As a business owner in the Granite State, you probably rely on many forms of intellectual property law to protect your company. These might include laws concerning copyright, trademark, and patent. Another important form of intellectual property is trade secrets. In New Hampshire, what laws protect your business's trade secrets?
Trade secrets are typically considered to 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.
Information is more likely to be considered a trade secret if it is:
A common way for New Hampshire businesses to protect their trade secrets is by having employees sign nondisclosure agreements (NDAs). 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 software company in Manchester, an NDA with an employee could prevent that person from disclosing your proprietary code to a future employer, for a certain period of time. The employee knows that if he or she discloses the code, or misappropriates it in some fashion, your business will be able to sue for breach of the NDA.
New Hampshire is one of the many states that have adopted the Uniform Trade Secrets Act (UTSA). New Hampshire’s trade secret law can be found at N.H. R.S.A. Secs. 350-B:1 et seq.
New Hampshire's statute defines trade secrets 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."
New Hampshire’s version of the UTSA refers to the theft of trade secrets as misappropriation. Under New Hampshire 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 gives company secrets to a rival.
New Hampshire 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 New Hampshire company was unaware it possessed purloined trade secrets, it can still be prosecuted under New Hampshire law if it should have known.
Under New Hampshire 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 continue for as long as necessary 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.
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 N.H. R.S.A. Sec. 350-B:3, financial 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 New Hampshire court can award punitive damages up to twice the amount of any award. Attorney fees will also be awarded where a court determines that the infringement was willful and malicious.
According to the terms of N.H. R.S.A. Sec. 350-B:6, a lawsuit for trade secret infringement must be brought within three years "after the misappropriation is discovered or by the exercise of reasonable diligence should have been discovered." In other words, if you believe that your company has been the victim of trade secret theft, you should act quickly to retain an attorney in order to review the matter and possibly to initiate litigation.
In addition to New Hampshire’s rules regarding trade secrets, certain federal rules also apply in New Hampshire. 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.