Guarding the Formula: Protecting trade secrets in Oregon

Every entrepreneur or business person dreams of discovering and developing the process, formula or device, that will set them apart from their competitors. Whether it is the legendary formula for Coca Cola or a galvanizing process for steel, specialized and secret knowledge is the proverbial royal treasure.

So, it is nothing short of a major setback for a company when an ex-employee elects to take and/or use the company's trade secrets after leaving its employ. Thankfully, however, a company may have legal options available in Oregon when a former employee illegally uses its trade secrets.

What is a Trade Secret?

Under the Oregon Uniform Trade Secrets Act (ORS 646.461) a Trade Secret is defined as:

Trade secret means information, including a drawing, cost data, customer list, formula, pattern, compilation, program, device, method, technique or process that:

(a) Derives independent economic value, actual or potential, from not being generally known to the public or to 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.

These two elements are among the most litigated issues arising from departing employees and key personnel. Whether the information has independent value, and whether the company has taken steps to protect the information are questions for the jury, the determination of which, will dictate the outcome in any subsequent proceeding. Should a court find the information has not been protected, or has no "independent value", the question of the financial impact, or the employees conduct in taking it, becomes moot.

Relief for trade secret misappropriation

As noted above, in Oregon, disputes related to trade secret misappropriation are typically governed by Oregon Uniform Trades Secrets Act . Under OUTSA, companies are expressly permitted to pursue several legal remedies when their trade secrets are stolen by ex-employees - or by anyone else for that matter.

For instance, victims of trade secret misappropriation may be entitled to recover monetary damages, which can include both the actual loss attributed to the misappropriation plus any unjust enrichment. In addition, if the misappropriation is found to be willful or malicious, Oregon law allows a victim to seek punitive damages. Importantly, if punitive damages are awarded, they can be as much as twice the amount of actual damages.

Alternatively, a victim may be able to obtain an injunction stopping any actual, or threatened, misappropriation. While this injunctive relief can be vacated if a trade secret no longer exists - such as the information becoming public - it can continue for an additional period of time under Oregon law so as to "eliminate commercial advantage that otherwise would be derived from the misappropriation."

Oregon companies must be proactive in protecting their secrets

Relief under OUSA requires compliance with its provisions regarding protection of sensitive information. For instance, in order for relief to be available under OUTSA, a company must make reasonable efforts to maintain the secrecy of its trade secret. If a company fails to take reasonable steps, the trade secret may lose protection under the law since it will no longer be considered, by definition, a trade secret.

Also, once a company discovers, or should have discovered, misappropriation by an ex-employee, it only has three years to file suit, after which time the claim may be forfeit.

Ultimately, there are many things that a company must consider when attempting to protect its trade secrets, which is why it is best to consult with an experienced attorney if any issues related to trade secret misappropriation arise. A skilled attorney can help by fully explaining your rights and options, including whether any additional claims may exist for breach of an employee-signed confidentially or trade secret agreement.