Trade secrets have protections — even with friends

David Becker/AP file photoCollaborating on apps could expose young tech workers to the risk of having ideas stolen.

Today's question comes from Kent H. from the Mission, who asks:

Q: “I am a self-admitted computer geek and entrepreneur. I was developing this app and I shared it with someone I thought was my friend because he said he could help me develop it and find financing. We had discussed him getting some equity in my company. I didn't have a non­compete signed because I had known him since college and he gave me his word. I kept it secret aside from those who had a “need to know” in developing the project. He agreed and then after many months of me collaborating with him and revealing to him the system architecture, processes, functionality, interface and graphics, he told me that he couldn't help me after all. A similar app was released into the market about nine months later and I have just learned that one of the founders of the company that launched it was my “friend.” I think he ripped me off. Do I have any rights or am I just screwed?”

A: Kent, welcome to the Wild West of the applications Gold Rush. Just as the 1849 Gold Rush led to avarice and thievery of gold and claims at the end of a gun, today's claim jumper is a college dropout with a flash drive.

California has a adopted what is known as the California Uniform Trade Secrets Act, which is codified in Section 3426 of the California Civil Code. The CUTSA prohibits misappropriation of trade secrets. A trade secret is defined by Section 3426 as information, “including a formula, pattern, compilation, program, device, method, technique, or process, that derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use and is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.”

Misappropriation means acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means. It also covers the situation where there is disclosure or use of a trade secret of another without express or implied consent by a person who used improper means to acquire knowledge of the trade secret. Likewise someone who at the time of disclosure or use, knew or had reason to know, that his or her knowledge of the trade secret was derived from or through a person who had utilized improper means to acquire it or who acquired it under circumstances giving rise to a duty to maintain its secrecy or limit its use has misappropriate that secret.

Misappropriation can be indirect meaning that it occurs not only when someone directly misappropriates the secret but, also, when the trade secret is derived from or through a person who owed a duty to the person who owned the secret information to maintain its secrecy or limit its use or who knew or had reason to know that it was a trade secret and that knowledge of it had been acquired by accident or mistake.

Misappropriation of trade secrets has been the subject of many high-profile cases, including the ConnectU v. Facebook lawsuit against Mark Zuckerberg. (This was brought under Massachusetts equivalent of the California Uniform Trade Secrets Act.)

If you can show that you had a unique program, method or device, etc., and that it was misappropriated you can seek relief from the court in one of several forms. You can obtain an award of damages for the actual loss caused by misappropriation. A complainant also may recover for the unjust enrichment caused by misappropriation i.e., the profit gained by the misappropriation of your trade secret.

If neither damages nor unjust enrichment caused by misappropriation are provable, the court may order payment of a reasonable royalty for no longer than the period of time the use could have been prohibited. If willful and malicious misappropriation exists, the court may award exemplary (punitive) damages (Civil Code Section 3426.3). In addition to these monetary remedies you can seek an injunction prohibiting use of your misappropriated trade secrets pursuant to Section 3426.2.

Unfortunately, Kent, there is no shortage of charlatans who will proclaim themselves the source of invention for an application or, even, the founder of a revolution in technology. I have prosecuted several of these claims myself. There are those who are skilled as inventors and incubators of ideas and those who are nothing more than common thieves dressed in the costume of the successful entrepreneur. The district attorney and police will not, generally, prosecute these claims so, document the facts and find yourself a good trial lawyer to enforce your rights.

Christopher B. Dolan is owner of the Dolan Law Firm. Email questions to help@dolanlawfirm.com.

California Uniform Trade Secrets ActChristopher DolanConnectU v. FacebookFeaturesMark Zuckerberg

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