Reprinted from the Jan. 16, 2012, edition of The Review, the Newsletter of the Chamber of Commerce of Southern New Jersey.
When Gov. Chris Christie put pen to paper on Jan. 9 and signed the Trade Secrets Act, New Jersey significantly enhanced protection for trade secret owners in this state.
The new law puts New Jersey in line with 46 other states, the District of Columbia, Puerto Rico and the Virgin Islands in enacting legislation to protect trade secrets legislation. It also marks a tremendous victory for trade secret protection in our state.
Business innovation turns largely on development of proprietary information to gain a competitive advantage. Historically, trade secret protection in New Jersey has been based on case-by-case decisions under common law. The Trade Secrets Act provides trade secret owners with statutory protection – it codifies common law jurisprudence, removes uncertainty, clarifies areas that were subject to wide discretion, and creates uniform requirements and expectations.
Under the common law, there was no one definition of the term "trade secret." The Act clearly defines "trade secret" as information... including a formula, pattern, business data compilation, program, device, method, technique, design, diagram, drawing, invention, plan, procedure, prototype, or process, that derives independent economic value... from not being generally known... " and which is the subject of "reasonable" efforts to maintain secrecy.
The legislation also provides a definition of "misappropriation" – the acquisition, disclosure or use or another's trade secret through "improper means" by someone who knew or had reason to know that the information was a trade secret and was obtained improperly.
It also reduces the statute of limitations on misappropriation claims from the current six years to three years.
Potential penalties for misappropriation include injunctions against use of the trade secret, royalties, compensatory and unjust enrichment damages, punitive damages, and legal costs. Willful and malicious misappropriations can result in punitive damages up to double the actual damages.
Because protecting proprietary information is crucial to maintaining a competitive advantage, companies should have in place comprehensive policies and procedures. The Trade Secrets Act provides an opportunity for companies to take stock of their proprietary information and measures to protect it.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.