A few weeks ago, we posted an article geared towards entrepreneurs who are striking it out on their own with a new business venture. We provided some tips on how to make sure you leave behind all files and documents that your former employer might classify as “trade secrets” to avoid misappropriation allegations, but closed the article by acknowledging the impossibility of leaving a workplace with a spotless mind. Let’s discuss a few of these “intangible” types of trade secrets that might seem impossible to physically leave behind.
Chances are, if you are starting your own company, you aren’t going to be a newcomer to whichever industry category your new business falls within. After years of managing hotels, you found the perfect location to convert into your own bed and breakfast. After working as a mechanic at a dealership for a decade, you decide to go independent and open your own auto repair shop. After cooking in the kitchens of several well-known franchises, you are starting your own restaurant. But are you essentially stealing the “tricks of the trade” you may have picked up at your last place of employment when you open up your own shop?
How do we define misappropriation in business? In California, a claim made regarding misappropriation of trade secrets rests on proving two elements: 1) the existence of a true “trade secret” (discussed in our last blog post on this topic), and 2) that the trade secret was “misappropriated.”
For many businesses, success depends upon keeping certain, key pieces of company information strictly in-house. This information might be a certain technique or formula used to create a product, a client list, or a business plan- all of these could indeed represent “trade secrets.” Yet there is no hard-and-fast list of types of information that are uniformly labeled as trade secrets. Rather, the information must fit into the definition set forth in California Civil Code Section 3426-3426.11, known as the Uniform Trade Secrets Act, or UTSA.
While non-compete agreements are generally unenforceable in California, an employer can restrict an employee from utilizing, stealing, disclosing or compromising the employer’s trade secrets, data, client lists, patents, etc. Such confidential, proprietary information is owned by the employer and cannot be taken by the employee for use outside his or her employment with the employer.