What is a “trade secret?” Virginia law provides the answer by statute. A trade secret is defined as:
information, including but not limited to 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, and not being readily ascertainable by proper means by, 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. Virginia Uniform Trade Secrets Act, Va. Code. Ann. § 59.1-336.
Clear as mud right?
Virginia businesses, and their employees, frequently fight over just exactly what constitutes a trade secret. The typical scenario occurs where an ex-employee leaves his or her job and starts working for a direct competitor of the previous employer (or starts their own competitive business) utilizing the experience and knowledge gained from the previous employer. Disputes over just what is a trade secret have occurred with customer or client lists, computer software designs, price lists, engineering designs, contractors’ bidding calculations or processes, copyrighted materials, trademarked materials, and the list goes on…and on…and on.
The crucial characteristic of a trade secret is secrecy rather than novelty. The secrecy need not be absolute; the owner of a trade secret may, without losing protection, disclose to a licensee, an employee, or a stranger, if the disclosure is made in confidence, express or implied. Although the subject of a trade secret may be novel in the sense that it is something generally unknown in the trade or business, novelty, in the patent law sense, is not required for a trade secret.
If your past employer charges you with the misappropriation of trade secrets, the employer has the burden of proving its case. It must prove that the information or process at issue is not generally known within the trade or profession. For example, it must prove that the design of a product could not be obtained by “reverse engineering.” Or, that its list of clients or customers is not readily available on the company’s web site. Whether or not the employee signed a non-compete agreement exists is not a relevant issue.
The bottom line is that employers must prove their case under the statutory guidelines…and that is not always an easy task. Whether or not a trade secret exists is a fact-intensive question to be resolved on a case-by-case basis.