A Northern Virginia trial court recently held that the Virginia Uniform Trade Secrets Act, Va. Code § 59.1-336, et seq. (the “VUTSA”), did not prohibit a former employee from retaining trade secrets over the objection of her former employer when those trade secrets were acquired by proper means within the scope of employment and neither used, disclosed, or threatened to be used or disclosed after termination.
In Knowesis, Inc. v. Herrera, Case No. CL-2019-2807 (Va. Cir. Ct. Oct. 2, 2019) (Fairfax Cnty.), a former employee, Herrera, was issued a company laptop, desktop computer, and access card through which she acquired confidential personnel data and proprietary information for work purposes. This included salary information, contract pricing, marketing materials, vendor agreements, government contracts, and subcontract agreements that Knowesis alleged were trade secrets. After the termination of her employment with Knowesis, Herrera allegedly failed to return her company access card and laptop containing Knowesis’s trade secrets. The company also discovered that Herrera had deleted data from her company-issued desktop computer and used an external hard drive to store business information. Knowesis proceeded to file a lawsuit against Herrera alleging, among other things, misappropriation of trade secrets in violation of the VUTSA. In its complaint, Knowesis alleged that although Herrera had initially acquired the trade secrets in furtherance of her employment, she misappropriated them when she kept the trade secrets following her termination and after Knowesis demanded their return. Knowesis sought an award of $25,000 in damages, attorney’s fees, and $20,000 in punitive damages against Herrera.
In declining to grant Knowesis summary judgment on its trade secrets claim, the circuit court first observed that the VUTSA prohibits actual or threatened misappropriation of trade secrets through acquisition, disclosure, or use. However, under the statute, the acquisition of trade secrets must occur by “improper means.” The circuit court then found it significant that Knowesis failed to establish (1) that Herrera acquired its trade secrets outside of her work-related activities, (2) that Knowesis had a policy barring employees from transferring trade secrets onto private hard drives, or (3) that Herrera copied the materials at issue after her termination. While those allegations, had they been made in the complaint and proved, might have been sufficient to establish acquisition through improper means, the circuit court determined that Herrera “merely kept the trade secrets she properly obtained during her employment” and that the VUTSA “does not prohibit maintenance of [trade] secrets after the initial proper acquisition unless one can prove an actual or threatened disclosure or use of those secrets.” Accordingly, Knowesis could not prevail against Herrera on its VUTSA claim.
Although Knowesis’s trade secrets claim was unsuccessful, the circuit court emphasized that a former employee who retains trade secrets properly acquired during his or her employment could potentially violate the “threatened” misappropriation prong of the VUTSA by refusing their return after joining a competing organization. In addition, the circuit court stressed that employers can have employees sign confidentiality and non-disclosure agreements appropriately tailored to protect trade secrets and adopt policies prohibiting the transfer of data onto non-company electronic devices. The Knowesis decision underscores the point that active management of a company’s intellectual property portfolio through the implementation of reasonable security measures and enforceable policies can reduce the risk of trade secrets loss where statutes such as the VUTSA may not otherwise provide a remedy.
For more information, contact OFP attorney Jim Miller at 703-218-2100.
The VUTSA defines “trade secrets” to mean:
information, including but not limited to, a formula, pattern, compilation, program, device, method, technique, or process, that:
- 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, and
- Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
Va. Code § 59.1-336.
“Improper means” is defined under the VUTSA to include “theft, bribery, misrepresentation, use of a computer or computer network without authority, breach of a duty or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means.” Id.
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