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Trade Secrets Under Massachusetts Law

For many years, courts in Massachusetts relied on a six part test under the common law to determine if information was a trade secret. In 2018, a new statute took effect that provides a specific definition of "trade secret."

What Is a Trade Secret

In broad terms, trade secret law protects certain information only so long as its secrecy is maintained. Once the information is disclosed to the public, it loses its secrecy and is therefore no longer protected.

One example is when a company files for patent protection on an idea or process. In order to get a patent monopoly, the company or inventor has to publicly disclose the invention. Once that occurs, the company has to rely on the patent process to protect its idea, as trace secret law will no longer apply.

A trade secret under Massachusetts law is defined as "specified or specifiable information" that meets two tests:

• The information provides actual or potential economic advantage or value from not being generally known or readily ascertainable by others;
• The information was subject to reasonable measures by the company to protect it against being acquired, disclosed, or used without consent.

In this sense trade secrets are a unique form of intellectual property. Their protection is not only about the information itself, but the actions of the owner in maintaining secrecy.

Economic Value From Secrecy

With respect to the first test, the information not only must have value or potential value, but that value must be connected to the fact that others do not know the information.

Further, it must not be "readily ascertainable." Something that can be figured out by someone else with the same education or experience in a relatively short period of time is likely not a trade secret.

In contrast, a compilation of information, even information from public sources, that takes many hundreds of people hours and/or many months might be considered a trade secret.

There is always a tension in trade secret law between things an employee knows through general experience and "know-how" and actual protectible secrets of the employer.  Whether the information is readily gleaned by others with similar experience and expertise is a critical point in a trade secret case.

Reasonable Measures to Protect Secrecy

Under both common law and the new statute, companies must be vigilant about protecting their trade secrets. There is no bright line test, other than "reasonable under the circumstances."

At a minimum, companies should require their employees with access to the confidential information to sign nondisclosure agreements. They should also take measures to ensure that only those employees who need to use the information have access to it.

It is also important to monitor and enforce the NDAs in place with employees. A company who requires NDAs but never takes action when employees leave and use trade secrets could lose its protection.

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What is Misappropriation of a Trade Secret

Misappropriation can be the acquisition, use, or disclosure of a trade secret. Acquisition by another can be unlawful if it was done through improper means or through someone else who obtained the information through improper means.

Use or disclosure of a trade secret will unlawful if the person knew or should have known that it was acquired through improper means, acquired from someone with a duty not to disclose, or acquired under circumstances giving rise to a duty to protect the information.

Some examples of acquiring information through improper means include:

• Receiving it from someone in violation of their NDA.
• Obtaining the information under false pretenses.
• Physically or digitally trespassing to obtain the information.

It is not improper means to "reverse engineer" something that you have lawfully purchased.

Enforcement of Trade Secret Rights

An employee does not have to have an NDA to have a duty to protect trade secrets. So long as the information meets the definition of a trade secret, the employer can enforce its rights. Remember, however, that the absence of NDAs may be evidence that the employer did not sufficiently protect its secret.

An employer can bring a civil action seeking injunctive relief and money damages for misuse or disclosure of a trade secret. Under the new Massachusetts trade secrets law effective October 1, 2018, the prevailing party in a trade secret suit may be able to recover its attorneys fees and costs from the other side. This relief is available if the claim was made or defended in bad faith.

Attorneys fees and possible double damages are also available if the court finds the use or disclosure of trade secrets was willful and malicious.

Confidential Information That is Not a Trade Secret

There are some types of information that businesses consider proprietary and confidential that do not meet the two part test for a trade secret. Examples may include certain customer or pricing information.

Confidential information will still support enforcement of an otherwise valid noncompetition agreement. Employers can also protect this information by contract in a non disclosure agreement that defines confidential information broadly.

How Can We Help?

If you are a business owner seeking to protect trade secrets or an employee facing the threat of a trade secret lawsuit, we can help.  You can use the button below to schedule a call back from a member of our team, give us a call at  781-784-2322, or fill out our web form  to let us know a little more about your situation.

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