Keep Your Hands Off My Trade Secrets! The Michigan Uniform Trade Secrets Act and The Economic Espionage Act
Business owners who take proper precautions to protect their trade secrets from misappropriation have the ability to enforce them under the Michigan Uniform Trade Secrets Act.
In certain egregious cases, business owners can look to the Federal Government to pursue criminal remedies against misappropriations, including fines, jail sentences AND orders of civil restitution by the defendant to reimburse the business owner for damages that they caused by their actions.
Michigan law defines the term “trade secret” broadly, including “a formula, pattern, compilation, program, device, method, technique, or process that both (i) 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 (ii) is the subject of efforts that are reasonable under the circumstances to maintain it’s secrecy.”
The Michigan courts will protect against threatened or continued misappropriation by issuing injunctive relief, and if they determine that it is too late to enjoin the violation, have the authority to award damages, or affix a royalty payment in favor of the plaintiff.
Under this statute, your company’s business plans, customer lists, financial projections, designs, production techniques, list of suppliers, know how and technical information can be protected. Confidential information that is not protected includes any information: (a) which is, at the time of disclosure, available to the general public (b) which becomes at a later date available to the general public without involvement of the person making the disclosure, or (c) which is in the defendant’s possession prior to their dealings with the company.
Under certain circumstances, instead of pursuing a claim for misappropriation in the state court, the business owner should consider presenting the case to the U.S. Attorney for prosecution under the Economic Espionage Act (“EEA”). The theft of a trade secret is a federal criminal felony punishable by up to a $250,000 fine for individuals, $5,000,000 for corporations, and 10 years imprisonment. If a foreign government is involved the fines double.
The EEA broadly defines trade secrets that are covered by the Act, and the test is intended to be broader than the definition found in states’ Uniform Trade Secret Statutes.
The elements of the EEA trade secret claim closely follow the elements under the Michigan Uniform Trade Secret statute, with the addition of the requirements that (1) the trade secret be placed in interstate commerce (which is very likely given the use of the internet, mail, telephone, and courier services) and (2) intent that it will injure the owner of the trade secret. The latter requirement is expressed in the Latin term mens rea, meaning that there must be evidence that the defendant acted knowingly to misappropriate the trade secret rather than negligently.
As a practical matter, pursuit of a claim through the U.S. Attorneys office is only possible when there are egregious circumstances. However, in large metropolitan areas, assistant US Attorneys who specialize in white-collar crimes are more willing to evaluate cases that show the likelihood of substantial economic loss to the business community. They will have to be convinced, however, that you are not pursuing this claim against a competitor merely to obtain a competitive economic advantage.
If the U.S. Attorneys office accepts your case, it has the full resources of the United States Government, including the FBI and IRS to pursue the investigation.
Of course, an ounce of prevention is worth a pound of cure. A well thought out plan to protect your company’s confidential information, which includes having employees and visitors sign a confidentiality agreement, can deter these claims, and allow you to focus on your core business.
If you have any questions regarding protection of your company’s trade secrets, or enforcement of claims under the Michigan Uniform Trade Secret Act or the Economic Espionage Act contact Randolph M. Wright in the firm’s Birmingham office 248-645-9680 ext. 416 or by e-mail: firstname.lastname@example.org