Massachusetts Adopts Uniform Trade Secrets Law

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By Aaron Nicodemus

Massachusetts has adopted a uniform trade secrets measure changing the definition of a trade secret under state law.

An amendment (H.4868) to a $1.1 billion economic development bill (H.4732) that Gov. Charlie Baker (R) signed into law Aug. 10 included adoption language for the Uniform Trade Secrets Act.

The UTSA gives Massachusetts courts new power to enter injunctions against actual or threatened misappropriation of trade secrets. It also contains a provision that allows a defendant in a trade secret misappropriation case to recover attorneys fees if the court rules the claim was made in bad faith.

“This is a significant liberalization of existing law in Massachusetts and should make it easier for defendants in trade secret cases to recover fees for defending against bad-faith trade secret claims,” Gregory S. Bombard, an associate in the trade secrets practice at Duane Morris LLP in Boston, told Bloomberg Law.

The act, passed in 1985 by the National Conference of Commissioners on Uniform State Laws, codifies “basic principles of common law trade secret protection, preserving its essential distinctions from patent law.”

State courts handle most trade secrets litigation, Walter E. Judge, an intellectual property attorney with Downs Rachlin Martin PLLC in Burlington, Vt. told Bloomberg Law.

Impact on Employees

Massachusetts courts had protected trade secrets through a mix of common law and limited statutory law, Bombard said. They had required “continuous use” of a trade secret to qualify for protection, Bombard said. But the UTSA protects trade secrets even if they’re not in active use, he said.

The new law “could end up having an even bigger impact on employee mobility than the non-compete reform bill,” Bombard said, referring to a state law that limited non-compete agreements to one year and required employers to pay half of an employee’s annual salary while the agreement is enforced. The USTA has given rise to the so-called inevitable disclosure doctrine, Bombard said, which came from a 1995 federal court decision that enjoined a PepsiCo executive from working for the Quaker Oats Company.

The U.S. Court of Appeals for the Seventh Circuit ruled the executive knew Pepsi’s secret marketing strategies, and the executive’s use of those strategies at Quaker would be inevitable. Massachusetts courts generally rejected the inevitable disclosure doctrine because the state had not adopted the UTSA, Bombard said.

“We do not know yet how Massachusetts courts will interpret the new UTSA. Other states’ courts have interpreted the language to mean a court could prevent an employee from working for a competitor, even if the employee did not have a non-compete agreement,” Bombard said.

The New England Venture Capital Association, a trade association for venture capitalists and entrepreneurs, has long advocated for adoption of the UTSA, its associate director, Ari Glantz, told Bloomberg Law.

“The UTSA gives employers a strong alternative mechanism to protect intellectual property without constricting workers’ ability to advance their careers,” Glantz said in an email.

New York is now the only state without some form of the UTSA. Two bills, SB4688 and A06419, are stuck in committee. New York Assemblyman Clyde Vanel (D), an intellectual property attorney who sponsored the Assembly bill, said it’s unlikely the bill will pass this legislative session.

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