West Virginia Trade Secret Law

More types of businesses than one might think have trade secrets they want to protect. Trade secrets often comprise customer lists, sensitive marketing information, inventions that do not qualify for patent protection, software, formulas and recipes, techniques, processes, and other business information that provides a company with a business edge.

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.

A common way for a business to try to protect its trade secrets is by having employees sign nondisclosure agreements (NDAs).

What West Virginia Law Says About Stealing Trade Secrets (Misappropriation)

West Virginia is one of the many states that have adopted the Uniform Trade Secrets Act. West Virginia’s trade secret law can be found at W. Va. Code. Sec. 47-22-1 et seq. The statute defines a trade secret as "information, including, but not limited to, 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."

West Virginia’s version of the Uniform Trade Secrets Act refers to the theft of trade secrets as misappropriation. Under West Virginia law, "misappropriation" refers to 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 spills company secrets to a rival.

Under the statute, a business that believes that its trade secret has been stolen can seek both injunctive relief and money damages from the person who stole it.

The "Reason to Know" Standard

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

Penalties for Misappropriation of Trade Secrets in West Virginia

Under West Virginia 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 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 bad that the court order would be 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. In egregious situations, a West Virginia court can award punitive damages up to twice the amount of any award. Attorney fees will also be awarded in egregious (willful and malicious) situations or if a claim is brought in bad faith.

Statute of Limitations for Misappropriation of Trade Secrets

An action for misappropriation must be brought in West Virginia within three years after the misappropriation is discovered or by the exercise of reasonable diligence should have been discovered.

Federal Law on Trade Secrets

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