New Jersey Adopts Trade Secrets Act

March 1, 2012 | Comments Off on New Jersey Adopts Trade Secrets Act
Posted by Kurt E. Anderson

After an inexplicably long wait, this January, New Jersey finally adopted a modified version of the Uniform Trade Secrets Act. With the adoption, New Jersey becomes the 46th state to adopt a version of the uniform act. According to the National Conference of Commissioners on Uniform State Laws (NCCUSL) adoption map, only New York, North Carolina, Texas and Massachusetts have yet to adopt it (although legislation is currently pending in Massachusetts).

Here is a little bit of the history of the act’s adoption. The uniform act was promulgated by NCCUSL in 1979 and later amended in 1985. It was first introduced as a bill in New Jersey in 2000 and was reintroduced in each subsequent year. The New Jersey Law Revision Commission issued a final report recommending that the state adopt the uniform act in 2008.

In summary, the act provides for:

» Injunctive relief for actual or threatened misappropriate of trade secrets.

» Recovery of actual damages as well as unjust enrichment not included in any actual damages or, in the alternative, a reasonable royalty.

» In cases of willful misappropriation, punitive damages may be awarded equal to twice the damages otherwise determined together with attorneys fees.

» Attorneys fees may also be recoverable in cases involving bad faith misappropriation or seeking or resisting injunctive relief in bad faith.

» A 3 year statute of limitations for claims of misappropriation.

The New Jersey version of the act largely follows the New Jersey Law Revision Commission’s final report. Some interesting modifications to the uniform act were included in the New Jersey version (and are discussed in the commission’s final report). The New Jersey version clarifies that misappropriation through improper means includes “access that is unauthorized or exceeds the scope of authorization.” This would presumably include, among other things, access to computer systems to obtain trade secrets where the access to the computer was otherwise authorized for other purposes, but the access to the trade secret was not.

One of the commission’s suggested revisions which was not enacted with the final legislation would have created a presumption in favor of granting protective orders in discovery proceedings. Instead, the final legislation merely allows for protective orders in accordance with applicable court rules (See R 4:10-3 Protective Orders), but does not include the presumption in favor of such relief.

Finally, while the act supersedes tort law which may provide for remedies for misappropriation for trade secrets, the law expressly preserved all other common law rights. The New Jersey Law Revision Commission’s final report notes that New Jersey common law protects information that may not rise to the level of a trade secret. See Lamorte Burns & Co. v. Walters, 167 N.J. 285 (2001). Thus, while the prior common law relating to trade secrets is now superseded by the New Jersey Trade Secrets Act, the common law protecting confidential information that may not fall within the definition of a “trade secret” is presumably preserved.