The law in North Carolina tends to support the ability of people to work for who they want, and when they want. In most cases, with at-will employment, an employee can leave a job whenever they want to work for another company who may provide them more pay or benefits. On the other hand, the law recognizes that businesses have legitimate interests that could limit the rights of former employees. One way a business can narrowly protect its interest is through the non-compete contract as I’ve written about before. Another way the law protects a corporation’s business is provide a fiduciary duty that its owners and members owe to the corporation. Still another way when a non-compete clause and fiduciary duty don’t protect a business is the trade secrets statute.
Chapter 66, Article 24 of the North Carolina statutes is the Trade Secrets Protection Act. This law allows a business to sue in civil courts for the misappropriation of a trade secret for actual monetary damages and a court order returning or stopping the use of the trade secrets. Depending on how egregious the conduct, punitive (punishment) damages and attorney fees are also available. To “misappropriate” a trade secret simply means to take it or communicate it without being authorized to do so. If the trade secret was arrived at by independent development or reverse engineering, there is no misappropriation. Proving that something is a trade secret is a little bit trickier. Under the statute, a trade secret is any business or technical information that derives independent value from not being generally known or easily created. The statute includes as possible types of trade secrets formulas, patterns, programs, devices, compilations of information, methods, techniques, and processes. To illustrate, a list of customer names and addresses is not a trade secret since such a list can usually be readily created. However, a customer list that includes specific pricing could very well constitute a trade secret. In addition to providing value from its being not generally known, a “trade secret” must be the subject of some protection from the company to maintain it as a secret. It is logical that if you do not care enough about certain information, that you take no steps to keep it secret, it probably isn’t a trade secret.
It’s a good idea to include in any employment contract some specific definitions of what you consider your business’s trade secrets, to make any possible litigation down the road be as streamlined and as inexpensive as possible.
–Bradley A. Coxe is a practicing attorney in Wilmington, NC with Hodges & Coxe PC who specializes in Personal Injury, Medical Malpractice, Homeowner's Associations, Contract and Real Estate disputes and all forms of Civil Litigation. Please contact him at (910) 772-1678.