TRADE SECRETS

Unlike patents and copyrights, which are regulated exclusively by federal statutes, regulations and caselaw, trade secrets are regulated by state statutes and caselaw.  Although the law relating to trade secrets arose from the common law of each particular state, most states have now adopted versions of the Uniform Trade Secrets Act, which means that trade secret law is becoming more uniform in application from state to state.

What Is A Trade Secret And How Can It Be Stolen?
Tennessee has adopted a slightly modified version of the Uniform Trade Secrets Act.¹   A trade secret is defined under the Tennessee Act as follows:

"Trade secret" means information, without regard to form, including, but not limited to, technical, nontechnical or financial data, a formula, pattern, compilation, program, device, method, technique, process, or plan that:

• Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by other persons who can obtain economic value from its disclosure or use; and 
• Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy

T.C.A. § 47-25-1702.

Misappropriation or theft of trade secrets is defined in the Tennessee Act as follows:

• Acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or
• Disclosure or use of a trade secret of another without express or implied consent by a person who:
• Used improper means to acquire knowledge of the trade secret; or
• At the time of disclosure or use, knew or had reason to know that that person's knowledge of the trade secret was:
• Derived from or through a person who had utilized improper means to acquire it;
• Acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; or
• Derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use; or
• Before a material change of his or her position, knew or had reason to know that it was a trade secret and that knowledge of it had been acquired by accident or mistake…

"Improper means" includes theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy or limit use, or espionage through electronic or other means…

T.C.A. § 47-25-1702 (emphasis added).

Under the Tennessee Act, a "person" is defined expansively to mean a "natural person, corporation, business trust, estate, trust, partnership, association, joint venture, government, governmental subdivision or agency, or any other legal or commercial entity."  Id.

What Are The Characteristics Of Trade Secrets?
In states adopting the Uniform Trade Secrets Act, six characteristics have been used to determine whether or not something is a trade secret:

• The extent to which the information is known outside of its owner's business
  The extent to which it is known by employees and others involved in its owner's business
• The extent of measures taken by the owner to guard the secrecy of the information
• The value of the information to its owner and to its competitors
• The amount of effort or money expended by its owner in developing the information
• The ease or difficulty with which the information could be properly acquired or duplicated by others."² 
   

What Must Be Proved To Establish Liability For Trade Secret Misappropriation?
In order to prove the misappropriation of trade secrets, the owner must prove by a preponderance of the evidence the existence of a trade secret and that it was misappropriated.³

What Are The Remedies For Trade Secret Misappropriation?
Tennessee law gives the owner of a trade secret many remedies against those who misappropriate its trade secrets.  Among them are:

• Injunction (actual or threatened misappropriation may be enjoined, and in exceptional circumstances, an injunction can include payment by the defendant of a reasonable royalty)
• Actual loss damages caused by the misappropriation
• Unjust enrichment of the defendant which is not taken into account in computing actual losses of the plaintiff
• Exemplary damages for willful and malicious misappropriation, not exceeding twice an award for actual loss or unjust enrichment
• Attorney's fees (which are discretionary with the trial court).

What Are The Statutes Of Limitations For Trade Secret Actions?
Under Tennessee law, "[a]n action for misappropriation must be brought within three (3) years after the misappropriation is discovered or, by the exercise of reasonable diligence, should have been discovered."  The statute of limitations in Georgia is five (5) years.

¹Tennessee's "Uniform Trade Secrets Act" can be found at T.C.A. § 47-25-1701, et. seq. ("Tennessee Act").  Georgia has adopted its own unique Georgia Trade Secrets Act of 1990, found at O.C.G.A. § 10-1-760, which is nonetheless similar in many ways to the Uniform Act and Tennessee Act.  Unless otherwise noted, references herein shall be to the Tennessee Act.
²Pope v. Alberto-Culver Co., 694 N.E. 2d 615, 618 (Ill. App. Ct. 1998) (citation omitted); Wright Medical ³Tech., Inc. v. Grisoni, 135 S.W.3d 561, 589 (Tenn. App. 2001).
See generally, T.C.A. §47-25-1702, -1703, -1704.