Massachusetts to Adopt the Uniform Trade Secrets Act

With H. 4732 (and amendment H. 4868) sitting on Massachusetts Governor Charlie Baker’s desk, Massachusetts is finally on the verge of adopting the Uniform Trade Secrets Act (“UTSA”).  The UTSA was published by the Uniform Law Commission in 1979 and amended in 1985, at which time many states began adopting it.  New York, and possibly North Carolina and Alabama (there is some debate about whether their legislation has expressly adopted the text of the Act), are now the only jurisdictions in the United States that have not adopted the UTSA. Previously, Massachusetts trade secrets law was based on the Restatement (First) of Torts § 757 (1939).  See Jet Spray Cooler, Inc. v. Crampton, 282 N.E.2d 921, 925 (Mass. 1972).

Although the UTSA is largely consistent with existing Massachusetts law on trade secrets, it differs in two significant ways that may make it somewhat easier for trade secret owners to enforce their rights under the UTSA. The first difference is that the UTSA provides that trade secrets are protectable if they have “actual or potential” economic value.  Under prior Massachusetts law, a trade secret with “potential economic value” would probably not be protectable; the trade secret had to be in “continuous use” in one’s business. J.T Healy & Son, Inc. v. James A. Murphy & Son, Inc., 357 Mass. 728, 736, 260 N.E.2d 723, 729 (1970) (“A trade secret is a process or device for continuous use in the operation of the business.”)

The second difference is that the UTSA expressly allows courts to enjoin “[a]ctual or threatened misappropriation” of trade secrets.  This has been interpreted by many courts to allow injunctions against the “inevitable disclosure” of trade secrets; that is, in effect, to allow trade secret owners to stop their former employees from working for their competitors because their work for the competitor would result in the “inevitable disclosure” of the prior employer’s trade secrets.  See, e.g., PepsiCo, Inc. v. Redmond, 54 F.3d 1262 (7th Cir. 1995) (Pepsi executive enjoined from working for competitor because continued employment with competitor would result in employee’s inevitable disclosure of confidential marketing and development strategies).

Under the prior Massachusetts trade secret law, no Massachusetts appellate court has yet adopted the doctrine of inevitable disclosure (although lower courts have taken inconsistent positions on the issue). Once the bill is signed, it is likely that we will soon see motions seeking injunctions under the new Massachusetts UTSA based on the inevitable disclosure doctrine, especially now that the enforcement of non-compete agreements will be substantially limited by new legislative provisions encompassed in the same bill, as was discussed by some of our colleagues here.

If signed by Governor Baker, the new provisions will take effect October 1, 2018, and shall not apply to any alleged misappropriation that occurred prior to that effective date.

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