Everyone is familiar with the “legendary” tales of the Coca-Cola secret formula: only two corporate executives are privy to the formula,1 and the actual, written recipe is locked away in a chrome vault.2 While these tales may be somewhat exaggerated, the importance of protecting your company’s trade secrets cannot be overstated. According to a recent survey, one in five companies has been the victim of trade secret theft, and only one-third of companies have action plans for responding to trade secret theft.3 Undergirding the protection of trade secrets in Louisiana is the Louisiana Uniform Trade Secret Act (“LUTSA”).4 Under LUTSA, companies are equipped with various tools to protect their trade secrets,5 and to recover damages when its secrets are stolen or misappropriated.6
What is a trade secret? Under Louisiana law, a trade secret is defined as information, including a formula, pattern, compilation, program, device, technique, or process that:
- 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
- is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.7
Examples of trade secrets include: aspects of a machine (if that information is not readily ascertainable from an examination of the machine); sources of supply; a collection of components (each of which is known); and customer lists.8 Interestingly, this definition also encompasses information that has commercial value from a negative viewpoint.9 As the legislative commentary to LUTSA explains: “The results of lengthy and expensive research which proves that a certain process will not work could be of great value to a competitor.”10
How can your business protect its trade secrets? According to the U.S. Small Business Administration, there are several identifiable measures that businesses can take to protect its trade secrets.11 First, it is important to identify your business’s trade secrets. Doing so allows you to pinpoint what information should be subject to heightened security and protection. Second, your business must take reasonable measures to keep the trade secrets confidential. For example, trade secrets that are on paper should be stored in a locked location, and electronic files should only be accessible by authorized personnel. Third, your employees should be educated about protecting the business’s trade secrets. Employees who have access to or regularly interact with company trade secrets should be required to enter into nondisclosure agreements (sometimes called “NDAs”), which prohibit them from sharing the trade secrets or using them to compete against your business. Finally, the theft or misappropriation of your business’s trade secrets should be pursued by civil actions.
What happens if your trade secrets are stolen? If you believe your business’s trade secrets have been compromised, it is important to immediately consult with an attorney to consider your options and to mitigate any harm to your company. Actual or threatened misappropriation of a trade secret can be enjoined by a court-in other words, the court can order the defendant to stop using the trade secret.12 Additionally, you may be entitled to damages if your trade secret is actually misappropriated.13 There is, however, a narrow timeframe for you to bring a claim for trade secret misappropriation. Under LUTSA, “[a]n action for misappropriation must be brought within three years after the misappropriation is discovered or by the exercise of reasonable diligence should have been discovered.”14
In summary, trade secrets play a vital role in many modern businesses. Whether you operate a small bakery or a multinational technology firm, your company should take reasonable measures to protect its trade secrets. However, if you believe your trade secrets have been stolen, you have several options under LUTSA, including both injunctive relief and damages. As always, you should consult with an experienced corporate attorney to discuss your individual circumstances.
1 Coca-Cola’s Secret Formula, Snopes (Nov. 18, 1999), https://www.snopes.com/fact-check/coca-cola-fomula//
2 Vault of the Secret Formula, World Coca-Cola, https://www.worldofcoca-cola.com/explore/explore-inside/explore-vault-secret- formula/ (last visited Apr. 8, 2019).
3 The Rising Importance of Safeguarding Trade Secrets, in The Board Ultimatum: Protect and Preserve 3-4 (2017), https://www.bakermckenzie.com/-/media/files/insight/publications/2017/trade-secrets.
4 La. R.S. 51:1431, et seq.
5 See, e.g., La. R.S. 51:1432 (providing for injunctive relief in the case of “[a]ctual or threatened misappropriation”).
6 See La. R.S. 51:1433 (providing for damages in the case of “actual loss caused by misappropriation” and unjust enrichment).
7 La. R.S. 51:1431(4).
8 James S. Holliday, Jr., et al., Louisiana Corporations, in 2 Louisiana Practice Series § 29:65 (2018-19 ed.).
10 Id. (citation omitted).
10 See Barbara Weltman, 5 Steps for Protecting Your Trade Secrets, U.S. Small Bus. Admin. (Sept. 10, 2015), https://www.sba.gov/blogs/5-steps-protecting-your-trade-secrets.
10 See La. R.S. 51:1432.
10 See La. R.S. 51:1433.
10 La. R.S. 51:1436.