Many New Mexico companies rely on various forms of proprietary information as a core part of their business. They want to protect trade secrets such as 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 do New Mexico's laws help to safeguard such trade secrets?
In legal terms, information is more likely to be considered a trade secret if it is:
Before even considering applicable statutes, many New Mexico 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 manufacturing plant in Santa Fe. You have developed certain production methods that give you a competitive advantage, allowing your company to produce at greater efficiency than other similar plants. 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 your manufacturing process 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 of contract. This threat of litigation is often enough to prevent employees from stealing trade secrets.
Even beyond private NDA agreements, state law can also protect your company's trade secrets. New Mexico is one of the many states that have adopted the Uniform Trade Secrets Act (UTSA). New Mexico’s trade secret law can be found at N.M. Stat. Ann. Secs. 57-3A-1 et seq.
The state's statute defines a trade secret as "information, including 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."
New Mexico’s version of the UTSA refers to the theft of trade secrets as misappropriation. Under New Mexico 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 spills company secrets to a rival.
New Mexico 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 Mexico company was unaware it possessed purloined trade secrets, it can still be prosecuted under New Mexico law if it should have known.
Under New Mexico 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 a 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 of the trade secret on payment of a reasonable royalty.
A victim of trade secret theft can also seek financial compensation. The amount will be based on measuring either the actual loss attributed to the theft or the profits (or “unjust enrichment”) acquired by the trade secret thief. Or, as stated in N.M. Stat. Ann. Sec. 57-3A-4, 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 particularly egregious situations, a New Mexico court can award punitive damages up to twice the amount of any award. Attorney fees can also be awarded by a New Mexico court where trade secret theft is found to be willful and malicious.
Pursuant to N.M. Stat. Ann. Sec. 57-3A-7, any lawsuits 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 your company's trade secrets have been stolen, you should act quickly to retain an attorney, ideally a lawyer with experience in intellectual property law.
In addition to New Mexico’s rules regarding trade secrets, certain federal rules also apply in New Mexico. 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.