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Oregon Case Sheds Light on the Role of an Employee’s Memory in Trade Secret Misappropriation

On Behalf of | Dec 3, 2020 | Trade Secrets |

Trade secrets are essential to a competitive market. So, too, is the ability to protect those secrets by taking legal action. Under Oregon law, “trade secret” means a company’s valuable information that is actively protected by the company to maintain its secrecy. Trade secret information includes categories such as drawings, customer lists, formulas, methods, or processes.

In Oregon, the Uniform Trade Secrets Act (UTSA) seeks to strike a balance between safeguarding the proprietary information that gives a company their competitive advantage, while promoting and allowing innovation and competition. It gives businesses and employers the legal recourse they need to stop misappropriation and unauthorized dissemination and use by giving them the legal tools to seek damages and enjoin those committing illegal acts.

What Exactly is Misappropriation?

Oregon law establishes a multi-pronged definition for misappropriation. In general terms, misappropriation occurs when an individual improperly acquires or discloses a trade secret without the owner’s consent.

A common scenario involves a current or former employee sharing or using protected and confidential data received during their previous employment for their own gain or for another businesses advantage

What Recourse Do You Have for Misappropriation of Trade Secrets?

Actual or threatened misappropriation may be temporarily, preliminarily, or permanently enjoined.

A business or employer is generally entitled to recover damages adequate to compensate for misappropriation.

Damages may include both the actual loss caused by misappropriation, and the unjust enrichment caused by misappropriation that is not taken into account in computing actual loss. Damages shall not be less than a reasonable royalty for the unauthorized disclosure or use of a trade secret.

Upon a finding of willful or malicious misappropriation, punitive damages may also be awarded.

Oregon Court of Appeals Case Sheds Light

A recent Oregon Court of Appeals case sheds light on the elements required for a trade secret misappropriation case in unclear circumstances. In Pelican Bay Forest Products, Inc., v. Western Timber Products, Inc., a retiring sales representative of a lumber distribution company decided to give his son-in-law, who was a competitor, valuable information to help him in the industry by revealing sensitive customer information (in violation of his confidentiality agreement). The son-in-law used that information to lure customers to a competitor. When the sales representative’s former employer discovered the misappropriation of its sensitive information and trade secrets, it alleged diminished sales and profits caused by the former sales representative

It’s important to note that the sales representative had not stolen any physical or electronically-stored customer information, but instead, he relied solely on his memory when disclosing the sensitive information to his son-in-law. In court, the sales representative argued that his former employer could not own the rights to the information contained in his memory and experience

The Oregon Court of Appeals rejected the defendants’ argument, and opted instead to follow the lead of other UTSA states that have addressed this memory issue. Under the UTSA, disclosing a memorized customer list is no different than printing it, emailing it to yourself, and wrongfully using it or sharing it. What matters is that the information was wrongfully obtained and later misused—not whether it was in a tangible form.

What Businesses Can Learn from this Case

The takeaway is that protecting trade secrets requires businesses to take a comprehensive approach. Even the most secure of systems can’t prevent employees or contractors from simply memorizing valuable information and disclosing it to a competitor. However, without the confidentiality agreement in place, the plaintiff in this case would have undoubtedly had a much tougher time making a case for trade secret misappropriation. Talk to a lawyer about how to safeguard your trade secrets from every angle.