Trade Secret

Trade Secret Protection

McLaughlin & Nardi’s  attorneys help New Jersey businesses protect their confidential and proprietary information from misappropriation and misuse.  Our lawyers also help businesses and employers negotiate and draft restrictive covenants giving the use and disclosure of trade secrets.


Trade Secret Protection: The New Jersey Trade Secrets Act

 McLaughlin & Nardi’s business lawyers counsel businesses on protecting their trade secrets, and use the New Jersey Trade Secrets Act of 2012 and New Jersey’s common law to fight for the rights of businesses whose trade secrets have been misappropriated.

New Jersey courts had always afforded a limited level of protections to businesses’ trade secrets.  However, in 2012, the Legislature expanded these protections when it enacted the New Jersey Trade Secrets Act.  New Jersey’s law is modeled after the Uniform Trade Secret Act.  While the vast majority of states have adopted the Uniform Trade Secret Act (only New York, Massachusetts and Texas have not), New Jersey’s law provides greater protections.  The Federal Economic Espionage Act of 1996, also prohibits stealing trade secrets.

A trade secret can be any information, design, prototype, invention, formula, program, technique, pattern, business data compilation, device, diagram, drawing, plan, prototype or process which is secret, and gives a business an advantage over its competitors which do not have the trade secret.  One of the most closely guarded trade secrets is customer lists.

No person or business may disclose or use a misappropriated a trade secret without the consent of its owner.  “Misappropriation” can be a hazy concept, but it means acquiring trade secrets by "improper means."  The New Jersey Trade Secrets Act list some examples of what constitutes "improper means,” such as obtaining the trade secret through bribery, theft, misrepresentation, breaching a duty of secrecy, or inducing someone else (such as a former employee or contractor) to break their confidentiality obligations. Electronic or other types of business espionage also constitutes “misappropriation” under the New Jersey Trade Secrets Act. 

Unlike a patent, a trade secret is protected as long as it is still a secret, provided the company makes reasonable efforts to keep it secret.  Once it enters the public domain, it is no longer a trade secret.  However, if the trade secret was stolen or misappropriated, the New Jersey Trade Secrets Act gives the owner significant remedies.  It is, however, legal for a company to “reverse engineer” a trade secret from publicly available information.


Remedies

The New Jersey Trade Secrets Act protects against both actual or threatened misappropriation of trade secrets, and provide potential remedies for violations.
  • Courts may award monetary damages to compensate for the actual loss suffered by the owner of the trade secret, and also for whatever unjust enrichment the person or business gained by the misappropriation.
  • Courts may order “injunctive relief,” such as a restraining order, to stop actual or threatened misappropriation of a trade secret.
  • Courts may make payment of a reasonable royalty a condition of future use of the trade secret.
  • If the misappropriation was willful and malicious, a court may award punitive damages up to double what was awarded for the owner actual damages and the misappropriator’s unjust enrichment.
  • Courts may also award attorney’s fees and costs if the owner proves “willful and malicious” misappropriation, or a claim for misappropriation was made or opposed in bad faith.
Suits under the New Jersey Trade Secrets Act must be brought within three years after the misappropriation has actually been discovered or should have been discovered if the owner was using reasonable diligence. Also, the “continuing violation doctrine” applies – the Act provides that a continuing misappropriation constitutes a single violation of the Trade Secrets Act.

Our business litigation attorneys fight in New Jersey’s state and federal courts and arbitration forums for businesses whose trade secrets have been misappropriated.


Restrictive Covenants

One of the most frequent ways which trade secrets are lost is through departing employees.  The most effective way to prevent this is to have a well-written agreement preventing employees from using or disclosing trade secrets during or after their employment.  The requirements of “restrictive covenants” are complex; they must meet all of the legal requirements to be enforceable.  They can also include remedies and enforcement mechanisms in case one side breaches the restrictive covenant.

Our business lawyers have extensive experience in drafting restrictive covenants for both employers and employees which meet the strict requirements of New Jersey business law and protect their interests.  Examples of the restrictive covenants our attorneys prepare include confidentiality agreements, non-disclosure agreements, and non-competition (or “non-compete”) agreements.


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If you have trade secrets issues you wish to discuss, please e-mail us or call (973) 890-0004 to speak with one of our business attorneys.
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