Montana Trade Secret Law

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

Many Montana companies rely on various forms of proprietary information as a core part of their business. They want to protect trade secrets like 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 does Montana law help to safeguard such trade secrets?

In legal terms, information is 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 NDAs in Montana

Before even considering applicable laws, many Montana 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 data security firm in Billings. You have developed certain methods of data mining that give you a competitive advantage, allowing your company to collect more data from the Web 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 Montana

Montana is one of the many states that have adopted the Uniform Trade Secrets Act (UTSA). Montana’s trade secret law can be found at Mont. Code Ann. Secs. 30-14-401 et seq.

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

Montana’s version of the UTSA refers to the theft of trade secrets as misappropriation. Under Montana 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, breach 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.

Montana's "Reason to Know" Standard

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

Penalties for Misappropriation in Montana

Under Montana 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. Or, it may 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 to the trade secret owner.

A victim of trade secret theft can also seek financial compensation. The amount would be based on measuring the actual loss attributed to the theft or the profits (or “unjust enrichment”) acquired by the trade secret thief. Or, as stated in Mont. Code Ann. Sec. 30-14-404, financial damages for the plaintiff against the trade secret thief "may 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." These damages can be measured "by imposition of liability for a reasonable royalty for a misappropriator's unauthorized use of a trade secret. " In other words, the Montana court can determine a reasonable price for a "licensing" royalty that the infringer must pay.

In egregious situations of trade secret theft, a Montana court can award punitive damages up to twice the amount of any award. Attorney fees will also be awarded where the infringement is found to be willful and malicious.

Montana's Statute of Limitations

Under Mont. Code Ann. Sec. 30-14-407, a lawsuit for misappropriation of a trade secret must be brought within three years "after the misappropriation is discovered or by the exercise of reasonable diligence should have been discovered." If you believe that a trade secret was stolen from your company, you should act relatively quickly to retain an attorney who can sue before the limitations period has elapsed.

Federal Law on Trade Secret Theft Also Applies

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