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Recently Enacted Trade Secret Legislation Provides Additional Protection for Companies/Employers in New Jersey

April 25, 2012

New Jersey recently enacted the Trade Secrets Act (the “Act”), A-921/S-2956, which now provides clarity on what constitutes a protectable trade secret and what remedies are available to aggrieved parties under New Jersey law.

The Act defines a “trade secret” 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) [d]erives 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) [i]s the subject of efforts that are reasonable under the circumstances to maintain its secrecy.”

The Act provides remedies in the form of (i) injunctive relief; (ii) compensatory damages both for actual loss suffered by the plaintiff and for any unjust enrichment (i.e., improper benefits gained) on the part of the defendant as a result of the misappropriation of the plaintiff’s trade secrets; (iii) a reasonable royalty based on the misuse of a trade secret – a desirable remedy if the party cannot prove actual loss or unjust enrichment; and (iv) for cases involving willful and malicious misappropriation of a trade secret, punitive damages up to twice the amount of damages awarded as well as attorneys’ fees.

The Act also emphasizes the importance of confidentiality by requiring that courts presiding over trade secret claims preserve the secrecy of alleged trade secrets in a manner consistent with the court rules.

Companies should be proactive in taking full advantage of the law and can better protect their trade secrets in several ways, including, for example:

  • Implementing a policy of restricting access to information or processes that are considered trade secrets by requiring passwords to access that information/process;
  • Utilizing appropriate nondisclosure agreements for employees, independent contractors, potential acquirers of the company or anyone else who needs to come in contact with the company’s trade secrets; and
  • Sending out reminders periodically to employees/contractors to preserve confidential information.

A company’s particular needs will ultimately govern the appropriate precautions to take and, if those include written nondisclosure agreements or advisories, the form and language to use.

For more information, please contact:

Joseph Tripodi  |  Member of the Firm  |  (973) 530-2071  |  jtripodi@wolffsamson.com

David M. Dugan  |  Counsel  |  (973) 530-2078  |  ddugan@wolffsamson.com