A recent 10th Circuit Court of Appeals case, Double Eagle Alloys, Inc. v. Hooper et al, offers a critical reminder to employers: while departing employees downloading company information is common, it doesn’t automatically constitute trade secret misappropriation. In Double Eagle, the employer’s claims failed because they couldn’t specifically identify their alleged trade secrets or prove their true secrecy and competitive value. The courts emphasized that for information to be a trade secret, it must be distinguishable from general industry knowledge, not readily ascertainable through legitimate means, and confer a distinct competitive advantage due to its secrecy. This ruling underscores that simply having confidentiality agreements isn’t enough; the burden is on the employer to precisely define and protect their proprietary information.
California’s Stance on Trade Secrets
In California, these principles are powerfully reinforced by the California Uniform Trade Secrets Act (CUTSA), particularly Civil Code Section 3426.1 and Code of Civil Procedure Section 2019.210. CUTSA defines a “trade secret” as information that (1) derives independent economic value from not being generally known to the public1 or to others 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. Crucially, California’s Code of Civil Procedure Section 2019.210 mandates that a party alleging trade secret misappropriation must identify the trade secret with “reasonable particularity” before commencing discovery related to the trade secret. This “reasonable particularity” requirement means employers cannot simply make broad claims; they must precisely delineate what constitutes their trade secret to distinguish it from general industry knowledge. The Double Eagle case serves as a poignant illustration of what can go wrong when this specificity is lacking, underscoring that without a clear, specific identification of the trade secret, even seemingly obvious cases of data downloading by a departing employee may not hold up in court.
Proactive Protection is Paramount
To effectively protect truly valuable information, employers must implement robust practices beyond standard confidentiality agreements. This means more than just employee handbooks; it requires clearly marking documents as “confidential,” limiting access to sensitive data with password protections, and requiring Non-Disclosure Agreements (NDAs) before any product information is shared. If the customer lists or prospective customer lists that are derived from a Google search for potential customers are not likely to be considered a true secret. Similarly, product specifications and pricing that are available on a website also will not likely be considered a secret. The message is employers who wait until after the employee leaves to declare information secret and valuable may find that it is too late. Proactive, demonstrable efforts to safeguard specific, valuable information are absolutely essential for any chance of legal recourse.
