On January 9, New Jersey Gov. Chris Christie signed into law the
New Jersey Uniform Trade Secrets Act (NJTSA), which is intended to
afford greater protection for trade secrets in New Jersey. New
Jersey, recognizing the significant damage that misappropriation of
trade secrets poses to businesses in the state, now follows 46 of
its fellow states and the District of Columbia, all of which have
adopted, in whole or in part, the general uniform law. Employers
need to take several steps to benefit from the protection provided
by the NJTSA and to protect themselves from claims of
misappropriation by competitors.
Prior to the adoption of this statute, employers were left to rely
on common law when seeking to protect their trade secrets through
the courts. In the event of a threatened or actual loss of trade
secrets through misappropriation, businesses often faced
uncertainty concerning their legal rights and potential remedies.
The NJTSA is intended to provide greater clarity and consistency.
Further, the NJTSA has some important differences from the general
uniform law as adopted by other jurisdictions, as well as from the
pre-existing common law of New Jersey.
Scope. In adopting the NJTSA, the New Jersey
Legislature has broadly defined the concept of what a trade secret
is, which should provide greater protection to companies and
balance competing interests.
The legal standard for a trade secret protected by the statute
applies to "information, held by one or more people, without
regard to form, including a formula, pattern, business data
compilation, program, device, method, technique, design, diagram,
drawing, invention, plan, procedure, prototype 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."
The Legislature has also broadly defined the term "improper
means" so that it specifically includes "access that is
unauthorized or exceeds the scope of authorization, or other means
that violate a person's rights under the laws of this
State." The Legislature also included a statutory definition
for reverse engineering.
Remedies. The NJTSA includes a three-year statute
of limitations, which departs from the six years previously
provided under New Jersey law. The statute of limitations is
triggered when "the misappropriation is discovered or by the
exercise of reasonable diligence should have been discovered."
A continuing misappropriation is now a single claim rather than
multiple claims.
The NJTSA also provides greater remedies than were available under
the common-law protections previously afforded by New Jersey,
including the following:
- The recovery of monetary damages for both the "actual loss caused by the misappropriation and the unjust enrichment caused by the misappropriation that is not taken into account in computing actual loss."
- The potential award of punitive damages of up to two times the monetary damages under certain circumstances.
- The award to the prevailing party of attorney fees and costs, including a reasonable sum relative to expert witnesses under certain circumstances.
- In exceptional circumstances, the court can condition future use of the trade secret on payment of a royalty.
What This Means to You. At the outset it should
be noted that New Jersey has departed in several ways from the
general uniform law, and therefore, a close review of New
Jersey's statute is necessary for a full understanding of its
scope. Given the changes in the statute of limitations, employers
must be vigilant in their efforts to protect and preserve their
valuable corporate assets. In order to fully obtain the benefits of
this new statute, employers should have in place reasonable
precautions directed at keeping their trade secrets confidential
and also be able to establish that these steps were consistently
applied and enforced. To meet this objective, employers need a
comprehensive "trade secret protection policy," and any
existing policies should be re-examined at this time. For example,
now that the definition of "improper means" has been
statutorily broadened to include access that "exceeds the
scope of authorization," it is important for employers to
specifically define their employees' scope of authority when
accessing company computers. Employers should consider conducting a
trade-secret audit to assess the protections in place and monitor
for potential misappropriation. It is now even more important for
employers to be proactive in their efforts, mandate compliance with
all preservation policies, and consult with counsel as to important
issues with respect to confidentiality affecting their business
and/or industry.
In addition, employers should also consider potential liability.
As a result of the potential for augmented remedies, including
attorney fees and costs, we anticipate increased litigation.
Accordingly, employers should evaluate their hiring practices and
other internal practices so as to guard against misappropriation
claims asserted against them by competitors. This includes learning
of any potential obligations of new hires and requiring that they
be specifically precluded from disclosing or using trade secrets
belonging to others in the performance of their duties.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
