Minnesota Trade Secret Law

Minnesota is one of many states that have adopted the Uniform Trade Secrets Act.

As a business owner in the Land of 10,000 Lakes, you probably rely on many forms of intellectual property law to protect your company. These might include copyright, trademark, and patent law. Another important form of intellectual property is trade secrets. What laws protect your business's trade secrets in Minnesota?

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 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.

Protecting Trade Secrets with Nondisclosure Agreements

Perhaps the most common way for Minnesota businesses to protect their trade secrets is by having employees sign nondisclosure agreements (NDAs), which are enforceable in this state (but not 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 Minneapolis, 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 Minnesota

Minnesota is one of the many states that have adopted the Uniform Trade Secrets Act (UTSA). Minnesota’s trade secret law can be found at Minn. Stat Ann. Secs. 325C.01 et seq.

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

The statute further notes that the existence of a trade secret "is not negated merely because an employee or other person has acquired the trade secret without express or specific notice that it is a trade secret if, under all the circumstances, the employee or other person knows or has reason to know that the owner intends or expects the secrecy of the type of information comprising the trade secret to be maintained." In other words, someone does not have to be first warned that particular information is a "trade secret" for Minnesota courts to still characterize the information as a "trade secret" capable of being misappropriated.

Minnesota’s version of the UTSA refers to the theft of trade secrets as misappropriation. Under Minnesota 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.

Minnesota's "Reason to Know" Standard

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

Penalties for Misappropriation in Minnesota

Under Minnesota 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 continued for an additional reasonable period of time in order to eliminate 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.

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 Minn. Stat. Code Ann. 325C.03, damages "can include both the actual loss caused by misappropriation and the unjust enrichment caused by misappropriation that is not taken into account in computing actual loss."

In egregious situations, a Minnesota court can award punitive damages up to twice the amount of any award. Attorney fees will also be awarded in situations where the court determines that the infringement was willful and malicious.

Minnesota's Statute of Limitations

According to Minn. Stat. Code Ann. 325C.06, an action for misappropriation must be brought "within three years after the misappropriation is discovered or by the exercise of reasonable diligence should have been discovered." Thus, if you believe that your company's trade secrets were stolen by a third-party, you should act relatively quickly to retain a lawyer and potentially file suit.

Federal Law on Trade Secrets

In addition to Minnesota’s rules regarding trade secrets, certain federal rules also apply in Minnesota. 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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