1. The Uniform Trade Secrets Act (hereinafter “Uniform Act”)[4] was originally proposed in the United States by the National Conference of Commissioners on Uniform State Laws over twenty years ago and has now been enacted in most of the individual states of the United States. The Virginia Uniform Trade Secrets Act (hereinafter “Virginia Act”)[5] was enacted in Virginia with some modifications to the Uniform Act and became effective on July 1, 1986. The purpose of this article is to: (1) briefly review the historic background of trade secret law; (2) critically summarize the significant provisions of the Virginia Act, including a discussion of a few unusual and controversial features of the Virginia Act; (3) compare the Virginia Act and the Uniform Act; and (4) review some of the significant published case law in Virginia concerning the Virginia Act. This article does not cover the federal 1996 Economic Espionage Act.[6]

II. Historical Development of Trade Secrets Law

2. Epigraphical and literary sources establish that trade secrets have commonly existed for a very long time. Businesses have always had trade secrets, such as customer lists, secret formulae (e.g., dyeing), methods of production (e.g., pottery), vital business and financial records, etc. Even the earliest businessmen must have attempted to protect their trade secrets. After all, their trade secrets gave them a competitive advantage. Surprisingly however, trade secret law has not existed for a long time. There is a debate amongst classical Greek and Roman scholars as to whether there was any legal protection of trade secrets even in that era when sophisticated businesses flourished and the Greeks and Romans traded throughout the then known world.[7] One commentator, who cites Justinian and Gaius, makes the argument that under Roman law during the time of the late Republic and early Empire, there was a specific Roman cause of action named actio servi corrupti which prohibited a slave from stealing the trade secret of his master and giving it to a competitor.[8] As late as the Middle Ages in Europe, there does not appear to be any protection of trade secrets through the application of any unified body of trade secret law.[9] At that time, trade secrets were protected, if at all, through the application of unfair competition laws.

3. Trade secret law only began to develop with the newfound mobility of labor in the Industrial Revolution in Europe.[10] A few early trade secret cases were published in the 19th Century in England.[11] In the 1851 English case of Morison v. Moat,[12] plaintiff sought and was granted an injunction to restrain the defendant from using a secret for compounding a medicine, “Morison’s Universal Medicine,” which was not the subject of a patent, and to restrain the sale of this medicine by the defendant, who acquired knowledge of the secret in violation of a contract and in breach of “trust and confidence.” However, this case was hardly the first trade secret case. The Vice-Chancellor, who rendered the opinion in this case, noted therein that by 1851 the Court had already heard trade secret cases, stating, “[t]hat the Court has exercised jurisdiction in cases of this nature does not, I think, admit of any question.”[13]

4. Possibly the first reported American case involving trade secrets was the 1837 case of Vickery v. Welch.[14] It is a simple but fundamental case involving the 1836 sale of a chocolate mill in Braintree, Massachusetts. In the sales agreement for the mill, the seller agreed to sell the mill, convey to the buyer the secret as to how to make the chocolate and deliver a written assurance that he would not give the secret to anyone else, all for the consideration of $2000 and eight annual payments of $7500. Two or three other persons in the company had knowledge of the seller’s secret, but they had given a written oath not to divulge it. The buyer tendered the money; however, upon advice of counsel, the seller refused to tender to the buyer the written promise not to convey his secret or art to others. The seller argued that if he so bound himself, it would be an unlawful restraint of trade. The Massachusetts court upheld the terms of the contract and ordered the seller not to disclose the secret to others. The court reached the conclusion that there was no restraint of trade in this case since it was “...of no consequence to the public whether the secret art be used by the plaintiff or defendant.”[15]

5. Possibly the earliest reported case in the Commonwealth of Virginia involving a trade secret was decided on the basis of contract law. In the 1940 case of American Chlorophyll, Inc. v. Frank M. Schwertz,[16] an inventor of a process to extract chlorophyll, carotene and xanthophyll from vegetable leaf matter licensed the process to the company in 1935 for a royalty of 5% of net sales, payable quarterly. Thereafter, the company refused to pay him any royalty. The inventor did not notify the defendant of the breach of the contract, as required by the license agreement. Instead the inventor caused an article to be published in a trade journal known as the “Industrial and Engineering Chemistry,” disclosing the process. In deciding the case, the Court simply applied traditional contract law and concluded that the plaintiff had elected to continue the contract by not exercising his right under the contract to terminate it. Since the contract remained in effect, his disclosure of the trade secret constituted a violation of the license agreement since the agreement contained a specific provision prohibiting disclosure.

6. Throughout these early cases the judiciary attempted to formulate a unified comprehensive legal theory to justify the protection of trade secrets. In the previously cited 1851 case of Morison v. Moat, this English court was already focusing on the theoretical basis for the protection of trade secrets:

Different grounds indeed have been assigned for the exercise of that jurisdiction. In some cases it has been referred to property, in others to contract, and in others, again, it has been treated as founded upon trust or confidence, meaning, as I conceive, that the Court fastens the obligation on the conscience of the party, and enforces it against him in the same manner as it enforces against a party to whom a benefit is given the obligation of performing a promise on the faith of which the benefit has been conferred; but, upon whatever grounds the jurisdiction is founded, the authorities leave no doubt as to the exercise of it.[17]

7. Even today, there does not appear to be any singular underlying legal theory to justify the protection of trade secrets. While the need for the protection of such secrets is virtually uncontroverted in most Western countries, the several legal theories used to justify trade secret legislation do so only partially and inadequately. Early trade secret cases, and even some current cases, still justify the protection of trade secrets as a property right of the owner of the trade secret. However, this theory does not work in all cases. For example, trade secret law provides that the owner of a trade secret has no right to protect it if that secret is acquired by others who develop it on their own by proper means. Also, protection of a trade secret will be lost, and others will be able to exploit it, if the secret is inadvertently or even improperly disclosed to the public or enters the public domain. Clearly, these examples are inconsistent with the concept of protection of a trade secret based on a property right in the trade secret.

8. Another theoretical basis advanced for the protection of trade secrets is contract theory. However, this theory has very limited applicability. In many cases a written contract will not be in place between the trade secret owner and the misappropriator of the trade secret. A frequent example involves a departing employee who misappropriates a trade secret from his employer and the employee has not executed a non-disclosure of proprietary information agreement. Recognizing the obvious inadequacies of the use of the property theory and the contract theory to justify the protection of trade secrets, law professors and jurists advanced the theory that the protection of trade secrets is justified on the basis of a general duty of good faith. That is, it is fair to protect someone who has a trade secret from someone who misappropriates it by improper or unlawful means. Finally, it has been argued that trade secret protection is justified, like patents, to encourage inventors and investors to create, innovate and develop new technologies by protecting their inventions and investments and allowing them to profit thereby.

9. Regardless of the absence of a comprehensive underlying theory justifying the protection of trade secrets, by the early 20th Century, the number of trade secret cases had begun to substantially increase in the United States. Concurrently, prominent American professors of law and jurists began to publish the First Restatement of Torts in which they set forth what they considered to be general principles of law to be considered by the various states of the United States and others to foster uniformity in the laws of the various states. In 1939, in recognition of this growing body of trade secret case law, the First Restatement included an important new definition of a trade secret. Comment b of the First Restatement of Torts defined a trade secret as any formula, pattern, process, device, or compilation of information used in a business that gives the user an opportunity to obtain an advantage over nonusers.[18]

10. After the publication of the First Restatement’s definition, it was widely applied by the judiciary to ever increasing numbers of trade secret cases in the United States. In light of the success of this definition, a consensus began to develop that there was a need for a unified, distinct and comprehensive trade secrets law. In 1969, the United States National Conference of Commissioners on Uniform State Laws (hereinafter “the Conference”) organized a committee to develop a uniform trade secrets act. The committee considered the definition[19] of a trade secret used in the First Restatement and formulated the Uniform Act’s definition of a trade secret, relying heavily on the definition found in the First Restatement. In 1979, the Conference adopted the Uniform Trade Secrets Act and in 1985, it made important amendments to the Uniform Act.

11. The Uniform Act quickly became widely and favorably recognized in the various states of the United States as a model for legislation. Currently, 42 of the 50 states have enacted a version of the Uniform Act, with each state varying its legislation to some degree from the Uniform Act.[20] Since its adoption by the Conference and enactment by various states, courts of the various enacting states have decided and published numerous cases under their respective versions of the Uniform Act, interpreting the various provisions and enhancing our understanding of the Act. Since the Virginia Act’s effective date in the Commonwealth of Virginia on July 1, 1986, Virginia courts have decided numerous published and unpublished trade secret cases. Of course, many more Virginia trade secret cases have been arbitrated, mediated or settled by the parties.

12. Because so many states have enacted a version of the Uniform Act and there has been so much litigation based upon it, it is plausible to conclude that not only is trade secrets law here to stay as a distinct and unified body of law. It will also continue to develop into a more comprehensive body of law in Virginia and throughout the United States. Other countries, as well, are adopting some form of trade secrets law.[21] Some of those countries are following the format and concepts of the Uniform Act.[22] By contrast, some of the United States’ major trading partners, such as Canada and the United Kingdom, do not protect their citizens’ trade secrets by a distinct and unified body of law, such as our Uniform Act. They have simply applied their existing unfair competition laws to protect their citizens’ trade secrets. Further, while it is frequently said that there is no international treaty concerning the protection and exploitation of trade secrets, the United States is a signatory to the Agreement on Trade Related Aspects of Intellectual Property Rights of GATT which requires each signatory to enact legislation for the protection of information. The Agreement describes the required legislation using language very similar, if not identical in some respects, to the Uniform Act.[23] Other than the Agreement, there are no international treaties concerning the protection and exploitation of trade secrets. The lack of international treaties may not be surprising because modern trade secrets law is still new and developing. However, this may change someday. Governments of industrial countries with multinational businesses engaged in transnational transactions and foreign governments of less developed countries which desire to promote investments in their country all have good reasons to seek the international protection of trade secrets.

III. The Virginia Uniform Trade Secrets Act

13. While patents, trademarks and copyrights are regulated by federal law, the Court of Appeals for the Fourth Circuit has found that state regulation of trade secrets does not violate the supremacy clause. In Sears v. Gottschalk,[24] relying on Kewanee Oil v. Bicron Corp.,[25] the Court concluded that “... the states may protect trades secrets, and we perceive no violation of the fifth amendment in federal forbearance to permit that power to be exercised.”

14. From a drafting point of view, the Uniform Act is somewhat unusual in that its significant provisions are contained in the definitions section of the Uniform Act, which is Section 1. Section 1 defines “trade secret” and “misappropriation of a trade secret.” The Virginia Act follows the Uniform Act’s format in this regard.

A. Definition of Misappropriation

15. The initial language of Virginia’s Act, which defines the misappropriation of a trade secret, exactly follows Section 1 of the Uniform Act. Section 59.1-336 of the Code of Virginia begins its definition of misappropriation as follows:

1. Acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or

2. Disclosure or use of a trade secret of another without express or implied consent by a person who...

16. There is nothing remarkable in defining the misappropriation of a trade secret of another to mean a disclosure or use of a trade secret of another without express or implied consent by a person who used improper means to acquire the trade secret. Both the Virginia Act and the Uniform Act also define improper means to include “... theft, bribery, misrepresentation, breach of a duty or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means.”[26] However, it is interesting that both Acts also define misappropriation as the mere acquisition of a trade secret. In so doing, the Uniform Act’s drafters and the Virginia General Assembly recognized the reality that people who employ improper means to use or disclose a trade secret of another usually try to cover up those misdeeds, thereby making it difficult to prove their disclosure or use. It makes sense to define the misappropriation of a trade secret of another to include the mere acquisition of the trade secret of another even if you can not prove disclosure or use because it is reasonable. If someone goes through all of the trouble of acquiring a trade secret by improper means, they are doing so to use or disclose it at some other time.

17. The United States District Court for the Eastern District of Virginia, Alexandria Division, has addressed this issue as to whether the mere acquisition of a trade secret of another by improper means is a misappropriation under the Virginia Act. In the case of Smithfield Ham and Products Company, Inc. v. Portion Pac, Inc.,[27] the Court held that mere acquisition is sufficient, explaining its holding by applying property theory to justify the protection of the trade secrets:

[T]he VUTSA [Virginia Uniform Trade Secrets Act] prohibits the improper acquisition of a trade secret, whether or not the trade secret is used in direct competition with the rightful owner. Va. Code Ann. Section 59.1-336; see Trandes Corp. v. Guy F. Atkinson Co., 996 F.2d 655, 665 (4th Cir.) (interpreting the Maryland UTSA, and citing cases) cert. denied, 114 S.Ct. 443, 126 L.Ed.2d 377 (1993). This is so because the value of the trade secret as an asset of the company is diminished by its disclosure, whether or not the person acquiring it uses it competitively.

18. After defining misappropriation to mean the acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means, the Virginia Act continues its definition of misappropriation to include the disclosure or use of a trade secret of another without express or implied consent by a person who used improper means to acquire knowledge of the trade secret or who at the time of disclosure or use knew or had reason to know that his knowledge of the trade secret was:

1. Derived from or through a person who had used improper means to acquire it;[28]

2. Acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use;[29]

3. Derived from or through a person who had a duty to the person seeking relief to maintain its secrecy or limit its use;[30] or

4. Acquired by accident or mistake.

19. A common example of the misappropriation of a trade secret is an employee who properly obtains a trade secret during the course of his employment, but subsequently takes it for his own benefit. In 1990, the Virginia Supreme Court decided the case of Dionne v. Southwest Foam Converting & Packaging[31] in which a father and son had developed a new packaging material called “Durofoam,” while employed at the family corporation. The father died. After intra-family problems, the son left the family corporation to start a competing business using the trade secret to manufacture a competing packaging material. The family corporation sued the son for misappropriation of a trade secret under the Virginia Act. The son defended in part by arguing that “... he can not be found guilty of misappropriating something which he personally developed while employed at [the family corporation].”[32] The Supreme Court affirmed the Circuit Court’s decision, holding the Virginia Act defines misappropriation to include the use or disclosure of a trade secret if the trade secret was obtained under circumstances giving rise to a duty to maintain its secrecy or limit its use. The Court found the son clearly knew the manufacturing process was a trade secret and that he had a duty to maintain its secrecy since he had signed a confidential information agreement with the company.

20. The case of a trade secret acquired by accident or mistake is an interesting circumstance since it is a very specific, unique and possibly uncommon fact pattern. In such a case, the above Virginia definition of misappropriation prohibits the use or disclosure of a trade secret of another without express or implied consent by a person who at the time of disclosure or use knew or had reason to know that his knowledge of the trade secret was acquired by mistake or accident. A priori, if a person discovered that their acquisition of the trade secret was accidental or mistaken after they disclosed or used it, there is no misappropriation of a trade secret.[33]

21. This portion of the Virginia Act dealing with the acquisition of a trade secret by mistake or accident differs somewhat from the Uniform Act. The relevant portion of the Uniform Act provides that misappropriation means disclosure or use of a trade secret of another without express or implied consent by a person who, “(C) 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.”[34]

22. It appears that the seminal difference between the Virginia Act’s language and the Uniform Act’s language on this point is the Uniform Act’s requirement of a material change in position. In Virginia, there is no requirement of material change in position, which seems to make sense. Under the property theory of protection of trade secrets, a material change of position of another is irrelevant to the trade secret owner. As we learned in Virginia’s Smithfield case above, the value of a trade secret to the owner of the trade secret is diminished if it is merely acquired by another even if it is not used or disclosed by the other. The value of a trade secret is diminished under such circumstances regardless of whether there was a material change of position of another or the secret was acquired by another by accident or mistake.

23. Possibly applying the fairness theory to justify the protection of trade secrets, the drafters of the Uniform Act inserted the material change requirement in the Uniform Act in an attempt to balance the property interests of the trade secret owner and the interests of another who only acquired the trade secret by accident or mistake. However, the balancing of these interests may be accomplished, as Virginia has done, without the Uniform Act’s material change requirement. This may be achieved by simply prohibiting the disclosure or use of a trade secret acquired by accident or mistake if the other individual had knowledge of the accident or mistake at the time of his disclosure or use. If he did not have such knowledge when he disclosed or used it, the value of the trade secret is still diminished but it is unfair to punish the other person who used or disclosed it since he had no knowledge. On the other hand, it is fair to punish the other person if he had such knowledge before he used or disclosed it. Obviously, this is an example of how the application of the property theory and the fairness theory can lead to different results in trade secrets law.

24. If the only impact of this Virginia Act provision and Uniform Act provision on the accidental or mistaken acquisition of a trade secret were on this very specific and unique fact pattern, these provisions would probably effect the outcome of relatively few cases. However, these provisions of the Virginia Act and the Uniform Act may give rise to an unintended opportunity for misappropriators and can be problematic for a trade secret owner. For example, a misappropriator can falsely argue that he did not use improper means to acquire a trade secret and it was not until after he used it that he found out that he had acquired a trade secret by accident or mistake. In so doing, the misappropriator may get off the hook through the use of his false argument because it may be difficult for the trade secret owner to contest the timing of the misappropriator’s allegation that he did not know he had acquired a trade secret by mistake or accident until after he used or disclosed it since: (1) only the misappropriator may have this information; and (2) the owner may have difficulty discovering independent evidence to prove the timing of the misappropriator’s knowledge. Outside of Virginia, whose Uniform Act’s language prevails, this pitfall may be even more problematic. The trade secret owner has even more problems of proof because of the material change language in the Uniform Act.

25. A discussion of the prohibition of the disclosure or use of a trade secret under the Virginia Act or any state uniform trade secrets act is incomplete without at least a brief review of a line of non-Virginia trade secret cases which are sometimes referred to as the “inevitable disclosure” or “inevitability” cases. A discussion of these cases here may be helpful even though they are not Virginia cases since the theory of this doctrine may be useful to Virginia practitioners litigating cases with similar fact patterns. In these cases, courts have enjoined or limited the subsequent employment of a departing employee who leaves the employment of his employer to work for a competitor of his employer at a job where it is inevitable that the employee will use or disclose the trade secrets of his employer in order to perform his new job at the employer’s competitor. Courts utilizing the inevitable disclosure doctrine have employed it in cases where the employee has not signed or has refused to sign a non-competition agreement or non-disclosure of proprietary information agreement and where the employee has not threatened, directly or indirectly, to use or disclose trade secrets. Obviously, the courts do not need to apply the doctrine if there was such an agreement because the case could be decided as a breach of contract case. Similarly, if there was a threat of disclosure or use, the case could be decided under the Uniform Trade Secrets Act of the jurisdiction without the use of the doctrine since the act specifically permits an injunction even for the threat of disclosure or use. A great deal of controversy has accompanied this doctrine[35] because it eliminates or limits a worker’s right to move to a better job even though he has not signed a non-compete or non-disclosure of proprietary information agreement or has actually refused to sign one and he has not threatened to use or disclose any trade secret. This right has been long and widely recognized. In addition to being controversial, inevitably cases are sometimes illuminating because they require courts to balance this right of a worker to mobility and the right of the trade secret owner to protection of the trade secret. In so balancing these rights, courts may articulate the factors important in reaching their decision, thereby more fully describing the boundaries and features of these two rights.

26. The three principal early inevitable disclosure cases are: B.F. Goodrich Co. v. Wohlgemuth,[36] Allis-Chalmers Manufacturing Co. v. Continental Aviation & Engineering Corp.,[37] and E.I. duPont de Nemours & Co. v. American Potash & Chemical Corp.[38] All three of these cases were decided in the mid 1960s and all involved a similar fact pattern. The employer was a leader in its industry because of the technology it developed. In Goodrich, the technology was the development of space suits. In American Potash, it was pigments, and in Allis-Chalmers, it was advanced fuel injection pumps. In each of these three cases, the competitors could not compete successfully because they lacked the trade secret technology owned by the industry leader and attempted to get it by hiring away one of the plaintiffs’ senior scientists or executives who was directly involved with, and intimately familiar with, the subject technology. The competitors’ purpose was to obtain the technology in order to successfully compete with the plaintiffs. In all of these cases, the employees had not signed non-disclosure of proprietary information agreements or non-competition agreements nor had they threatened to use or disclose their employers’ trade secrets. In each case, the argument was made that it was inevitable that the employee would use or disclose the trade secret of his former employer while he was engaged in the duties for which he was hired by his new employer.

27. From the dates of these three cases until 1995, there were very few inevitable disclosure cases decided.[39] However in 1995, an interest in these cases was rekindled with the Seventh Circuit’s affirmation of an injunction in an inevitable disclosure case. In Pepsico, Inc. v. Redmond,[40] Pepsi was marketing and selling a sports drink called “All Sport” which was far behind Quaker Oats’ “Gatorade” in market share. Redmond was a senior executive of a larger Pepsi business unit which included All Sport. All Sport was a small part of this business unit. In this position, Redmond knew All Sport’s marketing information. Quaker Oats hired Redmond away from Pepsi to work on its Gatorade and Snapple lines. Applying the inevitable disclosure theory, the lower court granted Pepsi a preliminary injunction against Redmond and Quaker Oats, prohibiting Redmond from any beverage pricing, marketing and distribution at Quaker. The Seventh Circuit affirmed the injunction.

28. The Pepsico case is different from the prior three inevitable disclosure cases in that in the Pepsi case, the market leader and not the competitor was the party hiring away an employee with the alleged trade secret. In addition, the value of Quaker Oats’ trade secret to Pepsi, a competitor, is obvious but possibly less critical than in the three prior cases. Most troubling was that while the Seventh Circuit opinion acknowledged that the “mere fact that a person assumed a similar position at a competitor does not, without more, make it inevitable that he will use or disclose...trade secret information so as to entitle plaintiff to an injunction,”[41] the court did not go further to offer more guidance as to what did make it inevitable.

B. Definition of “Trade Secret”

29. Commentators of the First Restatement clearly recognized that “an exact definition of a trade secret is not possible.”[42] In recognition of this difficulty, the Uniform and Virginia Act’s definition of a trade secret is not specific. In Section 59.1-336 of the Virginia Act, a trade secret is defined as “information, including but not limited to, a formula, pattern, compilation, program, device, method, technique or process.”[43] Obviously, this definition is very broad and is very similar to the definition found in the First Restatement which defined a trade secret as any “formula, pattern, device or compilation of information used in one’s business, and which gives him an opportunity to obtain an advantage over competitors who do not know or use it”.[44]

30. It is significant to note that the Virginia Act’s, the Uniform Act’s and the First Restatement’s definition do not only cover high tech secrets. In fact in the case law in Virginia, the Virginia Act is frequently used to protect “low tech” secrets. Some common examples of low-tech trade secrets in published cases are: customer lists, business leads, financial information, marketing strategies, sales techniques and methods of conducting business.[45] The definitions of trade secrets in the Virginia Act, Uniform Act and the Restatement are significant in several other respects as well. These definitions do not require that the information exist in some tangible format, as is the case in patent law. In fact, the information need not be more than an idea, theory or concept. Further, these definitions do not require that the trade secret be novel.[46] Several courts have stated that novelty is not a requirement for a trade secret but that maintaining its secrecy is necessary.[47] In addition, those definitions do not impose any limit on the length of time a trade secret can be protected. While patents may be protected by statute for twenty years, trade secrets may be protected as long as their secrecy is maintained, they are not generally known and they are not readily ascertainable. The Virginia Act and the Uniform Act do not require a profit motive for the misappropriation.[48]

31. Significantly under the Virginia Act, the Uniform Act and the Restatement, the right to a trade secret, unlike patent law, need not be exclusive. It seems that this concept has been accepted from the very beginning of trade secret case law. Even the 1851 English case of Morison v. Moat [49] refers to the non-exclusivity of trade secrets. By non-exclusivity it is meant that two entities, which concurrently but independently develop the same trade secret, may both acquire rights to it. Thus, a business in Roanoke, Virginia may develop a technique to produce multiple clones of a renowned Virginia law professor in order to provide uniform legal instruction throughout the Commonwealth. That business may seek to protect that technique as a trade secret. Another business in Fairfax, Virginia may subsequently and independently develop the very same technique[50] and also seek to protect it as a trade secret. The Fairfax company’s acquisition, use and disclosure of that technique is not a violation of the Roanoke company’s trade secret and both companies can protect their secret. If at some point, however, the secret becomes known to more and more people to the point of becoming generally known, as discussed below, the right to protect the secret is lost. Similarly, if the secrecy of the trade secret is not maintained or if the trade secret becomes readily ascertainable, as discussed below, the right to protect the secret is lost.

32. Further, there is a significant difference between the relatively similar definitions of a trade secret in the Virginia Act and the Uniform Act from the definition found in the First Restatement. The Virginia Act and the Uniform Act do not require continuous use of the trade secret in business or even any use at all, as is required by the definition of a trade secret in the First Restatement. The Virginia Act and the Uniform Act do not require this because this protects the trade secret of an owner who has not yet begun business, not yet had the opportunity or acquired the means to put the trade secret to use, has temporarily stopped use or has determined that the secret process or method does not work and wants to protect that negative information as a trade secret.

C. Requirement of Independent Economic Value

33. The definition of a trade secret in the First Restatement requires that the trade secret gives the user an opportunity to obtain an advantage over nonusers. The Virginia Act’s and Uniform Act’s definition of a trade secret require that the secret information derive “independent economic value.” This quoted phrase as used in the Virginia Act and the Uniform Act, while seemingly unfathomable, has been interpreted by courts to simply mean that the trade secret information must give the owner of the secret some actual or potential competitive advantage.[51] The Virginia and Uniform Acts do not state that the independent economic value has to be substantial or significant, but the economic value has to be more than de minimis. In fact, the trade secret need only give the owner “an opportunity to obtain an advantage.”[52]

D. Requirement That Trade Secret Not Be Generally Known

34. The Virginia Act’s and Uniform Act’s definition of a trade secret further requires that the trade secret not be generally known. The drafters of the Uniform Act and the courts are clear that “not generally known” does not mean not generally known to the public. It means not generally known to those who are in the relevant industry or trade.[53] In trade secrets cases, this requirement that the information not be generally known is often a vigorously contested issue and it can be a close factual issue for a judge or jury to decide. For example, consider whether a particular method of selling a product or service is or is not generally known. A company may argue that it has developed a secret method of selling a product or service on which it has spent much money, time and effort to develop its particular sales method, train its employees to use it and maintain the secrecy of the method. On the other hand, a departing employee of that company who wants to use the method for her own benefit may argue that the method is most certainly generally known since you can simply read a book at your local public library on sales or marketing to find out about almost any sales method. Further, a departing employee may also contend that the sales method is generally known since several of the competitors of the company use the same or similar method. This is not unlikely in a mature competitive industry.

35. Perhaps one of the country’s more interesting trade secret cases concerning the meaning of “not generally known” is the Virginia case of Religious Technology Center v. Lerma[54], involving the Church of Scientology. In 1991 in California, the Church sued a disgruntled former member of the Church. In that California case, the defendant filed an affidavit in the open court file and attached thereto sixty-nine pages of Church documents. The Church claimed those documents were protected by the U.S. copyright laws and trade secret laws. While the Church sought to have these records sealed in that California proceeding, the Circuit Court upheld the District Court’s refusal to seal the file. Lerma, another disgruntled former Church member, obtained a copy of the affidavit and attached documents and published them on the Internet. Thereafter in mid 1995, the Church obtained a temporary restraining order from the U.S. District Court for the Eastern District of Virginia against Lerma from any further publication of the affidavit and attached documents, and the U.S. Marshall seized Lerma’s personal computer, disks and copies.

36. In the California proceeding, the Church went to great lengths to protect the court filed documents from disclosure. The Court found that the Church had been “checking that [court] file out [everyday] and holding it all day to prevent any one from seeing it, [however,] the file was not sealed and obviously made available, upon request, to any member of the public who wished to see it.”[55] In fact, the file was made available to a reporter. Apparently ever resourceful, the Washington Post sent a reporter to California and obtained the documents from the clerk of the court in the California case. The Washington Post published an article on the Church and the Church sued the newspaper in Virginia.

37. While the Church had gone to great lengths to protect the court filed documents from the public, the U.S. District Court for the Eastern District held that the documents were not a trade secret since they were generally known because they were in an open court file available to the public and they were posted on the Internet. The court stated:

Of even more significance is the undisputed fact that these documents were posted on the Internet on July 31 and August 1, 1995. (Lerma Affidavit). On August 11, 1995, this Court entered a Temporary Restraining Order among other orders which directed Lerma to stop disseminating the [Church] documents. However, that was more than ten days after the documents were posted on the Internet, where they remained potentially available to the millions of Internet users around the world.

38. As other courts who have dealt with similar issues have observed, “posting works to the Internet makes them ‘generally known’ at least to the relevant people interested in the news group.”[56] Once a trade secret is posted on the Internet, it is effectively part of the public domain, impossible to retrieve.[57]

39. In the more recent case of Hoechst Diafoil Co. v. Nan Ya Plastics Corp.,[58] the U.S. Court of Appeals, Fourth Circuit, took a different position with regard to trade secrets filed in an open court file but not posted on the Internet. In that case, a party had filed documents, which they alleged were trade secrets, in another court proceeding. They had been in the open court file for several months. The U.S. Court of Appeals, Fourth Circuit, reached a result different than the court in the Scientology case, stating:

In holding that the [Church’s] works were not trade secrets when the Post acquired them, the court specifically relied on both of these factors [documents in an open court file for 28 months and published on the Internet]. First, it noted that the documents’ extended presence in the court’s public files, from which the Post had obtained its own copy, made them no longer a secret. Importantly, though, the court reasoned that the documents’ posting on the Internet was “[o]f even more significance” than their extended presence in public records: “ posting works to the Internet makes them “generally known” at least to the relevant people interested in the news group.” As a result, the court correctly found that the information which had been both disclosed in public court files and made “generally known” by Internet publication had lost its trade secret status. In this case, there is no suggestion that the ... [d]ocument was published [on the Internet], only that it was present in the district court’s public files. We hold that, under the Act, this presence in the district court’s public files, in and of itself, did not make the information contained in the document “generally known” for purposes of the Act.[59]

40. In the Hoechst decision, the Court obviously concluded that there was a material difference between information deposited in an open court file available to the public and posting that information on the Internet. Of course, the information is publicly available in both cases. However, the Hoechst court determined that information in an open court file may or may not be generally known but is generally known if it is posted on the Internet. While the logic of this assertion is debatable, practically, this is a rational distinction since the contents of court files while publicly available, are not as accessible as information posted on the Internet. However, if and when court files become available on the Internet, the distinction made by the Court in the Hoechst case may be less meaningful.[60] At some not too distant time, this currently rational distinction may again be the subject of litigation.

E. Requirement That Trade Secrets Not Be Readily Ascertainable

41. The Virginia Act and the Uniform Act also require that a trade secret not be readily ascertainable by proper means. Improper means are defined in the Act and the Uniform Act and have already been discussed.[61] The Commentary to the Uniform Act lists several proper means, including:

1. Discovery by independent invention;

2. Reverse engineering;

3. Discovery under a license;

4. Observing the product or service on public use or display; and

5. Review of publicly available literature. [62]

42. Like the Virginia Act’s related requirement that a trade secret not be generally known, there is no line in the sand as to when information is readily ascertainable. This is also a factual issue which is often litigated. A common example in trade secret litigation is the case of a departing employee who takes the customer list with him when he departs to work at a competing business, which may even be the employee’s own start-up company. The former employer of the departing employee will argue that its customer list was developed only after many years of effort and great expenditures on advertising, client development and salaries. On the other hand, the departing employee, who has appropriated the list, will argue that the list constitutes information which is readily ascertainable through common business sources such as telephone books, trade magazines, published industry information sources, etc.

43. Some trade secret cases dealing with the issue of whether a trade secret is readily ascertainable are reverse engineering cases. The U.S. District Court for the Eastern District of Virginia recently decided the reverse engineering case of DSC Communications Corporation v. Pulse Communications, Inc.[63] In this case a manufacturer of plug-in channel cards for use in a telecommunications digital switching system lawfully purchased, through an agent, a competitor’s system on the open market with the specific intent to reverse engineer the card. The Court held that since the card was purchased lawfully, the trade secret was not obtained by improper means as defined in the Virginia Act, even though it was purchased with the intent to reverse engineer the card and even though it was purchased indirectly through an agent.

F. Requirement of Reasonable Efforts to Maintain Secrecy

44. The Virginia Act and the Uniform Act provide that a trade secret is protectable only if it “...is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.”[64] There are no qualifications or exceptions to this requirement. However, this language of the Act clearly states that complete secrecy is not required. Sensibly, trade secret protection is not lost if the trade secret is disclosed in confidence to those that need to know it, such as employees, agents, suppliers, subcontractors and others.[65] However, courts have also interpreted the Act to require that a trade secret owner demonstrate that he pursued an active course of conduct to keep the information secret.[66] Doing nothing is not enough, even though doing nothing has been good enough in the past to protect the secret. While the trade secret owner must be able to demonstrate that he has pursued an active course of conduct to protect the secret, the trade secret owner need not take heroic measures.

45. Generally speaking, if trade secret information is disclosed to outsiders or the public, trade secret protection is lost. In Advanced Computer Services v. MAI Systems,[67] the court simply stated the basic concept: “[t]rade secrets rights do not survive when otherwise protectable information is disclosed to others, such as customers or the general public, who are under no obligation to protect [its] confidentiality...”[68]

46. Sometimes a court holds that not much is required to protect the information as a trade secret. In Dionne,[69] cited above, the Virginia Supreme Court upheld the Circuit Court’s decision that the company had used reasonable efforts to maintain the secrecy of the trade secret, referring only to the fact that the company had required confidential information agreements from all its “employees, suppliers, customers, contractors and other plant visitors...”[70]

47. However, in many cases, a court will look much more closely at the facts of the case. In a Fourth Circuit case applying the Maryland Trade Secret Act, which is identical in this respect to the Virginia Act, the Court closely looked at the facts to determine if reasonable efforts were employed to maintain secrecy. Specifically, in Trandes Corporation v. Guy F. Atkinson Co.,[71] the owner of a software program which is used to design subway tunnels, sued a licensee and its contractor, the Washington Metropolitan Area Transit Authority, for misappropriation of a trade secret. The defendants argued that the information was not a trade secret since the software was widely disclosed, mass marketed and that its existence and its abilities were not secret. The defendants argued that the plaintiff software owner even offered a demonstration version of the software for sale for $100. However, the court found that only six or seven persons inquired about the demonstration version and none were sold. In deciding the case, the Court looked closely at the facts, finding that the company took measures that were reasonable under the circumstances to protect the secrecy of the software. The Court found that the company licensed only two object code versions of its software and they were licensed under a confidentiality agreement, the company used a password to prevent access to the program in-house and for licensed versions, and there was no other unauthorized person who ever obtained a copy of the software.

48. Of course, efforts that are reasonable under the circumstances will vary from case to case. Some examples include:

1. Classifying and labeling certain documents as trade secrets;

2. Restricting access to certain materials or areas;

3. Limiting disclosures within the company only to those individuals who need the trade secrets in order to perform their jobs properly;

4. Implementing badge or other electronic monitoring systems;

5. Advising employees of the existence of trade secrets and conditioning employment on signing confidentiality agreements;

6. Requiring consultants, customers, vendors, and ancillary service providers to sign confidentiality agreements;

7. Implementing periodic internal review procedures regarding inventions, periodicals, marketing materials, and government filings;

8. Restricting access to computers, copiers, fax machines, and trash receptacles;

9. Performing security checks of employees, visitors, and others with access to trade secrets; and

10. Using protective orders when disclosing trade secrets in the course of litigation. [72]

49. There is much for a lawyer to do here to advise and assist his clients. Today’s numerous trade secret law suits are ad hoc testimonials to the fact that many companies still do not take measures that are reasonable under the circumstances to protect their trade secrets. A trade secret owner should consider the implementation of a trade secret protection program, designed by counsel, to protect such secrets from disclosure and to increase the owner’s probability of success in future litigation involving the misappropriation of the secret.[73]

IV. Other Provisions of the Act

A. Section 2. Injunctive Relief

50. Because of the nature of trade secrets cases, money damages may be inadequate and injunctive relief may be necessary. In recognition of this, Section 2 of the Uniform Act and Section 59.1-337 of the Virginia Act specifically provide that a court may order an injunction in the case of actual or threatened misappropriation. The court order imposing the injunction can specify that the injunction shall terminate when the trade secret has ceased to exist. However, the court may continue the injunction for an even longer period in order to eliminate any commercial advantage that otherwise would be derived from the misappropriation. It is notable that even threatened misappropriation is the proper subject of an injunction under both Acts. However, it is unclear how threatened misappropriation fits within the Virginia Act’s and Uniform Act’s definition of misappropriation since, as we have seen, the definition of misappropriation only refers to the acquisition, use or disclosure of trade secrets and does not have any language specifically referring to the threat thereof. Virginia courts apparently have not found the Virginia Act unclear on this point. In Virginia, courts have already upheld the use of the Virginia Act to enjoin threatened misappropriation. In Dionne, cited above, the court granted an injunction against the misappropriating son, prohibiting him from the threatened use or disclosure of the secret manufacturing process.

51. As a significant consequence of the provision of the Act authorizing an injunction, the plaintiff will not have to prove irreparable injury or inadequacy of money damages to obtain an injunction as might otherwise be required for injunctions in Virginia. Virginia case law clearly stands for the proposition that where a statute specifically authorizes an injunction, the moving party does not have to prove irreparable injury or inadequacy of money damages.[74] The moving party will only have to show that there has been actual or threatened misappropriation.

52. As noted above, in 1985 the Commissioners adopted various amendments to the Uniform Act. One of those amendments was to add language to Subpart b of Section 2 of the Uniform Act concerning injunctive relief in the case of “exceptional circumstances.”[75] This new language is also in the Virginia Act. The new language provides that:

(b) In exceptional circumstances, an injunction may condition future use upon payment of a reasonable royalty for no longer than the period of time for which use could have been prohibited. Exceptional circumstances include, but are not limited to, a material and prejudicial change of position prior to acquiring knowledge or reason to know of misappropriation that renders a prohibitive injunction inequitable. [76]

53. The above requirement of material and prejudicial change of position is similar to the Uniform Act’s language used for its definition of misappropriation which requires a material change if a trade secret has been acquired by mistake or accident. While the above quoted language does not refer to the mistaken or accidental acquisition of a trade secret, this specific language appears to attempt to address a similar issue in the case of an injunction by authorizing a court to fashion an injunction in an exceptional case in which the court finds that the person obtained a trade secret and made use of the trade secret prior to their acquiring knowledge or reason to know of the misappropriation. In such case, the person acquiring the trade secret may be allowed to continue to use the trade secret upon payment of a reasonable royalty, where equitable under the circumstances. The Commissioners’ Comment emphasizes that this type of injunctive relief is only to be used in exceptional circumstances.[77]

B. Section 3. Damages

1. Actual Loss, Unjust Enrichment and Reasonable Royalty

54. With regard to damages, the exact language of the Virginia Act and the Uniform Act differ somewhat. Section 3 of the Uniform Act provides that damages can include damages for actual loss and damages for unjust enrichment that is not taken into account in computing damages for actual loss. Damages can also be measured by a reasonable royalty in lieu of any other damages. In the Virginia Act, damages can be measured by actual loss or unjust enrichment as in the Uniform Act, but damages can be measured by a reasonable royalty only “[i]f a complainant is unable to prove a greater amount of damages by other methods of measurement.”[78] Since plaintiffs are always seeking to be awarded the highest damages, the difference in practice between the Uniform Act and the Virginia Act on this point may be small. One commentator has also argued that the Racketeer Influenced and Corruption Organizations Act (RICO) is applicable to causes of action based on the misappropriation of trade secrets.[79] RICO provides for treble damages and legal fees.[80]

55. Measuring damages by a royalty amount instead of actual loss or unjust enrichment may be advantageous for some plaintiffs. Plaintiffs may not be able to easily determine their own actual losses because the defendant has kept his misappropriation secret and the plaintiff may not be aware of or be able to reasonably calculate the effects of the defendant’s misappropriation on plaintiff’s business. Also, plaintiffs may not be able to calculate defendants’ unjust enrichment because the defendant may not fully disclose the amount he has profited by the misappropriation. A royalty amount may be much easier for the plaintiff to prove since he has the information concerning the trade secret and may be already aware of its value. From a defendant’s point of view, measuring damages by a royalty amount may be disadvantageous. The defendant may have only had the secret for a short time, may not have been able to use it to its full potential and not have generated much money from it because it was wrongfully obtained. Also, the defendant may not have all of the facts concerning the secret to be able to disprove the alleged value which the plaintiff attributes to the secret.

56. Virginia may have one of the very few reported cases awarding a reasonable royalty as damages. American Sales Corporation v. Adventure Travel, Inc.[81] involves a multilevel marketing company, which previously licensed its customer list to one of its suppliers. After the supplier’s contract with the multilevel marketing company terminated, the supplier took the customer list and used it to start a competing business. There was no substantial actual loss to the plaintiff since the defendant did not disclose the list to others and there was little unjust enrichment to the defendant since the defendant only had gross sales from the subject list in the amount of $1,178. However, the Court found that the lack of significant profits did not insulate the defendant from being obligated to pay for what it had wrongfully obtained.[82] The Court awarded a reasonable royalty and attempted to define a reasonable royalty as an approximation of the actual value of the infringed secret to the defendant, relying on the fiction that a license was granted at the time of the beginning of the infringement and then determining what the license price should have been if both parties were reasonably trying to reach an agreement.

2. Punitive Damages

57. Under the Uniform Act, a court may award exemplary damages not exceeding twice the damages if there is a willful and malicious misappropriation. The Virginia Act characterizes such damages as “punitive” and limits such damages to the same amount stated in the Uniform Act “...or, $350,000 whichever amount is less.”[83] While some states’ uniform trade secrets acts do not have any punitive or exemplary damages provision in their state act, it appears that, for those states providing for punitive or exemplary damages in their uniform trade secrets acts, Virginia is the only state which sets a cap on its damage provision.[84] As many Virginia trial lawyers know, Virginia law does not favor punitive damages and reserves them for only the most egregious conduct.[85]

C. Section 4. Attorney Fees

58. Section 59.1-338.1 of the Virginia Act and Section 4 of the Uniform Act specifically provide that the Court may award reasonable attorney’s fees to the prevailing party if there is willful and malicious misappropriation. Both Acts also provide that reasonable attorney’s fees will be awarded if a claim of misappropriation is made in bad faith. “Willful and malicious” and “bad faith” are two different standards but the use of different standards may be appropriate since the types of acts and actors are different. However, both “bad faith” and “willful and malicious” are interpreted by the courts to require egregious conduct of a similar degree.[86]

59. The American Sales case also considered the award of attorney fees under the Virginia Act. After the plaintiff was awarded reasonable royalty damages in American Sales, the plaintiff sued for attorney’s fees.[87] The Court awarded attorney’s fees but refused to do so under the Virginia Act. It awarded them based on an indemnity clause in the contract between the parties. The Court refused to find the requisite willfulness and maliciousness, even though defendant’s representative admitted that he wanted to “destroy” plaintiff.

60. The Uniform Act also allows for attorney’s fees if a motion to terminate an injunction is made or resisted in bad faith. The Virginia Act has no such provision.

D. Section 5. Preservation of Secrecy

61. During the course of a court proceeding, Section 59.1-339 of the Virginia Act and Section 5 of the Uniform Act require that a court preserve the secrecy of any alleged trade secret by reasonable means and sets forth some examples, including (1) protective orders during discovery; (2) in camera hearings; (3) sealing records; and (4) ordering persons not to disclose the information.

62. Of course, the parties and the court can also protect the secrecy of discoverable information under the Rules of the Supreme Court of Virginia by stipulation[88] and by motion for protective order.[89] Quite frequently in trade secret litigation, the alleged trade secrets of both plaintiff and defendant are discoverable. In such cases, counsel for both parties may negotiate, prepare and submit to the court a stipulated protective order, applicable to all parties, restricting the disclosure of information in discovery, depositions, hearings and at trial. Such protective orders may have provisions allowing: (1) limited disclosure of specified information to counsel and parties; and (2) limited disclosure of other specified information to counsel only or special masters only. In such cases, all parties have a significant interest in reaching such an agreement to protect their information and such an agreement can go a long way in minimizing legal fees and court time.

E. Section 6. Statute of Limitations

63. Section 59.1-340 of the Virginia Act and Section 6 of the Uniform Act set forth a statute of limitations of three years for violations of these respective Acts. This three-year period starts after the misappropriation is discovered or should have been discovered by the exercise of reasonable diligence. Two individual states have four and five year statute of limitations provisions in their uniform trade secrets acts.[90]

F. Section 7. Effect on Other Law

64. Section 59.1-341 of the Virginia Act and Section 7 of the Uniform Act state that the Acts displace conflicting existing law providing for remedies for misappropriation of trade secrets. The Acts do not affect: (1) contractual remedies; (2) other civil remedies not based on misappropriation of trade secrets; and (3) criminal remedies.

65. The Commentary to the Uniform Act specifically states that the Uniform Act is not intended to affect the law concerning contractual provisions not to disclose trade secrets and covenants by employees not to compete against their employers.[91]

V. Conclusion

66. The Virginia Uniform Trade Secrets Act was enacted just when many high tech businesses were starting up in or moving to Virginia. Fourteen years after the Virginia Act’s enactment, Virginia courts have decided numerous cases under the Act which have interpreted the provisions of the Act. A critical review of the Act and much of the reported Virginia trade secrets case law suggests that the Virginia Act currently meets the needs of both the high tech and non-high tech trade secret litigants for a unified and comprehensive body of law governing this subject matter area without the apparent need for substantial amendment or supplementation by the General Assembly. The increasing volume of case law under the Act reflects the increased need for this unified and comprehensive body of law governing the protection of trade secrets. This case law also suggests that many Virginia businesses are not making efforts that are reasonable under the circumstances to maintain the secrecy of their trade secrets. Accordingly, Virginia lawyers should advise their clients as to the need for a comprehensive and demonstrable program to establish and maintain efforts that are reasonable under the circumstances to maintain the secrecy of such trade secrets.

[1] This article is derived from a speech entitled “The Uniform Trade Secrets Act in the United States” given by the author in Kitzbuhel, Austria on March 21, 2000, at a Conference on the International Protection of Intellectual Property, sponsored by the Center for International Legal Studies and co-sponsored by the American Bar Association’s Section on International Law.

[2] A shareholder of Babirak, Albert, Vangellow & Shaheen, P.C., 47539 Coldspring Place, Sterling, Virginia 20165-7446, Phone: (703) 406-4600; Fax: (703) 406-4365, E-mail: mbabirak@mindspring.com. The author wishes to express his appreciation to Joanna Schindler, Esquire of Babirak, Albert, Vangellow & Shaheen, P.C., for her review and editing of this article and to Nancy Anderson for her help with this article.

[3] MARK TWAIN, THE ADVENTURES OF TOM SAWYER 22 (1876).

[4] Unif. Trade Secrets Act, 14 U.L.A. 437, et seq. (1985).

[5] Va. Code Ann. §§ 59.1-336 - 343 (Michie 2000).

[6] Electronic Espionage Act, Pub.L. No. 104-294. See J. Derek Mason et al., “The Economic Espionage Act: Federal Protection for Corporate Trade Secrets,” 16 No. 3 COMPUTER LAW, Mar. 1999 at 14.

[7] A. Arthur Schiller, Trade Secrets and the Roman Law: The Actio Servi Corrupio, 30 COLUM. L.REV. 837 (1930).

[8] Id.

[9] Id. at 837.

[10] The relationship between current trade secret law and the mobility of employees is discussed in Edmund Kitch, The Expansion of Trade Secrecy Protection and the Mobility of Management Employees: A New Problem for the Law, 47 S.C. L. Rev. 659 (1996).

[11] For a brief discussion of some of these cases, see JERRY COHEN & ALAN S. GUTTERMAN TRADE SECRETS PROTECTION AND EXPLOITATION (BNA Books 1998).

[12] 68 Eng. Rep. 492, 9 HARE 241 (1851).

[13] Id. at 498.

[14] 36 Mass. 523 (1837).

[15] Id. at 527.

[16] 11 S.E.2d 625 (Va. 1940).

[17] 68 Eng. Rep. at 498.

[18] See RESTATEMENT (FIRST) OF TORTS ch. 36, § 757b (1939).

[19] For a discussion of the evolution of the various definitions of trade secrets in the Restatements since the 1939 First Restatement, see Kitch, 47 S.C. L. REV. 660-663.

[20] The effective dates of each of the state statutes and the citation to the act in the state code are: Alaska Stat. §§ 45.50, 910-45 (Michie 1994) (entered effect Sept. 12, 1988); ARIZ. REV. STAT. §§ 44-401-407 (2000) (entered effect April 11, 1990); ARK. CODE ANN. §§ 4-75-601-607 (Michie 1999) (entered effect Mar. 12, 1981); CAL. CIV. CODE ANN. §§3426 et seq. (Deering 2000) (entered effect Jan. 1, 1985); COLO. REV. STAT. ANN. §§ 7-74-101 et seq. (West 2000) (entered effect July 1, 1986); CONN. GEN. STAT. ANN. §§ 35-50 to -58 (1999); DEL. CODE TIT. 6, §§ 2001-09 (entered effect April 15, 1982); D.C. CODE ANN. §§ 48-50 et seq.(2000) (entered effect March 16, 1989); FLA. STAT. ch. 688.001-.009 (2000) (entered effect Oct. 10, 1988); GA. CODE ANN. §§ 10-1-760 to –767 (entered effect July 1, 1990); HAW. REV. STAT. §§ 482B-1 to –9 (2000) (entered effect July 1, 1989); IDAHO CODE §§ 48-801 to –807 (1999) (entered effect 1989); ILL. COMP STAT. §§ 1065/1 to /9 (West 2000) (entered effect Jan. 1, 1988); IND. CODE §§ 24-2-3-1 to 24-2-3-8 (1998) (entered effect Feb. 25, 2982); IOWA CODE §§ 550.1-.8 (1999) (entered effect April 27, 1990); KAN. STAT. ANN. §§ 60-3320 to –3330 (1999) (entered effect July 1, 1981); KY. REV. STAT. ANN. §§ 365-880 to –900 (Michie 1998) (entered effect April 6, 1990); LA. REV. STAT. ANN. §§51:1431 to :1439 (West 2000) (entered effect July 19, 1981); ME. REV. STAT. ANN. tit. 10, §§ 1541-48 (West 1999) (entered effect May 22, 1987); MD. CODE ANN., COM. LAW I §§ 11-201 et seq (1999).; MINN. STAT. §§ 325C.01-.08 (1999) (entered effect Jan. 1, 1981); MISS. CODE ANN. §§ 75-26-1 to –19 (2000) (entered effect July 1, 1989); MO. REV. STAT. §§ 417.450 to .467 (1999) (entered effect Oct. 6, 1995); MONT. CODE ANN. §§ 30-14-401 to –409 (1999) (entered effect 1985); NEB. REV. STAT. ANN. §§ 87-501 to –507 (2000) (entered effect July 8, 1988); NEV. REV. STAT. §§ 600A.010 to -.100 (2000) (entered effect Mar. 15, 1987); N.H. REV. STAT. ANN. §§ 350-B.1-.9 (2000) (entered effect Jan. 1, 1990); N.M. STAT. ANN. §§ 57-3A-1 to –7 (Michie 2000) (entered effect April 3, 1989); N.D. CENT. CODE §§ 47-25.1-01 to –08 (2000) (entered effect July 1, 1983); OHIO REV. CODE ANN. §§ 1333.61-.69 (Anderson 2000) (entered effect July 20, 1994); OKLA. STAT. tit. 78, §§ 85-94 (1999) (entered effect Jan. 1, 1986); OR. REV. STAT. §§ 646.461-.475 (1999) (entered effect Jan. 1, 1988); R. I. GEN. LAWS §§ 6-41-1 to –11 (2000) (entered effect July 1 1986); S.C. CODE ANN. §§ 39-8-10 to –120 (1999) (entered effect May 21, 1997); S.D. CODIFIED LAWS §§ 37-29-1 to –11 (Michie 2000) (entered effect July 1, 1988); UTAH CODE ANN. §§ 13-24-1 to –9 (2000) (entered effect May 1, 1989); VA. CODE ANN. §§ 59.336-343 (2000) (entered effect July 1, 1986); VT. STAT. ANN. tit. 9, §§ 4602-4609 (2000) (entered effect July 1, 1996); WASH. REV. CODE ANN. §§ 19.108.010 to .060, 19.108.900 to .940 (West 2000) (entered effect Jan. 1, 1989); W. VA. CODE ANN. §§ 4-22-1 to –10 (Michie 2000) (entered effect July 1, 1986); WIS. STAT. §§ 134.90 (1999) (entered effect April 24, 1986).

[21] Compare, e.g., Yuan Cheng, Legal Protection of Trade Secrets in the People’s Republic of China, 5 PAC. RIM L. & POL’Y J. (1996); with Anuja Rajbhandary, Protecting Trade Secrets Through Family Businesses: A Case Study on Nepal, 16 INT’L REV. L. & ECON. 483 (1996).

[22] For example, the Czech and Slovak Republics have enacted trade secret laws closely following the Uniform Act. See Jennifer Felicia Swiller, The Secrets of Success: Confidential Business Information in the Czech and Slovak Republics, 7 TRANSNAT’L LAW 497, (1994).

[23] The U.S. is a signatory to the Agreement on Trade Related Aspects of Intellectual Property Rights, April 15, 1994, 33 I.L.M. 1197, 1212 (entered into force January 1, 1995). Article 39 of this Agreement requires the United States and other signatories to provide legal protection for undisclosed information of private parties when disclosed or used contrary to “honest commercial practices.” Since the uniform trade secret acts of the various states of the United States are state and not federal law, United States compliance with the Agreement is based on state, not federal, law.

[24] 502 F.2d 122, 132 (4th Cir. 1974).

[25] 416 U.S. 470, 485 (1974).

[26] Unif. Trade Secrets Act, § 1(1), 14 U.L.A. 438 (1985); Va. Code Ann. § 59.1-336 (Michie 2000).

[27] 905 F.Supp. 346 (E.D.Va. 1995).

[28] See e.g.,Religious Tech. Ctr. v. Lerma, 897 F.Supp. 260, 266 (E.D. Va. 1995); DSC Communs. Corp. v. Pulse Communs., 976 F.Supp. 359. 365 (E.D. Va. 1997).

[29] See e.g., Trandes Corp. v. Guy F. Atkinson Co., 996 F.2d 655 (4th Cir. 1993); Smithfield, 905 F.Supp. 346.

[30] See Dionne v. Southeast Foam Converting & Pkg., Inc., 397 S.E.2d 110 (Va. 1990); Comprehensive Tech. Int’l, Inc. v. Software Artisans, Inc., 3 F.3d 730 (4th Cir. 1993).

[31] 397 S.E.2d 110.

[32] Id. at 303.

[33] There is no shame in the accidents of chance, but only in the consequence of our own misdeeds. Phaedrus, THE CRIPPLE AND THE BULLY FABLES (1st Century), tr. Thomas James.

[34] Unif. Trade Secrets Act, § 1(2)(ii)(C), 14 U.L.A. 438.

[35] For a fuller discussion and differing views of this doctrine and the related case law, see Terrence P. McMahon et al., Inevitable Disclosure: Not So Sure In The West, NAT’L L.J., May 12, 1997, at C35; and Lawrence I. Weinstein, Revisiting the Inevitability Doctrine: When Can A Former Employee Who Never Signed A Non-compete Agreement Nor Threatened To Use Or Disclose Trade Secrets Be Prohibited From Working For A Competitor? 21 AM. J. TRIAL ADVOC. 211 (1997).

[36] 192 N.E.2d 99 (Ohio 1963).

[37] 255 F. Supp. 645 (E.D. Mich. 1966).

[38] 200 A.2d 428 (Del. 1964).

[39]See Weinstein, 21 AM. J. TRIAL ADVOC. at n 72. A California appellate court apparently has also adopted the doctrine. See Electro Optical Indus., Inc. v. Stephen White, 53 U.S.P.Q.2d 1206 (1999).

[40] 54 F.3d 1262 (7th Cir. 1995).

[41] Id. at 1269 (quoting AMP Inc. v. Fleischhacker, 823 F.2d 1199, 1207 (7th Cir. 1987)).

[42] See, Restatement of Torts, § 757, cmt b.

[43] The Uniform Act does not contain the words “but not limited to.” Illinois, Maine and West Virginia have added the same phrase as Virginia. Compare Alabama, which requires that information specifically fit within one of its designated categories.

[44] Supra note 40.

[45] See Religious Tech. Ctr., 897 F.Supp. 260.

[46] See SperryRand Corp. v. Elec. Concepts, Inc., 325 F. Supp. 1209 (E.D. Va. 1970).

[47] See Avtec Sys. v. Peiffer, 21 F.3d 568 (4th Cir. 1994); Dionne, 390 S.E.2d 110; and Kewanee Oil Co., 416 U.S. 470.

[48] See Am. Sales Corp. v. Adventure Travel, Inc., 862 F. Supp. 1476 (E.D. Va. 1994). See also Am. Sales Corp. v. Adventure Travel, Inc., 867 F. Supp. 378 (E.D. Va. 1994).

[49] 68 Engl. Rep at 500, 9 HARE at 259.

[50] Assume that the differences in linguistic style and sartorial resplendence between the Roanoke and Fairfax clones are unrelated to the cloning technique itself and the technique to create both versions of the clones is the same for both versions.

[51] ElectroCraft Corp. v. Controlled Motion, Inc., 332 N.W.2d 890, 900 (Minn. 1983).

[52] Pepsico, supra note 40.

[53] Unif. Trade Secrets Act, § 1, 14 U.L.A. at 439 cmt.

[54] 908 F. Supp. 1362 (E.D. Va. 1995).

[55] Id. at 1365.

[56] Religious Tech. Ctr., No. C. 95-20091 RMW (N.D.Cal.) Slip Opinion entered 9/22/95 at 30.

[57] Id. at 1368.

[58] 174 F.3d 411 (4th Cir. 1999).

[59] Id.

[60] For thoughtful and interesting discussions of trade secrets and the Internet, see Victoria A. Cundiff, Trade Secrets and the Internet: A Practical Perspective, 14 COMPUTER LAW 6 (1997); Bruce T. Atkins, Trading Secrets in the Information Age: Can Trade Secret Law Survive the Internet,? 1996 U. ILL. L. REV. 1151 (1996).

[61] Unif. Trade Secrets Act, § 1, 14 U.L.A. 439.

[62] Unif. Trade Secrets Act, § 1, 14 U.L.A. 439 cmt. (1990).

[63] 976 F.Supp. 359 (E.D. Va. 1997).

[64] Unif. Trade Secrets Act, §1(4) (ii), 14 U.L.A. 439; Secure Serv. Tech., Inc. v. Time & Space Processing, Inc., 722 F.Supp. 1354 (E.D. Va. 1989).

[65] Dionne, 397 S.E.2d at 110 (citing Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 475 (1974)).

[66] Jet Spray Cooler, Inc. v. Crampton, 282 N.E.2d 921, 925 (Mass. 1972)

[67] 45 F.Supp. 356 (E.D. Va. 1994).

[68] Id. at 370 (citing Secure Serv. Tech., 722 F. Supp. at 1361).

[69] 397 S.E.2d 110.

[70] Id. at 300.

[71] 996 F.2d 655 (4th Cir. 1993), cert. denied 114 S.Ct. 443, 126 L.Ed.2d 377.

[72] Cohen & Gutterman, supra note 11 at 89-90.

[73] See Richard C. McCrea, Jr., Protecting Trade Secrets & Confidential Business Information (with Forms), 44 PRAC. LAW. 71 (1998).

[74] Envtl. Def. Fund, Inc. v. Lamphier, 714 F.2d 331 (4th Cir. 1983); Hart v. Riverside Hosp., Inc., 899 F.Supp. 264 (E.D. Va. 1995); and Virginia Beach S.P.C.A., Inc. v. S. Hampton Rds. Veterinary Ass’n, 329 S.E.2d 10 (1985).

[75] Unif. Trade Secrets Act, Section 2(b), 14 U.L.A. 450, 456 cmt. (1990).

[76] Va. Unif. Trade Secrets Act, §§ 59.1-339(B).

[77] Unif. Trade Secrets Act, Section 2(b), 14 U.L.A. 450, 456 cmt. (1990).

[78] Va. Unif. Trade Secrets Act, §§ 59.1-338.

[79] Thomas P. Heed, Misappropriation of Trade Secrets: The Last Civil RICO Cause of Action That Works, 30 J. MARSHALL L. REV. 207 (1996).

[80] 18 U.S.C. §1964(c).

[81] 862 F. Supp. 1476 (E.D. Va. 1994). See also 867 F. Supp. 378 (E.D. Va. 1994).

[82] 862 F. Supp. at 1479-80 (citing Univ. Computing Co. v. Lykes-Youngstown Corp., 504 F.2d 518 (5th Cir. 1974)).

[83] Id. at 1480.

[84] Examples of states that do not have any punitive or exemplary damage provision in their state act are Arkansas, Michigan, Mississippi and Nebraska.

[85] Am. Sales Corp. v. Adventure Travel, Inc., 862 F. Supp. 1476, 1481 (E.D. Va. 1994) (citing Owens-Corning Fiberglass Corp. v. Watson, 413 S.E.2d 630, 639 (Va. 1992).

[86] For egregiousness for punitive damages, see American Sales, 862 F. Supp. 1476 (E.D. Va. 1994). See also 867 F. Supp. 378 (E.D. Va. 1994). For egregiousness in bad faith cases, see Optic Graphics, Inc. v. Agee, 87 Md. App. 770, cert. denied 598 A.2d 465 (1991).

[87] 867 F. Supp. 378 (E.D. Va. 1994).

[88] VA. SUP. CT. R 4:4.

[89] VA. SUP. CT. R 4:1(c).

[90] Illinois and Maine have a 5 and 4 year statute of limitations, respectively. Unif. Trade Secrets Act, § 6, 14 U.L.A. 462 cmt. (1990).

[91] Uniform Trade Secrets Act, § 7, 14 U.L.A. 463 cmt. (1990); see also Smithfield Ham & Prod. Co., Inc. v. Portion Pac, Inc., 905 F. Supp. 346 (E.D. Va. 1995).