PROTECTING YOUR TRADE SECRETS IN MASSACHUSETTS (“MUTSA”)

front of sailboat on the open waterThe Massachusetts Uniform Trade Secrets Act was enacted in Massachusetts (MUTSA) in 2018 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). This Trade Secrets Act 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. It 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 two (2) key statutory words you need to know for discussion purposes:

(1) “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.

(2) “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 the discovery of BCI by independent invention, reverse engineering, or legally licensed information, public observation, or known from public literature, etc.)

As the owner or a manager of your company, how should you review your BCI systems annually for compliance with MUTSA? My basic recommendations are as follows:

  1.  Identify how your trade secret systems actually work right now.
  2. Ask yourself, what reasonable protection strategy should you have in light of MUTSA? (N.B. Your computer system is just one part of your strategy, and by no means comprehensive.)
  3. Send your Trade Secret draft plan to an attorney to see if it passes muster in light of the MUTSA requirements.

MUTSA may have taken the complication of searching many laws to find out how to comply, but compliance is about comparing what you are doing, with what MUTSA requires you must “reasonably” do. For example, if you spend a negligible amount of money protecting your trade secrets, good luck trying to convince a court that your allegedly misappropriated trade secrets are “priceless”. A judge will likely respond: “if it was so priceless, then why didn’t you spend more time and money to protect it”?

Remember, your biggest risk is, as the saying goes, “you don’t know what you don’t know”. Trade Secret protection is one of the most important legal risk management strategies to ensure it is done properly. It depends on your specific situation.

You should review your plan annually. Don’t wait until it’s too late!