How Minnesota Employers Can Protect Trade Secrets

The Uniform Trade Secrets Act, adopted by Minnesota, defines a trade secret as “information” 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.84

Trade secrets may be unique principles, engineering logic, coherence and computer software, but they also may be customer lists and marketing information. A trade secret may modify and improve standard models to such an extent that a newer version becomes unique in the industry. Generally known information may gain trade secret protection because of a peculiar combination of data. If the exact combination of certain features is unique, even though none of the processes or features is unique in an industry, and exact combinations are the only way to achieve the required performance, a trade secret may exist. Several competitors with the same information hypothetically each could own trade secret rights in the same information, if each maintained the appropriate protections.

It is difficult to prevent an employee from discovering trade secrets, particularly if that employee is among the group who developed the secret. However, an employer can take many precautions to protect its trade secrets from disclosure. They include restricting physical or computer access to sensitive areas; physical protection, such as security guards, personnel badges and restricted access areas; restricting copying and dissemination of sensitive information; putting employees “on notice” of trade secrets by marking documents or computer files as “secret” or “confidential;” requiring that only employees who “need to know” have access to secrets; and obtaining confidentiality agreements from the employees who have access to trade secret information.

An employer’s efforts to maintain the secrecy of information in Minnesota need not be perfect, but its measures must be reasonable under the circumstances. The employer’s systematic use of confidentiality agreements is particularly valuable. An employer should require most, if not all, employees to execute agreements acknowledging that the company owns trade secrets and promising never to disclose them, either during employment or after termination. Such an agreement (1) confirms that the employee is aware of a duty to maintain secrecy; (2) refutes any claim the employee may assert to ownership; and (3) puts the employee in a difficult position–he or she cannot, without contradicting an earlier signed statement, claim that what was once acknowledged as a secret is now publicly known or independently created. Moreover, the use of such an agreement will help an employer to demonstrate that it took “reasonable steps” to maintain the confidentiality of its trade secrets, a prerequisite to protection under the Uniform Trade Secrets Act.

The Computer Fraud and Abuse Act (“CFAA”) (footnote 85) may provide Minnesota employers with additional protection against employees or former employees who unlawfully access company computers to copy or transmit proprietary information directly or indirectly to themselves or to new employers. Although the courts have offered differing interpretations of the CFAA,86 the statute may provides a mechanism for obtaining an injunction, damages, and attorney fees against anyone, including a former or soon-to-be-departing employee, who uses the employer’s computers to loot trade secrets or other valuable intellectual property.

CREDITS: The content of this and any related posts has been copied or adopted from from An Employer’s Guide to Employment Issues in Minnesota, provided by the Minnesota Department of Employment and Economic Development & Linquist & Vennum P.L.L.P., Tenth Edition, 2009. Copies are available without charge from the Minnesota Department of Employment and Economic Development, Small Business Assistance Office.

This post is also part of a series of posts on how employers can protect intellectual property through non-compete and non-solicitation agreements.

84. Minn. Stat. § 325C.01, subd. 5 (2007).
85. 18 U.S.C. § 1830 et seq.
86. Compare Cenveo Corp. v. CelumSolutions Software GMBH & Co., 504 F.Supp.2d 574 (D. Minn. 2007) (no injunction or damages available unless computer access caused interruption of computer service) to Southwest Airlines Co. v. Farechase, Inc., 318 F. Supp. 2d 435, 439 (N.D. Texas 2004) (allegation of $5,000 loss sufficient to state claim).

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