Unintentional and Unauthorized Disclosure or Posting on the Internet of Trade Secrets
“About the author: Scott Lesowitz is a cum laude graduated of Harvard Law School and a former Assistant U.S. Attorney. His practice is located in Beverly Hills, California.His e-mail address is scott@syversonlaw.com.”
In order for proprietary and confidential information to be protected as a trade secret, it may not be generally known or readily ascertainable. When an unintentional or unauthorized disclosure of a trade secret occurs, the information may lose its trade secret status, even if the holder of the trade secret was not at fault for the disclosure. For example, 42 Cal.App.4th 436, 455 (1996) (“Voluntary disclosure of information as a public record, even if mistaken, constitutes a valid waiver of trade secret protection”).
That said, if someone obtains a trade secret and realizes that he or she received the information by mistake or from someone who had engaged in trade secret theft, he or she may not use or further disclose the trade secret. California Code of Civil Procedure § 3426.1(b)(2)(C).
In regards to online, if someone wrongfully posts trade secrets onto the Internet, this publication will likely end the status of the information as a trade secret going forward. The holder of the (now former) trade secret may sue the person who posted the information online for misappropriation but would not be able to sue anyone else for trade secret misappropriation who obtains or uses the information in the future.
Publication on the Internet does not automatically destroy the trade secret status of information. DVD Copy Control Assn., Inc. v. Bunner, 116 Cal.App.4th 241, 252 (2004) (“Publication on the Internet does not necessarily destroy the secret if the publication is sufficiently obscure or transient or otherwise limited so that it does not become generally known to the relevant people, i.e., potential competitors or other persons to whom the information would have some economic value.”). However, generally publication onto the Internet will end the trade secret status of the information. Religious Technology Center v. Netcom On-Line Communication Services, Inc., 923 F.Supp. 1231 (N.D. Cal. 1995); Hoechst Diafoil Co. v. Nan Ya Plastics Corp., 174 F.3d 411, 418-19 (4th Cir. 1999).
Similarly, if disclosure occurs that is sufficiently limited in scope that the information does not become “generally known,” trade secret status should be retained. Also, reasonable disclosures to third parties with confidentiality agreements or understandings of confidentiality will generally not end trade secret status. However, if that third party then wrongfully publishes or discloses the information to the extent that the information it becomes “generally known” to others, the trade secret status going forward ends. The (former) trade secret holder could only sue the third party who disclosed or published the information without permission.
Due to trade secrets potentially losing their status as trade secrets, in trade secret cases there are often standing protective orders limiting the disclosure, dissemination, or public filing of documents containing trade secrets. (Separately, the protective orders may be designed to have provisions to prevent even the opposing party from learning of the trade secret by limiting the viewing of trade secrets to their attorneys and other select people.)
A related practice note is that attorneys must be careful not to inadvertently file information containing trade secrets. Doing so may end trade secret status. Of course, attorneys face consequences if trade secrets of an opposing party are disclosed or disseminated in violation of a protective order.