[BreachExchange] What is the Punishment for Trade Secret Theft?

[Audrey McNeil]

http://www.wisegeek.com/what-is-the-punishment-for-trade-secret-theft.htm

Trade secrets can be one of the most ambiguous intellectual property rights
to protect and enforce. Unlike trademarks, copyrights, and patents, trade
secrets cannot generally be registered or preemptively protected. Most laws
set out definitions of what kinds of information constitute trade secrets,
but there is not usually such a thing as a “registered trade secret.” In
practice, this often means that it can be harder to prosecute misuse of
trade secrets, though misuse is punished almost everywhere. Penalties for
trade secret theft vary by jurisdiction, but typically range from monetary
damages and profit disgorgement to information surrender and sometimes even
jail time.

The crime of trade secret theft, often also called trade secret
misappropriation, occurs when someone knowingly accesses and uses the
protected information of another. Local statutes define what “protected
information” qualifies as a trade secret, but common examples include
business plans, sales models, marketing strategies, and sometimes even
customer lists. Any proprietary information that helps a person or company
do business, or any data that is crucial to how an operation works, often
falls under the definition of a trade secret.

Proving trade secret theft is often the hardest part of recouping damages.
Owning information that qualifies as a trade secret is a start, but that in
and of itself is not usually enough to bring a trade secret theft lawsuit.
In order to punish an alleged trade secret thief, a court must be convinced
not only that trade secret-worthy information existed, but also that it was
intentionally taken by another for some malicious purpose.

Judges usually look to trade secret statutes in order to make this
assessment. In the United States, the law of trade secrets is codified at
the state level. Nearly all of the states have codified versions of a model
trade secrets law known as the “Uniform Trade Secrets Act,” or UTSA. The
UTSA proscribes a standard definition of trade secret and offers a set of
recommended penalties for trade secret theft. Neither the UK nor Canada has
any official statutory protections against trade secret theft, although
each of those countries has an active body of precedential case law that
judges apply when considering trade secret cases.

Most of the time, penalties for trade secret theft concern money. Those who
are found liable for trade secret theft are often required to surrender any
money they made by using the trade secret. They usually must also
compensate the trade secret owner for lost profits and damaged image caused
by the misappropriation. Sometimes, courts will order trade secret thieves
to pay additional money as a penalty for the crime. These kinds of awards
are known as punitive damages.

Not all punishments are monetary, however. If the alleged trade secret
theft was by an employee against either a present or past employer, he or
she may be fired. Similarly, if that employee had signed a confidentiality
or non-compete agreement, he or she may be punished for breach of contract
and unfair competition. If the trade secret theft involved fraud, either in
the theft itself or in the later use of the stolen information, jail time
is also usually a possibility in most places.
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