Trade Secret Theft: Legal Remedies for Small Business Owners
For small business owners, your unique ideas, processes, and client lists are the lifeblood of your company. When this sensitive information is stolen, it can feel like a direct attack on your business operations. If you suspect trade secret theft, you need a powerful legal advocate on your side.
With over 40 years of distinguished experience as one of California’s top civil trial attorneys, William B. Hanley, Attorney at Law, brings a no-nonsense approach to litigation. His firm serves clients across Irvine, Newport Beach, Orange County, Los Angeles County, and San Diego County by delivering high-caliber representation to protect your business assets and providing strategies to identify and address trade secret theft for small businesses.
What Constitutes a Trade Secret?
A trade secret is not just any confidential business information. To be legally protected, the "trade secret" information must have independent economic value, and you must take reasonable efforts to maintain its secrecy in your business operations.
Independent economic value: The information must give your business a competitive edge because it is not generally known to the public or your competitors. This could include a secret recipe, a unique manufacturing process, a customer database, or a marketing strategy.
Reasonable efforts to maintain secrecy: You must be able to demonstrate that you took active steps to keep the information confidential. This is a vital element. If you did not treat the information as a secret, the court will not either.
Some common examples of reasonable efforts include using non-disclosure agreements (NDAs) with employees and partners, restricting access to sensitive data on a "need-to-know" basis, using password protection for digital files, and labeling documents as "confidential."
Common Scenarios of Trade Secret Theft
Trade secret theft can occur in many ways, often involving individuals with inside access to your company's operations. Small businesses are particularly vulnerable to these situations.
Departing employees: A frequent source of trade secret misappropriation involves former employees. An employee might leave your company to start a competing business or join a rival firm, taking your valuable information with them. This could be a client list they downloaded, proprietary software code they memorized, or strategic plans they copied. Even if their actions were not intentionally malicious, using your trade secrets for a new venture can cause significant harm to your business and operations.
Corporate espionage: While it may sound like something from a movie, corporate espionage is a real threat. Competitors may actively try to obtain your trade secrets through unethical means. This can range from hiring one of your key employees to gain inside information to more direct methods like hacking into your company's network. The goal is always to gain an unfair advantage by bypassing their own research and development costs.
Breaches by business partners: Sometimes, the threat of trade secret theft comes from those you trust to collaborate with. A business partner, contractor, or supplier who has been given access to your trade secrets as part of your working relationship might misuse that information. They could use it for their own benefit or disclose it to a third party, violating the trust and any agreements you had in place.
Steps Small Business Owners Can Take to Remedy Trade Secret Theft
If you suspect your trade secrets have been stolen, time is of the essence. The longer you wait, the more damage can be done to your business's market position and profitability. Here are specific steps small businesses in Nebraska can take to address trade secret theft.
Document the evidence: Collect all relevant evidence, such as emails, server logs, witness statements, and signed NDAs. Ensure the evidence is stored securely and not tampered with.
Avoid direct confrontation: Do not confront the suspected individual without legal guidance, as this could harm your case or complicate the legal process.
Consult a Nebraska business litigation attorney: Work with an attorney experienced in trade secret cases. They can evaluate your situation under the Nebraska Trade Secrets Act (Neb. Rev. Stat. §§ 87-501 to 87-507).
Seek an injunction: Your attorney can file for an immediate court-ordered injunction to stop the use or disclosure of your trade secrets. Nebraska courts can provide injunctive relief to prevent further harm.
File a lawsuit for damages: You may be entitled to recover damages, including actual losses, unjust enrichment, or, in cases of willful misconduct, exemplary damages of up to twice the actual damages.
Send a cease-and-desist letter: Your attorney can issue a cease-and-desist letter to formally demand the individual or business stop using your trade secrets.
Pursue criminal charges if necessary: Trade secret theft may also be prosecuted under Nebraska criminal laws. Your attorney can advise if this route is appropriate.
Review and strengthen your protections: Conduct a review of your internal processes for safeguarding trade secrets. Strengthen measures such as NDAs, employee training, and digital security to prevent future incidents.
Protecting your business’s intellectual property is fundamental to its long-term success. When someone threatens that foundation by stealing your trade secrets, a decisive and strategic legal response is your best defense.
California's Laws Governing Trade Secret Theft
California provides strong legal protections for trade secrets under the California Uniform Trade Secrets Act (CUTSA). This set of laws defines what a trade secret is, what constitutes "misappropriation" (the legal term for theft), and what remedies are available to the rightful owner. Under the CUTSA, misappropriation includes:
Acquiring a trade secret by someone who knows (or should know) it was obtained by improper means, such as theft, bribery, or misrepresentation.
Disclosing or using a trade secret without permission after acquiring it through improper means.
Using or disclosing a trade secret after learning it was a trade secret and that it had been acquired by accident or mistake.
The CUTSA allows business owners to take swift legal action. If you can prove that your trade secrets have been stolen, the court can issue an injunction to stop the person or company from using or disclosing your information. This is often the first and most immediate step to prevent further damage to your business.
In addition to stopping the unauthorized use of your information, you may also be entitled to financial compensation. A court can award damages to cover the actual losses your business suffered due to the theft. This could include lost profits or any unjust enrichment the other party gained from using your secrets. In cases where the misappropriation was malicious, the court may also award punitive damages, which can be up to twice the amount of the actual damages, as well as attorney's fees.
Trade Secrets Attorney Serving Irvine and Newport Beach, California
A desire to help those who have been wronged is the force behind Attorney Hanley’s success as a litigator. When your business is on the line, you need an attorney with a history of proven results. As the founder of a prominent and respected law firm with over 40 years of trial experience, Attorney Hanley is recognized as one of California’s top civil litigators.
His track record features a landmark $50 million verdict and one of the largest punitive damage awards recorded. The law firm of William B. Hanley, Attorney at Law, serves California residents in Irvine and Newport Beach, Orange County, Los Angeles County, and San Diego County. Call now to schedule a consultation.