Misappropriation of a Trade Secret as a Cause of Action in New York

Businesses in New York often depend on information that gives them an edge over competitors. This may include customer lists, marketing strategies, recipes, formulas, software code, or pricing models. When someone wrongfully takes and uses that information, the business may have a legal claim for misappropriation of a trade secret. In New York, there are two core elements a plaintiff must prove to win such a claim.

The Plaintiff Possessed a Trade Secret

The first step is showing that the information qualifies as a trade secret. Not every bit of company information will count. To be considered a trade secret, the information must be valuable because it is not generally known or easily discovered by others in the industry. The company must also make reasonable efforts to keep it confidential.

This might include limiting access to the information, requiring employees or contractors to sign non-disclosure agreements, encrypting files, or marking documents as confidential. Courts look at factors such as how much the information is worth to the business, how difficult it would be for someone else to replicate it, and what steps were taken to keep it secret.

For example, a restaurant’s unique recipe that is kept in a secure location and only shared with key staff may qualify as a trade secret. On the other hand, a customer list that is easily found online or shared without restriction likely will not.

The Defendant Used the Trade Secret Wrongfully

Once the plaintiff shows the existence of a trade secret, the next step is proving that the defendant misused it. This does not simply mean using similar information. The plaintiff must show that the defendant accessed or used the trade secret in one of three ways: in violation of an agreement (such as a confidentiality or employment contract), in breach of a duty of trust, or by using improper methods to discover it.

Improper methods could include hacking into a computer system, stealing files, or convincing someone to share the information in violation of their obligations. Even if someone is not bound by a contract, courts may still find liability if there was a clear expectation of confidentiality or if deceit was involved.

Conclusion

To win a trade secret misappropriation case in New York, a plaintiff must prove two things: that the information in question was truly a trade secret and that the defendant acquired or used it improperly. These cases often come down to whether the business took proper steps to guard the secret and whether the defendant acted in bad faith.

Because trade secret cases often involve complex facts and technical issues, both businesses and individuals should seek legal advice early if they suspect confidential information has been misused. A well-prepared case can help stop further harm and potentially recover financial damages.

Find the Law

“A plaintiff claiming misappropriation of a trade secret must prove: (1) it possessed a trade secret, and (2) defendant is using that trade secret in breach of an agreement, confidence, or duty, or as a result of discovery by improper means.  Integrated Cash Management Services Inc v Digital Transactions Inc., 920 F2d 171, 173 (2d Circuit 1990).” Shaw Creations INC. v. Galleria Enter., INC., 2010 N.Y. Slip Op. 51813, 6 (N.Y. Sup. Ct. 2010)