Indiana Trade Secret Law

How does Indiana law protect your company's trade secrets?

As a business owner in Indiana, you likely rely on several forms of intellectual property, including any copyright, trademark, or patent rights. Another important form of intellectual property is trade secrets. What laws protect your business's trade secrets in Indiana?

What Are Trade Secrets?

Trade secrets are a common and important form of intellectual property for businesses of all sizes. Trade secrets commonly include customer lists, sensitive marketing information, non-patented inventions, software, formulas and recipes, techniques, processes, and other business information that provides a company with a competitive advantage. 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.

Protecting Trade Secrets Using Nondisclosure Agreements

Perhaps the most common way for Indiana businesses to protect their trade secrets is by having employees sign nondisclosure agreements (NDAs), which are enforceable in this state (but not in all states). These are written contracts between employers and employees that attempt to prevent the employee from disclosing confidential information after leaving the company.

For example, if you own a computer chip manufacturing plant in Indianapolis, an NDA with an employee could prevent that person from disclosing your methods of production to a future employer for a certain period of time. The employee knows that if he or she discloses your proprietary chip manufacturing process, or misappropriates it in some fashion, your business will be able to sue for breach of the NDA.

Misappropriation of Trade Secrets in Indiana

Indiana is one of the many states that have adopted the Uniform Trade Secrets Act (UTSA). Indiana’s trade secret law can be found at Ind. Code. Ann. Secs. 24-3-2 et seq.

The statute defines a trade secret as "information, including a formula, pattern, compilation, program, device, method, technique, or process, 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."

Indiana’s version of the UTSA refers to the theft of trade secrets as misappropriation. Under Indiana 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 reveals company secrets to a rival.

Indiana's "Reason to Know" Standard

Indiana 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 Indiana company was unaware it possessed purloined trade secrets, it can still be prosecuted under Indiana law if it should have known.

Penalties for Misappropriation in Indiana

Under Indiana 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 continue for as long as necessary to eliminate any commercial advantage that otherwise would be derived from the misappropriation. In exceptional circumstances, a court may "condition future use upon payment of a reasonable royalty" to the trade secret owner.

Beyond 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.

Under Ind. Code. Ann. Sec. 24-2-3-4, a plaintiff "may recover damages for the actual loss caused by misappropriation." In egregious situations, a Indiana court can award punitive damages, up to twice the amount of any award. Attorney fees will also be awarded in cases where the court determines that the infringement was willful and malicious.

Indiana's Statute of Limitations

Under Ind. Code. Ann. Sec. 24-2-3-7, a lawsuit for trade secret misappropriation must be brought within three years "after the misappropriation is discovered or by the exercise of reasonable diligence should have been discovered." As a result, you should act quickly to retain counsel if you believe that a trade secret has been stolen from your company.

Federal Law on Trade Secrets

In addition to Indiana’s rules regarding trade secrets, certain federal rules also apply in Indiana. 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 Uniform Trade Secrets Act.

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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