December 23, 2013 Articles

Preemption Is No Secret

Exploring the preemptive effect of trade-secret legislation.

By John A. Stone

Over 45 states have enacted statutes based on the Uniform Trade Secrets Act (UTSA). U.S. Gypsum Co. v. LaFarge N. Am., Inc., 508 F. Supp. 2d 601, 623 (N.D. Ill. 2007). The UTSA provides, among other things, a "statutory cause of action for misappropriation of trade secrets and authorizes injunctive and monetary relief where such misappropriation is proven." Hauck Mfg. Co. v. Astec Indus., Inc., 375 F. Supp. 2d 649, 654 (E.D. Tenn. 2004). The "prime purpose" of the UTSA is to "sweep away the adopting states' bewildering web of rules and rationales and replace it with a uniform set of principles for determining when one is—and is not—liable for acquiring, disclosing or using 'information . . . of value." Angelica Textile Servs., Inc. v. Park, 163 Cal. Rptr. 3d 192, 201 (Cal. Ct. App. 4th Dist. 2013).

A majority of courts that have addressed the preemptive effect of their UTSA-based legislation hold that those statutes "preempt all common law tort claims based on misappropriation of information regardless [of] whether [the information] reaches the level of a trade secret," to "create a uniform business environment [with] more certain standards for protection of commercially valuable information." Orca Commc'ns Unlimited, LLC v. Noder, 2013 WL 5655898, at *8 (Ariz. Ct. App. Oct. 17, 2013) (citations and internal quotations omitted). These courts hold that the UTSA was intended "to preserve a single tort action under state law for misappropriation of a trade secret" as defined by the UTSA, while eliminating tort actions "founded on allegations of misappropriation that may not meet the statutory standard" or definition of a trade secret. Id. Courts in these states may use a "same facts" standard to bar non-UTSA claims that allege "same operative facts" on which the misappropriation-of-trade-secret claim is based, but allow other claims that have "an 'independent factual basis . . . not solely dependent'" on a UTSA claim. Office Depot v. Impact Office Prods., LLC, 821 F. Supp. 2d 912, 920 (N.D. Ohio 2011) (emphasis in original).

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