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New Jersey Trade Secrets Act

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On January 9, 2012, New Jersey Governor Chris Christie signed into law the New Jersey Trade Secrets Act (NJTSA). The NJTSA codifies many court decisions that provide certain rights and remedies in the event that a trade secret – such as a formula, design, prototype or invention – is misappropriated. The NJTSA provides New Jersey businesses with a statutory vehicle to use in the event of either actual or threatened misappropriation of trade secrets.

The NJTSA is modeled after the Uniform Trade Secret Act (USTA), making New Jersey the 47th state (plus the District of Columbia) to enact a version of the USTA and leaving just Massachusetts, New York and Texas as the only non-UTSA states. Notably, the definitions of “trade secret” and “misappropriation” under the NJTSA are broader than under the UTSA, thus providing more protection to businesses. Further, while the UTSA provides that, as a general rule, it “displaces other law which provides civil remedies for misappropriation of a trade secret,” the NJTSA specifically states that “the rights, remedies and prohibitions provided under this act are in addition to and cumulative of any other right, remedy or prohibition provided under the common law or statutory law of this State.”

An action for misappropriation must be brought under the NJTSA within three (3) years after the misappropriation is discovered, or, with reasonable diligence, should have been discovered. It is not a defense to the NJTSA to argue that proper means to acquire the trade secret existed at the time of the misappropriation.

The remedies available under the NJTSA to the holder of a trade secret include:

  1. Damages for both the actual loss suffered by the plaintiff and for any unjust enrichment of the defendant caused by the misappropriation. Damages may also include the imposition of a reasonable royalty for unauthorized disclosure or use.
  2. Injunctive relief for actual or threatened misappropriation of a trade secret. Under certain exceptional circumstances, an injunction may condition future use upon payment of a reasonable royalty.
  3. In cases involving the willful and malicious misappropriation of a trade secret, punitive damages may be awarded in an amount not exceeding twice that awarded for actual damages and unjust enrichment.
  4. An award of attorney’s fees and/or “reasonable” expert fees if: (i) willful and malicious misappropriation exists; (ii) a claim of misappropriation is made in bad faith; or (iii) a motion to terminate an injunction is made or resisted in bad faith.

It remains to be seen how the passage of the NJTSA will affect business competition in New Jersey, but the enhanced protections offered by the Act and the availability of attorney’s fees, expert fees and punitive damages will hopefully deter frivolous litigation and the theft of trade secrets.