Trade secrets are indispensable to most companies, particularly those who deal in products with unique designs, usages, or flavors. They are the backbone of entire industries that are dependent on them for economic and financial success. However, trade secrets often are violated and misappropriated, sometimes due to personal vendettas or an attempt to capitalize on a company’s potential collapse. You may be wondering: What happens if you steal a trade secret?

What Are Trade Secrets?

A trade secret is a formula, design, or business information unique to one company that uses it to develop products in a confidential way. Not every product developed by a company is considered a trade secret. In order to be considered under the Uniform Trade Secrets Act (UTSA), the secret in question has to meet certain criteria:

  • The secret must be considered valuable on a commercial level. Its secretive nature makes it sought after by competitors or those seeking to hurt the company that owns it.
  • Only a select group of people are aware of the secret, and they are legally bound via a non-disclosure agreement or other binding contract not to reveal it publicly or try and sell it.
  • The owner of the trade secret has taken substantial steps to keep the secret from being known by the public or competitors. This has been done through the use of confidentiality agreements and other methods.

A viable trade secret is any privately owned company secret, product formula, or confidential business practice that could provide a potential competitive edge to the company that owns it, such as KFC’s secret recipe or Google’s top-secret search algorithm.

What Happens If You Steal a Trade Secret?

In the United States, stealing trade secrets is punishable under federal law, thanks to the Economic Espionage Act of 1996. Under this act, trade secret penalties are quite harsh depending on the nature of the crime that was committed. There are largely two forms of trade secret theft that could be committed:

  • Economic Espionage: Economic espionage is the intentional theft or misappropriation of trade secrets with the full knowledge or total intent that stealing these secrets will benefit a foreign government or foreign agent. This carries a significant penalty of up to $500,000 in fines per offense and a potential 15 years in prison if committed by an individual. If the offense was committed by an organization or a group, the fine rises to $10 million.
  • Theft of Trade Secrets: Theft of trade secrets is the intentional theft or misappropriation of trade secrets with the full knowledge or total intent that stealing these secrets will injure the owner of the trade secret and their company. This carries a significant penalty of up to 10 years in prison if committed by an individual. If the offense was committed by an organization or a group, there is a fine of up to $5 million.

Trade secrets are enticing and tantalizing to entities that wish to capitalize on another company’s failure. It is vital to companies that possess trade secrets that they take the proper precautions to protect those secrets and seek maximum sentences when those secrets are violated or misappropriated.

FAQs

Q: Is Theft of Trade Secrets a Federal Crime?

A: Yes, the theft of trade secrets is absolutely a federal crime, thanks to the Economic Espionage Act of 1996. Under this comprehensive act, the theft of trade secrets with the intention of damaging a private company or aiding a foreign government can result in significant prison time and hefty fines, depending on what your intent ultimately was with the theft. The EEA was established to protect the intellectual property of American companies and further contribute to the country’s economic health.

Q: Is Stealing Trade Secrets a Financial Crime?

A: Yes, the stealing of trade secrets is considered a financial crime. Oftentimes, the motive for stealing trade secrets is a financial one, with the perpetrator largely intending to hurt the bottom line of the company that owns the secret or capitalize on the opportunity by trying to sell that secret to a competitor. The ultimate goal is largely financial, which makes stealing trade secrets a very serious white-collar crime that can be prosecuted in federal court under the EEA.

Q: What Is the Most Likely Outcome of a Trade Secret Theft?

A: Every trade secret theft case is different, so it can be difficult to determine the most likely outcome of one. Each case has different circumstances surrounding it, which will impact the ultimate decision that is made by a judge and jury regarding the consequences. Stealing trade secrets is a serious federal crime that will likely be prosecuted under the EEA and other possible statutes. The outcome may be favorable or unfavorable for the perpetrator, depending on the evidence against them.

Q: What Happens If You Reveal a Trade Secret?

A: Revealing a company’s trade secrets can have devastating, far-reaching consequences to that company’s financial health and long-standing reputation. Once a trade secret is revealed, it is no longer a secret and is available for anyone to access. It no longer has any value. As for the person who willfully revealed the secret, they may have violated federal law in doing so.

It is important for companies to do whatever they can to protect their trade secrets in any way they can, from enforcing NDAs to increasing their cybersecurity.

Contact an Orange County Trade Secret Attorney Today

A company’s lifeblood is its trade secrets. They can make or break a company for good, and if they are revealed unceremoniously, the resulting fallout can damage a company’s bottom line, possibly for good.

At The Myers Law Group, our legal team has comprehensive experience handling trade secret violations and protecting a company’s rights. We can provide consistent help in developing your case, gather the necessary evidence that supports your claim, and give you substantial knowledge of California trade secret laws. Reach out to speak to a team member today.