Trade secrets are a valuable form of intellectual property that provide businesses with a competitive edge in the marketplace. In New Jersey, trade secret law is governed by state statutes and common law principles that protect the confidential and proprietary information of businesses from misappropriation and unauthorized use. The protection of trade secrets is essential for fostering innovation, promoting economic growth, and preserving the competitive advantage of businesses in New Jersey.
This page will provide an overview of the key concepts, legal framework, and protection of trade secrets under New Jersey law, as well as the remedies available for trade secret misappropriation.
Understanding the intricacies of New Jersey’s trade secret law is crucial for businesses and individuals seeking to safeguard their valuable intellectual property assets and prevent unauthorized disclosure or use by competitors and third parties.
What is a trade secret?
The New Jersey Trade Secrets Act defines a “trade secret” as information that (1) derives economic value from being not known or readily ascertainable by others through proper means, and (2) is the subject of reasonable efforts to maintain its secrecy. N.J.S.A. § 56:15-2. A court may consider the extent that the information is known inside and outside of the business community, the efforts taken to guard its secrecy, the value of this information to the business and the competitors of the business, the money and effort expended in developing the information, and the ease with which it can be acquired or duplicated. A critical determination involves the issue of: (1) whether the information is not readily discernable by competitors through lawful means, and (2) whether the plaintiff has taken meaningful efforts to keep the information confidential.
If the alleged trade secret or confidential information is available through the public domain it is not a trade secret because, by its nature, the information is known and no value can be derived from keeping it secret from others. For example, information that is publicized on the internet or television does not meet the statutory definition of trade secret.
Winning a Case Under the NJ Trade Secrets Act
To state a claim for misappropriation under the New Jersey Trade Secrets Act, N.J.S.A. 56:15-1, (“Act”), a plaintiff must set forth specific factual details to support (1) the existence of a “Trade Secret”, as defined in the Act and (2) that the contents of the trade secret were obtained by “Improper Means” as defined in the Act. A claimant must also set forth specific factual details to support its conclusion(s) that the information alleged to have been wrongfully taken is in fact a trade secret under the Act.
The Act defines a trade secret “misappropriation” as:
- the 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) the disclosure or use of a trade secret of another without express or implied consent of the trade secret owner by a person who (a) used improper means to acquire knowledge of the trade secret; or (b) 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 (c) before a material change of position, knew or had a trade secret and that knowledge of it had been acquired through improper means. J.S.A § 56:15-2.
In one reported case, a NJ court enjoined a defendant from making use of thousands of internal company records he took upon his exit from his employer, however, the court made a point of noting that the defendant was NOT enjoined from using general industry knowledge and company specific information that was disclosed to him during the ordinary course of employment, as this was not a trade secret. The court noted that if the employer had wanted to prevent such use, it should have required a non-disclosure agreement prior to employment.
A Court draws a distinction between information learned from an employee’s many years of employment with an employer in an industry and the information he or she appropriated in anticipation of his/her resignation. A Court will not generally prohibit a resigning or terminated employee from using the generalized industry knowledge and even company specific information he/she obtained through his/her years of employment… so long as that information was disclosed during the ordinary course of his or her many years of employment, especially if the employee’s information is retained by memory unless it can demonstrate that this information was obtained through improper means, as defined by the statute.
Can Non-Trade Secret Information Be Protected?
Even if the information concerning a potential trade secret does not (in actuality) meet the statutory definition of a trade secret, a Court may still find that it is subject to protection as “confidential and proprietary information.” There is no statutory definition of “confidential” or “proprietary” information. Case law in this state has offered guidance in determining what can qualify as “confidential or proprietary information.” Under New Jersey law, “to be judicially protected, misappropriated information need not rise to the level of a trade secret and can to some extent be publicly available. The key to determining the misuse of the information is the relationship of the parties at the time of disclosure, and its intended use. Actionable disclosure of confidential information can exist where an ex-employee uses confidential information to assist a competitor. A court will consider the circumstances of the disclosure and the intended use of the information, even if the information is publicly available to a limited extent, concluding that the information qualifies as confidential and proprietary, because it was disclosed only between a plaintiff and its clients, that plaintiff’s competitors did not have knowledge of it, the information was deemed to be confidential and the disclosing party was not at liberty to appropriate it for their personal business advantage and purposes.
What About “Customer Lists”; Are They Protectable?
Customer lists have been afforded protection as trade secrets under the NJSTA “Where a service company is concerned, the names and addresses of its customers ‘are not open to and ascertainable by everyone; they are private information and the property’ of the company. Information relating to customers, merchandising, costs, and pricing may be considered trade secrets. A substantial measure of secrecy must exist in order for customer lists to be treated as a trade secret.
To discuss your trade secret case, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com. Please ask us about our video conferencing or telephone consultations if you are unable to come to our office.
Written by Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a New Jersey Trade Secret Law Attorney
Fredrick P. Niemann, Esq. is a NJ Trade Secret Law Attorney serving these New Jersey Counties:
Monmouth County, Ocean County, Essex County, Cape May County, Mercer County, Middlesex County, Bergen County, Morris County, Burlington County, Union County, Somerset County, Hudson County, Passaic County