USA Law and Practice Contributed by: Claudia Ray, Joseph Loy, Brandon R. Weber and Andrew (Keum Yong) Lee, Kirkland & Ellis LLP
ics Corp, 2019 WL 1959487, at *3–4 (N.D. Cal. May 2, 2019). On the other hand, loss of domestic revenues from entirely extraterritorial activity may not alone be sufficient to bring alleged misap - propriation within the reach of the DTSA. See Luminati Networks Ltd v BIScience Inc, 2019 WL 2084426, at *9–10 (E.D. Tex. May 13, 2019). The ability of domestic trade secret owners to redress theft by foreign companies and those in their employ will therefore depend greatly on the facts of each particular case. 2. Misappropriation of Trade Secrets 2.1 The Definition of Misappropriation The DTSA and UTSA both define misappropria - tion as the “ acquisition of a trade secret of anoth- er by a person who knows or has reason to know that the trade secret was acquired by improper means or disclosure or use of a trade secret of another without express or implied consent ” (18 USC Section 1839(5); UTSA Section 1(2)). Improper means include “ theft, bribery, misrep- resentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means ”, but do not include lawful means of acquisition such as reverse engineering or independent discovery (18 USC Section 1839(6); UTSA 1(1)). 2.2 Employee Relationships There is an implied confidential relationship between employers and employees, such that the employee is obligated not to disclose the employer’s confidential information (Restate - ment (Third) of Unfair Competition Section 42, Comment b (1995)).
Disclosing a trade secret to employees does not typically constitute public disclosure result - ing in the termination of the trade secret, given that employees have a fiduciary duty to maintain the secrecy of the trade secret. Even if there is no express contractual term in an employment agreement prohibiting the employee from dis - closing the trade secret, the employee still has an implied duty to maintain the secrecy of the trade secret. If, however, the trade secret is disclosed to employees who do not need knowledge of it in order to perform their jobs, and precautions (such as the signing of non-disclosure agree - ments with employees) are not taken to pre - vent those employees from disclosing the trade secret, then the trade secret protection may be terminated – eg, In re Island Indus., Inc, 2024 WL 869858, at *4 (6th Cir. Feb. 29, 2024)). Thus, it is a beneficial precaution to require an employee, in express contractual terms, not to disclose the employer’s trade secrets. 2.3 Joint Ventures Entities that participate in a joint venture owe each other a fiduciary duty not to disclose their trade secret during the joint venture. Never - theless, it is best practice to create a contract between the owners of the joint venture that requires them to maintain the secrecy of the trade secret both during the joint venture and after its dissolution. Alternatively, a joint ven - ture might involve a company licensing its trade secret to a third-party company. Again, in this scenario, it is best practice for the company with the trade secret to require the third party to sign a contract stating that the third party will not dis - close the company’s trade secret, rather than relying on any implied duty of confidentiality.
257 CHAMBERS.COM
Powered by FlippingBook