An Overview Of Trade Secrets In South Carolina

Understanding Trade Secrets

Under the Defend Trade Secrets Act (DTSA) of 2016, the definition of a trade secret aligns with that established by the Uniform Trade Secrets Act (UTSA), which is widely adopted across states. According to the DTSA, a trade secret is defined as information that meets the following criteria:

First, the information must not be generally known to the public or readily ascertainable within the industry. If the information is common knowledge or easily obtainable, it does not qualify as a trade secret.

Second, the information must derive economic value from being kept confidential. Essentially, the information should offer the owner a competitive advantage or the potential for economic gain, which would not exist if it were widely known.

Third, there must be reasonable efforts in place to maintain its secrecy. The owner of the information is required to take practical steps to safeguard it, which could include implementing confidentiality agreements with employees and others who have access to the information.

The scope of what can constitute a trade secret under the DTSA is extensive and encompasses a variety of types including financial, business, scientific, technical, economic, or engineering data. This may involve a range of formats such as patterns, plans, compilations, formulas, designs, prototypes, methods, techniques, processes, procedures, and codes, irrespective of whether the information is stored physically, electronically, graphically, photographically, or in written form.

The DTSA offers strong legal protections for trade secrets, granting businesses the right to pursue legal action in federal court for any misappropriation of their trade secrets. This legislation serves as a critical mechanism for businesses to safeguard their proprietary information against unauthorized use or disclosure.

What Is The Uniform Trade Secrets Act (UTSA)

The Uniform Trade Secrets Act (UTSA) was established by the Uniform Law Commission in 1979 to create a standardized legal framework for the protection of trade secrets in the United States. Prior to the UTSA, the laws governing trade secrets varied significantly across different states, which led to inconsistencies and challenges in protecting such information.

The UTSA defines trade secrets as information, including formulas, patterns, compilations, programs, devices, methods, techniques, or processes, that hold economic value from not being generally known to or readily ascertainable by others. For information to qualify as a trade secret under the UTSA, there must also be reasonable efforts to maintain its secrecy.

One of the primary objectives of the UTSA is to harmonize the protection of trade secrets across all adopting states. This harmonization helps ensure that businesses have consistent and reliable legal recourse across state lines.

Under the UTSA, legal remedies are available for the misappropriation of trade secrets. Misappropriation includes acquiring a trade secret through improper means such as theft, bribery, misrepresentation, or espionage. It also includes the use or disclosure of a trade secret without consent by someone who obtained the trade secret through improper means. The act allows for both injunctions, to prevent further misuse of the trade secret, and damages, to compensate the trade secret owner for the economic harm caused by the misappropriation.

Overall, the UTSA provides a crucial legal foundation for protecting trade secrets, ensuring that innovators and businesses can safeguard their valuable information while promoting fair competition.

The South Carolina Trade Secret Act

The South Carolina Trade Secrets Act, detailed in Section 33-8-10 et seq of the South Carolina Code of Laws., provides comprehensive protection for trade secrets within the state. This legislation encompasses a wide range of information, including both technical and non-technical data, formulas, patterns, compilations, programs, devices, methods, techniques, and processes. To qualify as a trade secret under this Act, the information must not only be confidential but must also carry independent economic value from that confidentiality and be subject to reasonable efforts to maintain its secrecy.

A pivotal component of the Act is its framework for dealing with the misappropriation of trade secrets. Misappropriation can occur through improper acquisition, disclosure, or use of a trade secret without the rightful owner’s consent. When assessing whether misappropriation has taken place, several factors are considered, such as the measures taken to protect the trade secret, the value of the information to both the business and its competitors, and the resources expended in its development.

The Act provides multiple remedies for trade secret misappropriation. It offers injunctive relief to prevent further misuse and compensatory damages for actual losses. Additionally, in cases where the misappropriation is willful and malicious, the Act allows for exemplary damages, potentially amounting to twice the actual damages. Recovery of attorney’s fees may also be available under certain circumstances.

The South Carolina Trade Secrets Act aims to protect businesses from the unauthorized exposure or exploitation of proprietary information, thereby promoting innovation and ensuring fair competition in the marketplace. By establishing clear legal recourse and substantial penalties for breaches, the Act plays a vital role in protecting intellectual property rights and creating a business environment conducive to safeguarding valuable trade secrets.

Trade Secret Litigation in the United States

Trade secret litigation in the United States typically arises when a business suspects that its valuable information—such as formulas, patterns, programs, or techniques—has been unlawfully accessed or disclosed. Given the substantial economic value of trade secrets, companies vigorously defend them through legal means.

In trade secret disputes, the crux of the litigation often revolves around determining whether the information in question qualifies as a trade secret and whether it was misappropriated through illicit means like theft, espionage, or breach of confidentiality obligations. These cases also frequently assess whether the accused party had an explicit duty to protect the secrecy of the information and whether this duty was violated.

Federally, the Defend Trade Secrets Act (DTSA) of 2016 governs trade secret litigation, providing a uniform legal framework that permits businesses to file lawsuits in federal courts across the United States, irrespective of the value of the trade secret. The DTSA complements state laws rather than replacing them, offering an additional layer of protection.

Under the DTSA, trade secret owners can initiate civil actions if their secrets, related to products or services in interstate or foreign commerce, are misappropriated. The Act enables courts to issue injunctions and award damages for the actual losses and any unjust enrichment resulting from the misappropriation. In extreme cases, the DTSA also allows for ex parte seizure orders to prevent the spread or misuse of the trade secret.

At the state level, most states have adopted the Uniform Trade Secrets Act (UTSA) in some form, which also allows for injunctive relief and damages, ensuring that trade secret owners have robust legal avenues at both the federal and state levels to address and remedy the misappropriation of their proprietary information. This legal structure is crucial for maintaining the integrity of businesses and fostering an environment of fair competition by protecting the confidentiality of innovative and commercially valuable information.

Contact Our Charleston Business Attorneys

In today’s competitive market, your trade secrets are invaluable, serving as a cornerstone of your company’s unique value proposition and a vital element for sustained success. However, the increasing complexity of the digital landscape poses significant challenges in safeguarding these secrets. If you encounter any issues related to your trade secrets, or if you wish to proactively secure your proprietary information, contact us for assistance. We make every effort to respond to all inquiries within one business day.