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FAQ: Trade Secrets in Indiana

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Not every workplace is going to be like a hospital or law firm with federal or industry related regulations on keeping business-related information secret but protections still exist to make sure your business’ private information stays that way. Just like non-compete agreements, when it comes to trade secrets, Indiana has statutory and case law protections to maintain what makes your business unique.

 

Q: Does Indiana have any laws that govern how to deal with trade secrets?

A: Yes, one. We do protect trade secrets in the Hoosier state primarily through the Indiana Uniform Trade Secrets Act (Ind. Code §§ 24-2-3-1 to 24-2-3-8). Indiana criminal law also defines trade secrets as property, so any crime involving property would also qualify, like conversion.

 

Q: Is Indiana’s trade secret law particularly unique?

A: Not very. Indiana’s trade secret law is based off the model Uniform Trade Secrets Act, which was created by the National Conference of Commissioners on Uniform State Laws. Every state has enacted this model into their state laws except New York and Massachusetts. The one main difference with Indiana’s version is that the language involving preemption is stronger. In the legal world, preemption means that in situations where multiple laws may discuss the same topic, then the preempting law would apply. This effectively means common law protections of trade secrets would not apply and instead Indiana would look to the statute.

 

Q: What is a trade secret?

A: A trade secret is

  1. One of the following
    1. Formula
    2. Pattern
    3. Compilation
    4. Program
    5. Device
    6. Method
    7. Technique
    8. Process
  2. That derives actual or potential independent economic value because it is
    1. Not generally known; AND
    2. Not readily accessible by proper means by others who can obtain economic value from its disclosure
  3. And is the subject of reasonable efforts under the circumstances to maintain its secrecy

 

Q: Have Indiana courts tried to elaborate any further on this definition?

A: A little. The state’s supreme court identifies “not being readily ascertainable” as being ambiguous, which means each case can be different on how to apply. To determine if the information is not readily accessible, courts should look at whether acquiring that information would involve a substantial investment of time, expense, or effort (Amoco Prod., 622 N.E.2d at 919). For compilations of information, the collection as a whole can still count as a trade secret even if parts of the compilation are public or readily ascertainable, especially if effort is exerted to compile the information. Id. This basically means a customer list can count as a trade secret even if it includes public information because the business went through the effort to put that information together.

 

Q: What are some examples of what Indiana would or would not count as trade secrets?

A: What is a trade secret:

  • Customer lists with public and private information
  • A new process that combines elements of other known processes
  • Chemical formulae and their instructions for mixing

What is not a trade secret:

  • Customer lists with only readily available information
  • Marketing and sales materials regularly provided to third parties like consultants or customers.
  • Domain names and information contained on a business website.

There is not categorical group of information definitively excluded from being a trade secret, so each situation would involve its own analysis.

 

Q: Hold up, customer lists seem to be all over the map, so do they count as a trade secret or not?

A: It depends. (I know, ugh lawyers). A court is going to go back to those three factors of how much time, effort, or expense went into creating the customer list and what kind of information is included in the list. Some public information may only be accessible if you put a considerable amount of work into finding but if all the information is googleable, then that’s probably not going to count.

 

Q: Is there information that counts as trade secrets just because of what it is?

A: No. In particular, a business has to demonstrate reasonable efforts to maintain the information as secret. Some reasonable secrecy protections approved by Indiana courts include:

  • Requiring employees to sign a confidentiality agreement
  • Marking documents as confidential
  • Shielding the information or processes from visitors or restricting access
  • Locking up the information

Each case is going to be different of what counts as reasonable but a business does have to put forth some effort. It does not matter if it’s your employee files, secret formula, or business plan, if you leave the information out for anyone to see or find, then a court is not going to protect the information under trade secret.

Q: When can using a trade secret cross the line into misuse?

A: There’s three main scenarios where someone would be liable for misappropriating a trade secret:

  1. When someone uses improper means to acquire the trade secret. “Improper means” includes:
    1. Theft
    2. Bribery
    3. Misrepresentation
    4. Breach of a duty to maintain secrecy, or
    5. Espionage (electronic or otherwise)
  2. When someone knows (or should know) that knowledge of the trade secret was derived from someone who
    1. Used improper means to acquire it
    2. Acquired it under circumstances where they have a duty to maintain secrecy, or
    3. Owed a duty to maintain its secrecy or limit use
  3. Before a material change of position, they know or should know the trade secret was acquired by accident or mistake.

 

Q: What if, rather than stealing or some other improper means, the employee happens to memorize a trade secret?

A: IDK. Indiana has not yet dealt with this kind of case yet but this may implicate an employee’s duty of loyalty to their employer.

 

Q: What happens if a business, rather than an individual person, misuses a trade secret?

A: Then sue the business. Indiana recognizes different kinds of businesses as “people” and so they can be identified as a party in this type of case. This applies to any legal or commercial entities along with governments or agencies.

 

Q: Does that mean I can sue an individual and the company for misuse?

A: Not usually. Employees, managers, or officers cannot be held liable unless you can prove they knew or should have known the information was misappropriated.

 

Q: What should I say if someone claims I, or my business, misused a trade secret?

A: Demonstrate that they cannot satisfy all the required elements that makes a trade secret protected. For instance, you can show:

  • They did not take reasonable steps to maintain secrecy
  • The information does not derive independent economic value from not being generally known.
  • The information is readily ascertainable by proper means
  • You did not know or have reason to know about the misuse
  • The statute of limitations has expired

 

Q: Hold up, that last one. What’s the statute of limitations?

A: Three years. That is the length of time someone has to make a claim or else the case cannot move forward. The timer starts from when the misappropriation is discovered or should have been discovered.

 

Q: Besides misappropriation, are there any other types of cases that can be made?

A: A few. Some related options include:

  • Breach of contract (if the employee signed a nondisclosure agreement)
  • Breach of fiduciary duty (which applies to some managers or employees that have a duty to do what is best for the company)
  • Fraud
  • Unjust enrichment
  • Wrongful interference with business relationships
  • Conspiracy
  • Conversion

 

Q: What can courts do to resolve an issue related to trade secrets?

A: Indiana allows for five types of remedies:

  1. Injunctive relief, which is an order from the court they have to do something (like return stolen information) or not do something (like disclose or use the information)
  2. Actual damages, which is the provable and specific monetary loss as a result of the misappropriation. This can also include any unjust enrichment the defendant acquired to the extent it does not overlap the actual damages.
  3. Reasonable royalty, which is useful when damages are difficult or impossible to prove.
  4. Exemplary damages, also known as punitive damages, are ordered by the court as an extra level of punishment to deter the defendant or others from trying to do the same thing in the future. This is utilized only in cases where a plaintiff can prove the defendant’s actions were willful and malicious and courts may only amount to twice the amount of actual damages.
  5. Reasonable attorneys’ fees are available when someone makes a claim or motion in bad faith or when willful or malicious misappropriation occurs.

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