Trade Secrets Law in California

Note: This page covers information specific to California. See the Trade Secrets overview for more general information.

The California Uniform Trade Secrets Act ("CUTSA") is located at sections 3426 to 3426.11 of the California Civil Code. CUTSA is largely identical to the Uniform Trade Secrets Act. For generally applicable information on trade secrets claims and defenses, see Basics of a Trade Secret Claim and Publishing Trade Secrets.

Like the Uniform Trade Secret Act, CUTSA prohibits "misappropriation" of trade secrets and provides certain remedies. In addition, California law may impose criminal penalties for stealing trade secrets. See Cal. Penal Code §§ 499c, 502.

Definitions

Cal. Civ. Code 3426.1 defines the key terms of CUTSA:

(a) "Improper means" includes theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means. Reverse engineering or independent derivation alone shall not be considered improper means.

(b) "Misappropriation" means:

(1) 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
(2) Disclosure or use of a trade secret of another without express or implied consent by a person who:
(A) Used improper means to acquire knowledge of the trade secret; or
(B) At the time of disclosure or use, knew or had reason to know that his or her knowledge of the trade secret was:
(i) Derived from or through a person who had utilized improper means to acquire it;
(ii) Acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; or
(iii) Derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use; or
(C) 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.

(c) "Person" means a natural person, corporation, business trust, estate, trust, partnership, limited liability company, association, joint venture, government, governmental subdivision or agency, or any other legal or commercial entity.

(d) "Trade secret" means information, including a formula, pattern, compilation, program, device, method, technique, or process, that:

(1) Derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and
(2) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

For generally applicable information on how a trade secrets claim works, see Basics of a Trade Secret Claim.

Remedies

If a court finds that a defendant has misappropriated a plaintiff's trade secret(s), it may impose the following remedies:

  • Injunctive Relief: CUTSA empowers a court to order a defendant to stop violating the plaintiff's rights and to take steps to preserve the secrecy of the plaintiff's information. Cal. Civ. Code § 3426.2 (scroll down). Most importantly, this means that a court has the authority, as far as the law of trade secrets goes, to order you to stop publishing someone's trade secrets if it finds that your publication amounts to misappropriation. The First Amendment to the U.S. Constitution may limit the court's ability to do so, however. For details, see Publishing Trade Secrets.
  • Damages: A court can make a defendant pay money damages to the plaintiff for the economic harm suffered as a result of a trade secret violation. This may include the plaintiff's losses resulting from the misappropriation and the defendant's profits derived from it. If the court determines that the defendant acted willfully or maliciously, it may award the plaintiff punitive damages in an amount up to twice its actual damages. Cal. Civ. Code § 3426.3 (scroll down).
  • Attorneys' Fees: If a plaintiff sues and wins, the court may award attorneys' fees if it finds that the defendant acted willfully or maliciously. On the other hand, if the defendant wins, the court may award attorneys' fees if it finds that the plaintiff acted in bad faith when filing the lawsuit. The court may also award attorneys' fees if a motion to terminate an injunction is made or resisted in bad faith. Cal Civ. Code § 3426.4 (scroll down).

Statute of Limitations

The statute of limitations for a trade secret claim in California is three years. Cal. Civ. Code § 3426.6 (scroll down).

 

 

Last updated on November 13th, 2013

   
 
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