Theft of Trade Secrets

Theft or misappropriation of trade secrets may be prosecuted under a variety of provisions.

Trade secret includes not only secret formulas and processes, but more mundane proprietary information, such as customer and price lists, sales figures, business plans, or any other confidential information that has a value to the business and would be potentially harmful if disclosed.

The essential elements of a typical theft of trade secret claim are:

·         That a party possessed information of value to the business;

·         That was treated confidentially;

·         That the defendant took or used by breach of an agreement, confidential relationship, or other improper means.

It is critical that the information being sought to be protected was treated confidentially, although absolute secrecy is not required; it is sufficient if the information was "substantially" undisclosed. Limited disclosure to people with a need to know or pursuant to confidentiality agreements will not void the secret. Methods of demonstrating that information was intended to be kept confidential include a written policy describing the information as proprietary or secret; strict limitations on distribution of the information; and physically securing the information to prevent unauthorised access and use.

The owners of the information also should enforce restrictive agreements and act promptly to remedy any inadvertent disclosures. Failure to do so might be construed as a waiver of confidentiality and make it impossible to prevent future use or disclosures.

The most typical defence is that the information was developed independently. If the aggrieved party demonstrates that the information came to the defendant as the result of or during a confidential relationship, the burden of proof shifts to the defendant to demonstrate independent discovery. The defendant also might defend a misappropriation claim by showing that the information was not in fact a secret, that the third party's use was authorised, or that the trade secret or proprietary information had been abandoned by the owner.

Remedies - Civil Action

It is possible to file a civil action for damages or request an injunction. Civil damages may include reimbursement for actual losses caused by the defendant such as lost profits, reimbursement of development expenses and overhead costs, and the cost of efforts to protect the secret or recover damages, as well as for reduction in the value of business.

Damages also can be measured by the defendant's profits, which may be ordered paid to the claimant.

Injunctions

In addition to damages, the claimant in a civil action for theft of trade secrets also may obtain an injunction prohibiting further use of the information. A party may seek an injunction at any time after proceedings have been commenced. The claimant cannot obtain an injunction unless he can show that he has a substantive cause of action in English law.

The claimant may have a good claim in law, but may still fail to get an injunction. This is because as an injunction is an equitable remedy, it is discretionary and the claimant must comply with the usual 'equitable maxims' such as: he who comes to equity must come with clean hands. In order to obtain an injunction, the claimant must demonstrate:

·         A serious harm which is likely to continue, or

·         The harm is irreparable or cannot be quantified in financial terms;

·         The defendant does not have the means to pay damages.

As to the nature of injunctions a prohibitory injunction is to prohibit use of trade secret, whereas the mandatory injunction must specify exactly what the defendant has to do and the time within which he must do it.

An important injunction in an action to recover stolen trade secrets is the search order which will allow documents to be seized.