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Misappropriation of a Trade Secret in New Jersey
by: Paul W. Norris of Stark & Stark  -  Stark & Stark Newsroom
Tuesday, January 30, 2024

In the business world, a company might have information, a process, a technique, or a design that they consider to be a trade secret. The question is whether the aforementioned constitutes a protectable trade secret under NJ Law. The New Jersey Trade Secrets Act defines what may be considered a protectible trade secret. Under the Act, a trade secret is defined as “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.” (N.J.S.A. 56:15-2)

Upon reviewing the statute, it is evident that a trade secret can arise in numerous scenarios and in different industries. An essential component in determining the protectible nature of the secret, however, always involves whether reasonable efforts were made by the holder of the purported secret to maintain its secrecy and to prevent its disclosure. Despite these efforts, at times, secrets are stolen or misappropriated by a current or former employee or even a competitor. Should that occur, the question that arises is what relief the owner of the secret may be entitled to in court.

The New Jersey Trade Secret Act also addresses when the holder of the secret may be entitled to relief by a court. Typically, the unlawful taking of a trade secret is referred to as the misappropriation of the trade secret. The Act provides that “Misappropriation” means:

  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:
    • used improper means to acquire knowledge of the trade secret, or
    • 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
    • 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.

Should the holder of the trade secret be able to establish any of the elements listed above, it would be entitled to commence an action in court to prevent the use and dissemination of the secret. In such action, the holder will seek an injunction to prevent the use and dissemination of the secret, and further, may seek an award of damages against the wrongdoer, which may include the disgorgement of any profits this party made by using the trade secret, compensatory damages, and potentially, an award of punitive damages and counsel fees. In other words, this Act aims to protect trade secrets and define the remedies a holder may seek against a wrongdoer.

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