As noted last week, this blog is running a six-part series on Virginia business litigation claims. This week, the featured Virginia business litigation claim is misappropriation of trade secrets.
In light of the mobility of employees in today’s workforce, businesses face the arduous task of protecting their confidential and proprietary information. In Northern Virginia, through which technology companies of all sizes adorn the Dulles Technology Corridor, the issue of employee theft of trade secrets is one that routinely crosses an attorney's desk. Fortunately for Virginia businesses, the Virginia Uniform Trade Secrets Act provides an avenue of recourse to avenge an employee’s theft of a company’s trade secrets.
What is a “trade secret” under Virginia Law?
Although most people associate the term “trade secret” with technology or intellectual property, a trade secret can be as simple as a company’s customer list, pricing data, or marketing strategy. (The Trade Secrets Act provides that a trade secret can be a “formula, pattern, compilation, program, device, method, technique, or process.”) Under Virginia law, the determination as to whether a company’s information constitutes a trade secret is not based on the type of information at issue. The key is whether the information derives independent economic value (actual or potential) from being unknown and not readily available to someone who can obtain economic value from the use or disclosure of the information. Additionally, the company must take reasonable efforts to maintain the secrecy of the information.
A classic example of a trade secret is the formula for Coca-Cola. The formula has economic value because it is unknown and not available (i.e., if the formula were known, then anyone could make and sell Coca-Cola). And, Coca-Cola takes reasonable steps to keep its prized formula a secret. (According to urban legend, two executives know half of the formula but no one in the company knows the entire formula.)
What does it take to succeed on a trade secrets claim in Virginia?
To succeed on a trade secrets claim in Virginia, a company must not only prove in court that its information is, in fact, a trade secret, the company must also show that its trade secret was misappropriated. Generally, under the Trade Secrets Act, a misappropriation can occur through the acquisition, disclosure or use of a trade secret.
What damages are available for misappropriation of a trade secret?
If misappropriation of a trade secret is proven, the company can get an injunction to prevent its trade secret from being used or disclosed. Additionally, the company can recover damages for the actual loss caused by the misappropriation or for the unjust enrichment caused by the misappropriation. If the company can prove that the misappropriation was willful and malicious, it can also receive punitive damages (up to twice the amount of damages for actual loss and unjust enrichment).
It is important to note that misappropriation of trade secrets cases are often brought not only against the former employee who took the trade secrets but also against the company who hired the employee and may have benefited from use of the trade secret. The addition of a company defendant typically ensures a deep pocket from which a judgment can be collected.
Stay tuned for Part 2 of the Virginia business litigation claims series, which will focus on breach of non-compete agreements.