• Alexander J. Kemeny

The New Jersey Trade Secrets Act

Updated: Feb 21, 2019


The New Jersey Trade Secrets Act, N.J.S.A. § 56:15-1 et seq., (“NJTSA”) provides protections against the misappropriation of trade secrets. It allows businesses to recover damages and punitive damages when a trade secret has been misappropriated. N.J.S.A. § 56:15-4. The Act also allows a court to enter an order to prevent actual or threatened misappropriation, condition future use of a trade secret on the payment of a royalties, and compel affirmative actions to protect the trade secret. N.J.S.A. § 56:15-3.




Important Definitions


The Act defines “misappropriation” as:


(1) Acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or

(2) Disclosure or use of a trade secret of another without express or implied consent of the trade secret owner by a person who:

(a) used improper means to acquire knowledge of the trade secret; or

(b) at the time of disclosure or use, knew or had reason to know that the knowledge of the trade secret was derived or acquired through improper means; or

(c) before a material change of position, knew or had reason to know that it was a trade secret and that knowledge of it had been acquired through improper means.


N.J.S.A. § 56:15-2.


A “trade secret” is:


information, held by one or more people, without regard to form, including a formula, pattern, business data compilation, program, device, method, technique, design, diagram, drawing, invention, plan, procedure, prototype or process, that:

(1) 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; and

(2) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.


Id.


To demonstrate that a trade secret was acquired through “improper means,” one must show:


the theft, bribery, misrepresentation, breach or inducement of a breach of an express or implied duty to maintain the secrecy of, or to limit the use or disclosure of, a trade secret, or espionage through electronic or other means, access that is unauthorized or exceeds the scope of authorization, or other means that violate a person's rights under the laws of this State.


Id.


Legal Protections for Trade Secrets


The NJTSA allows for the recovery of damages for based upon the actual loss caused by misappropriation as well based as the amount the misappropriating party was unjustly enrichment by the misappropriation to the extent that it exceeds the actual loss. N.J.S.A. § 56:15-4(a). The Act also allows a court to award punitive damages that are twice the amount the of the actual damages. N.J.S.A. § 56:15-4(b). Furthermore, the Act allows a court to order a losing party to pay reasonable legal fees and costs to a plaintiff who shows that there was willful and malicious appropriation or to a defendant that demonstrates that a misappropriation claim was made in bad faith. N.J.S.A. § 56:15-6.


In addition to requiring a person or business to pay money, a court may grant injunctive relief to protect against actual or threatened misappropriation of trade secrets. N.J.S.A. § 56:15-6(a). In exceptional circumstances, a court require that future use of a trade secret be conditioned on the payment of royalties. N.J.S.A. § 56:15-6(b). It may also order that affirmative actions be taken to protect a trade secret. N.J.S.A. § 56:15-6(c)


When to Hire a Lawyer


If you have confidential information that you want to protect, it is best to hire an attorney before a problem arises. The attorneys at Kemeny, LLC have experience preparing agreements to protect our clients’ trade secrets and other confidential information. We tailor these agreements for each client to meet their specific needs.


If you believe that someone has misappropriated a trade secret of yours or you have been accused of having engaged in misappropriation, you should also consider retaining experienced legal counsel. This is especially true if a lawsuit has been started or is threatened.


Kemeny, LLC has represented clients in trade secrets litigation. In a recent case, Kemeny, LLC obtained a favorable jury verdict for a client who was being sued by a former employer. After several days of trial in Federal Court, the jury found that employer had brought its misappropriation of trade secrets claim against our client in bad faith. A judgment was entered by the trial court based upon the jury verdict and the employer appealed to The United States Court of Appeals for the Third Circuit. Kemeny, LLC continued its representation the employee in the appeal and the Third Circuit affirmed the judgment.