Many Massachusetts companies rely on various forms of proprietary information as a core part of their business. They want to protect trade secrets such as their customer lists, sensitive marketing information, non-patented inventions, software, formulas and recipes, techniques, processes, and other knowledge that gives them a business edge. How do the Commonwealth's laws help to safeguard such trade secrets?
In legal terms, information is more likely to be considered a trade secret if it is:
Before even considering applicable statutes, many Massachusetts 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 employer to any future employer.
For example, imagine that you own a manufacturing plant in Boston. You have developed certain production methods that give you a competitive advantage, allowing your company to produce at greater efficiency than other similar plants. 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 your manufacturing process 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 of contract. This threat of litigation is often enough to prevent employees from stealing trade secrets.
Massachusetts is one of just a few states that has not yet adopted the Uniform Trade Secrets Act (UTSA). However, a bill proposing the adoption of the UTSA has been proposed in the state legislature. Currently, however, the Commonwealth employs its own trade secret legislation, which can be found at Mass. Gen. Laws Ann. ch. 93, § 42-42A.
The state's definition of a trade secret, found at Mass. Gen. Laws Ann. ch. 266, §30, is "anything tangible or intangible or electronically kept or stored, which constitutes, represents, evidences or records a secret scientific, technical, merchandising, production or management information, design, process, procedure, formula, invention or improvement."
Massachusetts’s courts and statutes refer to the theft of trade secrets as misappropriation. Under Massachusetts law, "misappropriation" means the acquisition of a trade secret by someone who knows that the trade secret was acquired by improper means, such as theft, bribery, misrepresentation, breach or inducement of a breach of duty to maintain secrecy.
The law states that: "Whoever embezzles, steals or unlawfully takes, carries away, conceals, or copies, or by fraud or by deception obtains, from any person or corporation, with intent to convert to his own use, any trade secret, regardless of value, shall be liable in tort to such person or corporation for all damages resulting therefrom."
Under Massachusetts 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.
A victim of trade secret theft can also seek financial compensation. The amount awarded will be based on measuring the actual loss attributed to the theft or the profits (or “unjust enrichment”) acquired by the trade secret thief. In egregious situations, a Massachusetts court "in its discretion, may increase the damages up to double the amount found." Attorney fees will also be awarded in egregious situations.
An action for misappropriation must be brought within three years after the misappropriation is discovered (or within four years if brought under Chapter 93A, § 11 of the state Consumer Protection Act). This means that you should act fairly quickly to retain an attorney if you believe that a trade secret was stolen from your company.
In addition to Massachusetts’s rules regarding trade secrets, certain federal rules also apply in Massachusetts. 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.