Trade secrets are important and valuable assets of a business operation. In Indiana, trade secrets are protected by the Uniform Trade Secrets Act pursuant to Indiana Code § 24-2-3-2, et seq. Trade secrets are generally defined as information that derives its independent economic value from being generally not known or readily ascertainable, and reasonable efforts are instituted to maintain their secrecy. Businesses must be vigilant in maintaining the secrecy of their trade secrets. Failure to maintain proper mechanisms to protect a businesses’ trade secrets, could potentially limit a businesses’ rights to pursue a former employee if that former employee, discloses or uses confidential trade secret information of the former employer at his next place of employment. While the Uniform Trade Secrets Act does not prohibit a former employee with knowledge of a company’s trade secrets from taking a position with a competitor, the statute does prohibit the misappropriation of trade secrets.
Misappropriation of trade secrets involves the use or disclosure of information to the disadvantage of the owner of the trade secret. Misappropriation of trade secrets can also include the disclosure or use of the trade secret, if the trade secret was acquired under circumstances that gave rise to a duty to maintain the secrecy of the trade secret or limit its use. Businesses can seek an injunction and damages for misappropriation of their trade secrets, and in the case of willful and malicious misappropriation, exemplary damages and attorneys’ fees can be sought. If an employer has the employee sign a non-compete and/or non-disclosure agreement, the employer may also seek damages for a breach of contract claim.
In addition to any misappropriation, the inevitable disclosure doctrine is a theory under which former employers may try to protect their trade secrets by arguing that a former employee, merely by working for a new employer, will inevitably disclose or use confidential trade secrets of the former employer. Courts are often hesitant to recognize the inevitable disclosure theory as it gives employers the benefits of non-compete agreements without the employee ever consenting to such an agreement. Indiana courts have recognized the inevitable disclosure doctrine under extreme facts.
With such fact sensitive issues and valuable trade secret information on the line, one way a business can protect itself is by having employees sign non-compete agreements as indicated above. Non-compete agreements place limitations on former employees’ ability to work in the same industry and/or competing organization, but also provide a person, business, or organization with the ability to help enforce their rights to trade secrets.
For more information on non-compete agreements or to discuss how a non-compete agreement and/or a non-disclosure agreement may benefit you, contact G. Michael Schopmeyer or Monica E. Edwards, members of our firm’s Intellectual Property Law team.