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Non-Compete and Trade Secrets Blog

Don’t Worry, Your Secret is Safe With Me

Many defendants attempt to defend claims for trade secret misappropriation by claiming that they never used or disclosed the information in question. Based on a recent ruling by a federal district court in New York, however, that may not matter. In AUA Private Equity Partners, LLC v. Soto, No. 1:17-CV-8035-GHW (S.D.N.Y. Apr. 5, 2018), an employer filed suit against one of its former employees, asserting claims for trade secret misappropriation under the Defend Trade Secrets Act (“DTSA”), the federal law enacted in May 2016. The employer alleged that shortly before her termination, the employee uploaded files containing confidential and proprietary business information from her company-issued laptop to her personal cloud storage account on Google Drive. Following a preliminary injunction hearing, the employee moved to dismiss the employer’s DTSA claim on grounds that the employer did not allege that she ever used or disclosed the files, only that she acquired them.

The court rejected the employee’s argument, finding that neither “use” nor “disclosure” was a required element of the DTSA claim. In reaching this decision, the Soto court relied primarily on the definition of the term “misappropriation” set forth in the statute. That definition was disjunctive, the court noted, such that either “acquisition” of a trade secret by a party who knows or should know that the information was acquired through improper means, or the “disclosure or use” of a trade secret could give rise to liability. See 18 U.S.C. § 1839(5). In other words, proving “use or disclosure” was one way, but not necessarily the only way, for the company to establish its claim for misappropriation of trade secrets under the DTSA.

Having recognized that improperly acquiring a trade secret was actionable, the only remaining issue was whether the employee’s alleged conduct—i.e., uploading confidential information to a personal cloud-based storage account—was an “acquisition” within the meaning of the DTSA. In concluding that it was, the Soto court relied on the fact that courts have interpreted other trade secret statutes that define “misappropriation” in the same way as the DTSA to prohibit similar forms of employee misconduct, “even in the absence of any subsequent use or disclosure of the information.” The employer therefore stated a valid claim for misappropriation of trade secrets under the DTSA. 

As the Soto decision demonstrates, an employer is not required to wait until an employee has forked over its valuable trade secrets to a competitor or started to actually use them before pursuing legal action. Even where there is no evidence that a departing employee has any intention of using or disclosing the information, it may still be prudent for an employer to seek relief if the employee acquired the information through improper means (such as by emailing it to a personal email account without permission on their last day after submitting their resignation). As one of the elements of what makes information a “trade secret” is that the employer took reasonable steps to protect the information, lack of action to pursue return of improperly acquired trade secrets may diminish the employer’s ability to later claim that it took steps to protect the information.

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