California Uniform Trade Secrets Acts Preempts State Common Law Claims

Friday, 10 April 2009 08:10

Trade Secrets & Proprietary Information

The lower court dismissed three common law causes of action: breach of confidence, tortuous interference with contract, and unfair competition on the ground that CUTSA preempts common law claims based on the same set of facts as a trade secret claim.

CUTSA, California Civil Code section 3426, et seq., defines “misappropriation”, “trade secret”, and “damages”, among other things. The Court of Appeals held that the eleven provisions of CUTSA:

1. “suggests a legislative intent to preempt the common law” and
2. “occupies the field in California” as to common law claims for trade secret misappropriation claims.

However, CUTSA does not affect other common law claims not based on trade secret misappropriation.

The Court also held that the determination of whether a claim is based on trade secret misappropriation is largely factual. K.C. Multimedia alleged the same conduct for each common law claim as it alleged for its misappropriation of trade secrets claim. Accordingly, CUTSA preempts the common law claims because they were based on the same set of facts as the trade secret misappropriation claims.

Employers bringing claims against former employees and third parties for claims of breach of confidence, interference with contract, unfair competition and other employment related torts may have their claims preempted and their theory of recovery and remedies limited to those available by CUTSA.

COUNSEL TO MANAGEMENT:

It is imperative for employers to protect their trade secrets from competitors. Employers may decrease their potential exposure of their trade secrets by doing the following:

· Clearly mark documents containing a trade secret;
· Include a trade secret provision in the employee handbook that includes an explanation of how an employee may use a trade secret;
· Limit access to the trade secret information;
· Have all employees, contractors, and other third parties sign non-disclosure agreements prior to granting them access to the trade secret; and
· Isolate and protect the trade secret.

The goal of this article is to provide employers with current labor and employment law information. The contents should not be interpreted or construed as legal advice or opinion. For individual responses to questions or concerns regarding any given situation, the reader should consult with The Saqui Law Group at (831) 443-7100 in Salinas.