work right now.
- Ask yourself, what reasonable protection should you consider in light of the new law (e.g., your computer system is just one form of your strategy, and by no means comprehensive)?
- Take your Trade Secret draft plan to an attorney to see if it passes muster in light of the new MUTSA requirements.
The new law may have taken the complication of searching many laws to find out how to comply, but compliance is now about comparing what you are doing with what MUTSA 2018 states you must “reasonably” do. For example, if you spend a negligible amount of money protecting your trade secrets, and then try to convince a court that your allegedly stolen trade secrets are priceless, how do you think a judge will respond other than to say “if it was so priceless then why didn’t you spend the time and money to protect it”?
Your biggest risk is that, as the saying goes, “you don’t know what you don’t know”. Trade Secret protection is one of the most important legal strategies that you need to ensure is done properly.