New Jersey Enacts Trade Secret Act

On Monday, January 9, New Jersey joined the 46 other states that have adopted some form of the Uniform Trade Secrets Act. The “New Jersey Trade Secrets Act” (“the New Jersey Act”) will provide additional uniformity and certainty to businesses and individuals seeking trade secret protection. The Legislature intended, in addition to providing uniformity, that the New Jersey Act exist in harmony with New Jersey’s trade secret common law, noting that the codified rights “are in addition to and cumulative of any other right . . . provided under the common law or statutory law of this State.”

The New Jersey Act establishes liability for the “misappropriation” of a trade secret, i.e., the acquisition or disclosure of a trade secret through “improper means.” The New Jersey Act broadly defines “improper means” in comparison to the Uniform Trade Secrets Act (“UTSA”) upon which it is based. In addition to incorporating and supplementing common law concepts, “improper means” includes acts such as theft, bribery, or the breach of any duty to maintain the secrecy of or to limit the use or disclosure of a trade secret. The New Jersey Act also deviates from the UTSA by defining “proper means” of discovery, which include independent invention and reverse engineering.

The definition of “trade secret,” consistent with that of the UTSA and many other states, includes:

[I]nformation, held by one or more people, without regard to form, including a formula, pattern, business data compilation, program, device, method, technique, design, diagram, drawing, invention, plan, procedure, prototype or process, that:

(1) 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

(2) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

The New Jersey Act provides for injunctions of actual or even threatened misappropriation. With respect to damages, a trade secret holder can recover one or more of the following categories of damages: 1) actual loss; 2) unjust enrichment; and 3) reasonable royalty. For misappropriation that is willful and malicious, a court may award punitive damages.

The trade secret holder may recover its attorney’s fees and costs (including expert fees) if the misappropriation was willful and malicious, or a motion to terminate an injunction is made or resisted in bad faith. The New Jersey Act also provides that the party accused of misappropriation may recover its attorney’s fees if the misappropriation claim was made in bad faith.

The causes of action defined by the New Jersey Act have a three year statute of limitations.

Notably, the New Jersey Act is not retroactive, that is, it does not apply to misappropriation occurring prior to the January 9, 2012 effective date, nor does it apply to misappropriation that began prior to the effective date and continued after.

The New Jersey Act, through its broad definition of misappropriation, wide array of damages and other remedies, and the availability of cost-shifting provisions, demonstrates New Jersey’s intent to foster a pro-trade secret environment. Consistent with other trade secret statutory schemes, the New Jersey Act incentivizes businesses to develop and continue to adhere to well-articulated trade secret policies.

RatnerPrestia routinely advises corporations and individuals with respect to trade secret protection and enforcement, as well as all aspects of intellectual property. RatnerPrestia attorneys handle IP cases from a myriad of fields including pharmaceuticals, biotechnology, computer software, automotive, agricultural chemicals and seeds, consumer electronics, specialty chemicals, and medical devices. For more information concerning the New Jersey Act, or about RatnerPrestia’s Trade Secret Practice, please contact the author of this article.