Ohio Trade Secret Law

As a business owner in the Buckeye 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 Ohio, what laws protect your business's trade secrets?

Defining Trade Secrets

Trade secrets often comprise 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:

  • 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.

Protecting Trade Secrets with Nondisclosure Agreements

A common way for Ohio 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 Cleveland, 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.

Misappropriation of Trade Secrets in Ohio

Ohio is one of the many states that have adopted the Uniform Trade Secrets Act (UTSA). Ohio’s trade secret law can be found at R.C. Secs. 1333.61 et seq.

The statute defines a trade secret as "information, including the whole or any portion or phase of any scientific or technical information, design, process, procedure, formula, pattern, compilation, program, device, method, technique, or improvement, or any business information or plans, financial information, or listing of names, addresses, or telephone numbers, that satisfies both of the following: (1) It 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) It is the subject of efforts that are reasonable under the circumstances to maintain its secrecy."

Ohio’s version of the UTSA refers to the theft of trade secrets as misappropriation. Under Ohio law, "misappropriation" means the acquisition of a trade secret by someone who knows or has reason to know that the trade secret was gotten 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.

Ohio's "Reason to Know" Standard

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

Penalties for Misappropriation in Ohio

Under Ohio law, a trade secret thief can be prevented from disclosure by court order, known as an injunction. Under R.C. Sec. 1333.62, 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 serious 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. The statute provides that "Damages may 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 Ohio 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.

Ohio's Statute Of Limitations

Pursuant to R.C. Sec. 1333.66, an action for misappropriation must be commenced "within four years after the misappropriation is discovered or by the exercise of reasonable diligence should have been discovered." Consequently, if you discover that your company's trade secrets are being misappropriated, you should act diligently to retain an attorney to file your litigation. Otherwise, you might find yourself time-barred.

Federal Law on Trade Secrets

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