by John Marsh
10. November 2011 10:30
New Jersey appears close to adopting the Uniform Trade Secret Act (UTSA). I think that this is a pretty big development, as New Jersey is one of the four remaining states that have not adopted some or all of the provisions of the UTSA (Massachusetts, New York and Texas are the others) but instead rely upon some variation of the Restatement of Torts (2d) for trade secret misappropriation claims.
The bill, which is simply described as the "New Jersey Trade Secrets Act" (A-921/S-2456), has taken more than two years to work its way back and forth between the New Jersey General Assembly and Senate. However, on September 26, 2011, the New Jersey Senate approved the bill which would formally adopt the UTSA and replace the current common law remedies. The Act would include many features of the UTSA including the right to recover damages for unjust enrichment or a reasonable royalty for unauthorized disclosure or use of the trade secrets in question. The Act would allow for punitive damages in cases of willful misappropriation (not to exceed twice the amount of the actual damages proven) and would also permit an award of attorneys fees for claims found to have been brought in bad faith.
The New Jersey Act also has a couple of unique provisions. Going against the trend favoring public proceedings, the Act would impose "a presumption in favor of granting protective orders in connection with discovery proceedings" as well as "provisions limiting access to confidential information to only the attorneys for the parties and their experts, holding in-camera hearings, sealing the records of the action, and ordering any person involved in the litigation not to disclose an alleged trade secret without prior court approval." The Act also precludes a defendant from arguing that "proper means to acquire the trade secret existed at the time of the misappropriation," which is a defense commonly offered in trade secret cases.
The Assembly has to vote on the Senate’s amended version before it is presented to Governor Chris Christie for his signature. The bill is expected to be voted upon after the November recess and signed by Governor Christie. Once the bill is signed by Governor Christie, it will become effective immediately.
In short, trade secret protection is very much on the minds of state and federal legislators. As I wrote last month, Congress is now considering a federal civil cause of action under the Economic Espionage Act. In addition, Georgia broadened its non-compete statute through a consitutional amendment last year and legislative developments in Masachusetts are underway as well. It is truly a momentous time to be practicing in this area.