Protecting Your Trade Secrets: Confidentiality Agreements Can't Transform Generally Known Information Into Trade Secrets
Louisiana’s Uniform Trade Secrets Act prevents a person or business from profiting from a trade secret developed by another. The threshold question in every trade secret dispute is whether a legally protectable trade secret actually exists. What information is considered a legally protectable trade secret?
The Operative definition appears in La. R.S. 51:1431(4). It provides:
(4) “Trade secret” means information, including a formula, pattern, compilation, program, device, method, technique, or process, that:
(a) 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
(b) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
Businesses often use confidentiality agreements executed by employees to protect sensitive or trade secret information. Information that is generally known, however, is not considered a trade secret. Moreover, confidentiality agreements cannot transform generally known information into a trade secret.
How should businesses protect their sensitive trade secret information? First make sure that reasonable efforts have been taken to maintain the secrecy of that information, so it qualifies as a trade secret. Is it limited to “need to know” employees? Is it withheld from the general public? As an example, distributing price sheets to customers eliminates any trade secret protection regarding pricing. Additionally, readily ascertainable information is not subject to trade secret protection.
If your information qualifies as a trade secret subject to protection under Louisiana law, misappropriation of such information is actionable. What qualifies as misappropriation? Misappropriation includes the acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means. It also includes the disclosure or use of a trade secret of another without express or implied consent to do so.
How long do you have to file suit for misappropriation? According to Louisiana law, an action for misappropriation must be brought within three years after the misappropriation is discovered or by the exercise of reasonable diligence should have been discovered.
In the competitive marketplace, it is critical for Louisiana businesses to protect their sensitive, trade secret information. Today’s efforts to maintain trade secret protection for your sensitive information will prove critical in later alleging misappropriation of your company’s most important information.