New York law creates civil liability for “misappropriation” of someone else’s trade secret(s). New York’s criminal larceny statute may also impose criminal liability for stealing trade secrets. An action for misappropriation must be brought within 3 years after the misappropriation is discovered.
New York’s courts and statutes refer to the theft of trade secrets as misappropriation. Under New York law, “misappropriation ” refers to the acquisition of a trade secret by someone who knows that the trade secret was acquired by improper means — theft, bribery, misrepresentation, breach or inducement of a breach of duty to maintain secrecy. Under New York law, a trade secret thief can be prevented from disclosure by court order – an injunction. A victim of trade secret theft can also seek financial compensation that measures the actual loss attributed to the theft or the profits (or “unjust enrichment”) acquired by the trade secret thief. In egregious situations, a New York court can award punitive damages.
To successfully recover on a trade secret claim, you must show that:
1. Prove You Have Qualifying Subject Matter (That Your Information is a Protectable Trade Secret)
Trade secrets in New York are defined as follows: “A trade secret consists of a formula, process, device, or compilation which one uses in his business and which gives him an opportunity to obtain an advantage over competitors who do not know or use it.” Information is more likely to be considered a trade secret in New York if it is:
• not known outside of the particular business entity
• known only by employees and others involved in the business
• subject to reasonable measures to guard the secrecy of the information
• valuable, and
• difficult for others to properly acquire or independently duplicate
2. Reasonable Precautions to Prevent Disclosure
The second element that must be established by the plaintiff in a trade secret case is that the holder of the trade secret took reasonable precautions under the circumstances to prevent its disclosure. No one may let information about products and operations flow freely to competitors and then later claim that the competitors acquired the information wrongly. To establish the right to sue later, one must be consistently diligent in protecting information.
Secrecy is not lost by communicating a trade secret to employees involved in its use or to others pledged to secrecy. Similarly, secrecy is not lost merely because others have discovered the subject matter independently and are keeping it secret. By negative implication, however, independent discovery followed by publicity negates the secrecy element. Trade secret owners regularly are deprived of their claimed trade secrets because the defendant proves they have been lax with respect to secrecy. Carelessness can destroy the secrecy required.
Finally, a trade secret plaintiff must also prove that the defendant wrongfully acquired, or misappropriated, the trade secret. Just because a person’s information is valuable does not make it wrong for others to use or disclose it. Acquisition or use of a trade secret is illegal only in two basic situations: where it was done through improper means, or where it involves a breach of confidence.