In order for Maryland businesses to remain competitive, they often rely on trade secrets. Trade secrets usually comprise things like 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. Learn more about the basics of trade secrets. Each state's laws on this form of intellectual property are slightly different. If you run a business in Maryland, how does state law protect the trade secrets that you have developed?
Information is more likely to be considered a trade secret in Maryland if it is:
Employers often protect trade secrets through nondisclosure agreements (NDAs). NDAs are private contracts between an employer and employee in which the employee covenants not to disclose information learned over the course of employment after leaving the company. NDAs frequently also include non-solicitation agreements, preventing the employee from attempting to solicit other employees or clients to leave the company.
If the employee violates the agreement, the employer can sue. These are an important mechanism for protecting trade secrets privately.
Maryland also has legislation to help protect trade secrets. Maryland is one of the many states that have adopted the Uniform Trade Secrets Act (UTSA). Maryland’s trade secret law can be found at Md. Com. L. Code Secs. 11-1201 et seq.
Maryland’s version of the UTSA refers to the theft of trade secrets as misappropriation. Under Maryland law, "misappropriation" is 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.
Maryland 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 Maryland company was unaware it possessed purloined trade secrets, it can still be prosecuted under Maryland law if it should have known.
Under Maryland 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 would be a theft that is so severe 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 Maryland court can award punitive damages up to twice the amount of any award. Attorney fees will also be awarded by the Maryland court in egregious (willful and malicious) situations or if a claim is brought in bad faith.
An action for misappropriation must be brought to court in Maryland within three years after the misappropriation is discovered or by the exercise of reasonable diligence should have been discovered. This deadline is known as the statute of limitations, and should encourage you to act quickly if you believe that your trade secret was stolen.
In addition to Maryland’s rules regarding trade secrets, certain federal rules also apply in Maryland.
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.