Coming Soon to New Jersey . . . Trade Secrets Law!
New Jersey, along with New York, Massachusetts and Texas, are the only states that have not adopted some form of the Uniform Trade Secrets Act. Not for much longer.
Last week, the New Jersey Trade Secrets Act, A-921/S-2456 passed unanimously in the New Jersey Assembly, and is on its way to the Governor’s desk. Governor Christie will have 45 days to sign the measure into law. Once enacted, the law will be effective immediately, but will not apply retroactively.
To date, New Jersey has applied the common law to trade secrets. The pending law reflects much of this common law tradition. Basically, the Act defines a trade secret as information, regardless of form, that derives independent economic value from not being generally known to others who can gain economic value from its disclosure; and, is the subject of reasonable efforts to maintain its secrecy.
The Act protects a trade secret holder from misappropriation, which is defined as a trade secret acquired by improper means or improperly disclosed. Among the remedies available for misappropriation are: damages, both actual and for unjust enrichment; as well as a reasonable royalty for unauthorized use or disclosure; punitive damages; injunctive relief for actual or threatened misappropriation; and the possibility of attorney’s fees. Attorney’s fees are also available as a remedy for misappropriation claims made in bad faith, and with respect to a motion to terminate an existing injunction that is made or resisted in bad faith. The Act shortens the six-year statute of limitations previously available for bringing an action (under N.J.S.A. §2A:14-1) to a three-year term beginning with the time of actual discovery of a misappropriation or the time at which discovery would have occurred with reasonable diligence.
Trade secrets can be an important tool for protecting a company’s valuable know-how and proprietary information. Policies and practices to safeguard trade secrets should be put in place and periodically reviewed with employees. Companies should also continuously and actively monitor for evidence of possible trade secret misappropriation. Looking ahead, companies operating in New Jersey should factor New Jersey’s pending Trade Secrets Act into their trade secret calculus.