As a business owner in the Bayou State, 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 Louisiana?
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:
Perhaps the most common way for Louisiana 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 New Orleans, 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.
Louisiana is one of the many states that have adopted the Uniform Trade Secrets Act (UTSA). Louisiana’s trade secret law can be found at La. Rev. Stat. Ann. Secs. 51:1431 et seq.
The statute defines a trade secret as "information, 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."
Louisiana’s version of the UTSA refers to the theft of trade secrets as misappropriation. Under Louisiana 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 discloses company secrets to a rival.
Louisiana 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 Louisiana company was unaware it possessed purloined trade secrets, it could still be prosecuted under Louisiana law if it should have known.
Under Louisiana 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 can last for as long as necessary "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 will be based on measuring the actual loss attributed to the theft or the profits (or “unjust enrichment”) acquired by the trade secret thief. The trade secret owner "may recover damages for the actual loss caused by misappropriation," which can be proven through evidence and testimony to the court.
In egregious situations, a Louisiana court can award punitive damages, up to twice the amount of any award. Attorney fees will also be awarded in situations where the court finds that the infringement of the trade secret was willful and malicious.
In accordance with La. Rev. Stat. Ann. Sec. 51:1436, a lawsuit for trade secret misappropriation must be filed in court "within three years after the misappropriation is discovered or by the exercise of reasonable diligence should have been discovered." Thus, if you believe that a trade secret was stolen from your company, you should act diligently to retain a lawyer to initiate litigation within the permitted period.
In addition to Louisiana’s rules regarding trade secrets, certain federal rules also apply in Louisiana. 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.