Michigan Trade Secret Law Frequently Asked Questions

1. What qualifies as a trade secret in Michigan?

Michigan’s Uniform Trade Secrets Act (“UTSA”) defines a trade secret as information, including a formula, pattern, compilation, program, device, method, technique, or process, that is both of the following:

• Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use.
• Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

In layman’s terms, the information must be (1) monetarily valuable, (2) secret, and (3) the employer must have taken reasonable steps to keep the information secret from the public.  If the information fails to meet these criteria, a court may find that it is not a trade secret and therefore not entitled to protection under the UTSA.

2. Can “trade secret” information lose its “trade secret” designation?

Yes.  Suppose a company fails to make reasonable efforts to maintain secrecy, and the information becomes widely known. In that case, the information that was once a “trade secret” can lose that designation.  Reasonable efforts to maintain secrecy may include:

• Limiting access to the “trade secret” information (both digital and physical copies) within the company to only those who need to know the information.
• Marking the “trade secret” information “Confidential.”
• Making individuals who view or use the “trade secret” information sign non-disclosure agreements (NDAs).
• Maintaining strict policies and procedures for the viewing and use of the “trade secret” information.

In short, the more extensive the efforts a company makes to keep the “trade secret” information secret, the more likely a court will determine the information is, in fact, a “trade secret.”

3. What qualifies as an unlawful use or disclosure of a trade secret in Michigan?

The UTSA defines “misappropriation” as either of these:

• Acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired improperly.

or

• Disclosure or use of a trade secret of another without express or implied consent by a person who did one or more of the following:

1. Used improper means to acquire knowledge of the trade secret.
2. At the time of disclosure or use, knew or had reason to know that his or her knowledge of the trade secret was derived from or through a person who had utilized improper means to acquire it, acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use or derived from or through a person who owed a duty to the person to maintain its secrecy or limit its use.
3. Before a material change of his or her position, knew or had reason to know that it was a trade secret and that knowledge of it had been acquired by accident or mistake.

In layman’s terms, if you (1) take or (2) use or disclose trade secret information without your former employer’s permission, you may have misappropriated a trade secret and have to pay damages to your former employer.

4. My former employer or a competitor has sued me for misappropriation of trade secrets. What kinds of damages can they get in Michigan?

Under Michigan’s Uniform Trade Secrets Act, your employer or competitor can recover three types of damages: (1) injunctive relief, (2) money damages, and (3) attorney’s fees associated with bringing the lawsuit.

Injunctive relief is simply a court order stopping actual or threatened misappropriation of trade secrets. The injunction preventing the alleged misappropriation can be kept in place as long as the court finds it necessary “to eliminate commercial advantage that otherwise would be derived from the misappropriation.”  In other words, the injunction can be kept in place for years if necessary.

Money damages 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.” Michigan courts can also impose a reasonable royalty for an alleged misappropriator’s unauthorized disclosure or use of a trade secret.

Attorney’s fees are awarded in trade secret misappropriation lawsuits in Michigan if “a claim of misappropriation is made in bad faith, a motion to terminate an injunction is made or resisted in bad faith, or willful and malicious misappropriation exists, the court may award reasonable attorney’s fees to the prevailing party.” In other words, if your former employer or competitor brings the lawsuit or moves for an injunction in bad faith, a court may order your former employer to pay the attorney’s fees you paid to defend against the lawsuit.  On the other hand, if a court finds that you willfully or maliciously resisted the injunction in bad faith, it may order you to pay your former employer’s or competitor’s attorney’s fees.  “Bad faith” and “willful and malicious” will be interpreted differently by different judges, but both require a finding that the party had bad intentions.  The word “may” gives the court discretion, meaning it can decide not to require the other side to pay attorney’s fees if it does not believe it is appropriate under these circumstances.

5. My former employer or a competitor has sued me for misappropriation of trade secrets. What happens next in Michigan?

The legal process for misappropriation of trade secrets lawsuits is basically the same as the process for non-compete and non-solicitation lawsuits outlined here.

If your former employer or a competitor is suing you for misappropriation of trade secrets, Contact Michigan trade secret attorney Warren Astbury at 313-859-4459 or email at wastbury@caklegal.com.