Connecticut Trade Secret Law

Connecticut is one of the many states that have adopted the Uniform Trade Secrets Act (UTSA).

As a business owner in the Nutmeg State, your company may rely on various forms of proprietary information, sometimes developed over many years. Connecticut businesses want to protect trade secrets like customer lists, sensitive marketing information, non-patented inventions, software, formulas and recipes, techniques, processes, and other knowledge that gives your company a business edge. In legal terms, information is more likely to be considered a trade secret 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.
Trade secrets are extremely valuable to businesses. Their theft can severely impact a company's competitiveness in the marketplace. How does Connecticut law help to safeguard such trade secrets?

Protecting Trade Secrets Using NDAs

Before even considering applicable statutes, many Connecticut businesses will attempt to protect their trade secrets by the use of nondisclosure agreements (NDAs). NDAs are essentially private contracts in which the employee promises not to disclose certain information learned while working for the current (or eventually, prior) employer to any future employer.

For example, imagine that you own a manufacturing plant in New Haven. You have developed certain methods of production that give you a competitive advantage, allowing your company to produce products more efficiently than other, similar businesses. You require that your employees sign an NDA so that if they leave for a competitor, they are contractually obligated to not share the information about data mining that they learned while working for you.

If you believe that an employee has violated the obligations described under the NDA, you can sue for breach. This threat of litigation is often enough to prevent employees from stealing trade secrets.

Misappropriation of Trade Secrets in Connecticut

Connecticut is one of the many states that have adopted the Uniform Trade Secrets Act (UTSA). Connecticut’s trade secret law can be found at Conn. Genl. Stat. Secs.35-50 et seq.

Connecticut’s version of the UTSA has a broader definition of trade secrets than some states, and specifically includes drawings, cost data, and customer lists.

The statute defines trade secrets as "information, including a formula, pattern, compilation, program, device, method, technique, process, drawing, cost data or customer list that: (1) 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 (2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy."

Connecticut’s version of the UTSA refers to the theft of trade secrets as misappropriation. Under Connecticut law, "misappropriation" means the acquisition of a trade secret by someone who knows or has reason to know that the trade secret was acquired by improper means, such as theft, bribery, misrepresentation, or breach of or inducement of a breach of duty to maintain secrecy.

It also includes the disclosure or use of a trade secret without consent by someone who used improper means to acquire knowledge of the trade secret, for example, an ex-employee who spills company secrets to a rival. In Connecticut, unlike some states, “improper means” also includes searching through someone’s trash.

Connecticut's "Reason to Know" Standard

Connecticut prohibits use of trade secrets by a company that has “has reason to know” that the material constitutes a trade secret. This is known as constructive knowledge (versus actual knowledge). In other words, even if a Connecticut company was unaware it possessed purloined trade secrets, it can still be prosecuted under Connecticut law if it should have known.

Penalties for Misappropriation of Trade Secrets in Connecticut

Under Connecticut law, a trade secret thief can be prevented from disclosure by court order, known as an injunction. This is true for both actual or threatened misappropriation. The injunction may be terminated when the trade secret has ceased to exist, but the injunction may also be continued for an additional reasonable period of time in order to eliminate any commercial advantage that otherwise would be derived from the misappropriation.

In exceptional circumstances, an injunction may condition future use upon payment of a reasonable royalty for no longer than the period of time for which use could have been prohibited. Exceptional circumstances can a theft that is so serious that the court order would be rendered meaningless.

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. Under Conn. Genl. Stat. Sec. 35-53, a plaintiff "may recover for the unjust enrichment caused by misappropriation that is not taken into account in computing damages for actual loss." In egregious situations, where there is malicious and willful intent to misappropriate a trade secret, a Connecticut court can award punitive damages up to twice the amount of any award.

Connecticut Statute of Limitations for Bringing Suit Over Trade Secret Theft

Pursuant to Conn. Genl. Stat. Sec. 35-56, any action for trade secret misappropriation must be brought "within three years from the date the misappropriation is discovered or by the exercise of reasonable diligence should have been discovered."

In other words, if you believe that your company's trade secret has been misappropriated, you should act quickly to retain an attorney in order to file a lawsuit. If you delay too long, you may find your action time-barred.

Federal Law Regarding Trade Secret Theft

In addition to Connecticut’s rules regarding trade secrets, certain federal rules also apply in Connecticut. The Economic Espionage Act of 1996 makes the theft of trade secrets a federal crime. The Act prohibits the theft of a trade secret by a person intending or knowing that the offense will injure a trade secret owner. The Act also makes it a federal crime to receive, buy, or possess trade secret information knowing it to have been stolen. The Act’s definition of “trade secret” is similar to that of the UTSA. The penalties for a violation of this statute include a potential prison term of 15 years and fines up to $5 million, depending on whether the defendant is an individual or a corporation. A private party can still sue for trade secret theft even if the federal government files a criminal case under the Economic Espionage Act.

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