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1. Introduction
Trade secrets are protected by state law through California’s adoption of the Uniform Trade Secrets Act ("UTSA"), found at Section 3426 of the Code of Civil Procedure, in 1984. Under the UTSA, trade secrets are defined as any information that has independent actual or potential economic value from not being generally known or readily ascertainable by proper means and is the subject of reasonable efforts to maintain its secrecy. In general trade secrets include patentable inventions, including pending patents, and other categories of information which may or may not be patentable and which go far beyond the general concept of "inventions." These other categories include know- how (such as manufacturing techniques, processes, formulas and programs), business information (including new product information, business methods and transactions, marketing plans, sources of supply, customer lists, the knowledge of a particular customer's needs), and ideas (including industrial and commercial ideas).
2. Disclosure/Misappropriation
Because a trade secret can lose all of its value once it is freely disclosed to the public, it is extremely important that such information only be released under written conditions of confidentiality. Visitors to your manufacturing facilities should not be allowed to receive proprietary information without first signing a written agreement that any such information which they receive will be retained as confidential. All drawings and other documents which are sent outside of the company and which contain proprietary information should bear a legend notifying the recipient that the information is confidential and is not to be disclosed without prior permission of the owner.
Misappropriation of trade secrets occurs when someone uses improper means of obtaining or using a trade secret. As an example, a person misappropriates a trade secret when they acquire it from another person (such as an employee or former employee of the company) when they knew or had reason to know the person was under an obligation to maintain the secrecy of the trade secret or that it was obtained by improper means. Liability can also arise when a person discloses or uses a trade secret without the owner's consent. Employees who learn trade secrets during the course of their employment are legally required to maintain the confidentiality of the trade secret even after they are no longer employed by the company. Trade secret misappropriation can subject the guilty party to an injunction (an order to cease using or disclosing the trade secret) and economic damages resulting from loss of the trade secret. When the misappropriation is willful and malicious, the court can award double damages and attorney’s fees. In addition, trade secret misappropriation can subject a person to criminal liability.
Employees who come to work for your company from another company cannot disclose or use any of the previous employer’s trade secrets or other confidential information while an employed by your company. As set forth above, this information includes customer lists and buying preferences, new product information and information concerning proprietary manufacturing processes. However, an employee of yours is free to utilize general skills and knowledge that he or she acquired while employed by another company. In addition, a person who has personally developed relationships with customers while formerly employed by another company can continue those relationships. Likewise, an employee of yours can utilize customer information that is generally known or easily ascertainable through public sources. General engineering principles, publically known mathematical models and other matters of public knowledge, no matter where acquired, can be freely utilized.
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