What if an Ex-Employee is Using Your Trade Secrets?
Today's employees are a fickle bunch. They come and they go. Sometimes they go taking a little bit more with them than when they came.
It is not uncommon for businesses to hire employees away from their competitors. Losing an employee hurts because you'll have to do interviews, find another employee, and then train them all over again. But, losing an employee can hurt even more if that ex-employee is using your trade secrets to steal your clients or copy your products and technology.
So, what can you do if an ex-employee is using your trade secrets?
The Laws
Trade secrets are protected by federal law and state law. The Economic Espionage Act of 1996 is a federal law that makes it a crime to steal trade secrets. Violation of the act can result in a fine of up to $5 million and up to 10 years in prison.
Most states have adopted the Uniform Trade Secrets Act (UTSA) which allows businesses to sue in civil court for misappropriation of trade secrets.
Is it a Trade Secret?
To sue under the UTSA, you must be able to show that the information you're seeking to protect is in fact a trade secret. To be a trade secret, the information must be not generally known or readily learned, maintained in secret, and have economic value to the company because of its secret nature.
Sue for Misappropriation
If the information fits the definition of a trade secret, you may be able to sue for misappropriation under the UTSA.
Misappropriation can happen in two ways: 1) acquisition by improper means, and 2) use or disclosure of trade secrets. If an employee physically takes protected information without permission, the information was acquired by improper means. However, a person can still be guilty of misappropriation if they disclose knowledge of trade secrets from their memory, without ever physically taking anything.
If your suit is successful, the court could order an injunction against the defendant to stop using your trade secrets and money damages.
Vicarious liability
If the ex-employee's employer knew or should have known that the employee was misappropriating trade secrets and benefited from that misappropriation, they may also be liable under the principle of vicarious liability.
So, if an ex-employee is using trade secrets, you may be able to sue both the ex-employee and the new employer. An experienced business attorney will be able to help you assess your options.
Related Resources:
- Browse Business & Commercial Lawyers by Location (FindLaw's Lawyer Directory)
- Protecting Trade Secrets (FindLaw's Learn About The Law)
- How to Protect Your Company Secrets (FindLaw's Free Enterprise)
- Noncompete Agreements: When are They Enforceable? (FindLaw's Free Enterprise)