Wednesday, January 11, 2012

New Jersey Adopts Uniform Trade Secrets Act


On January 9, Governor Chris Christie signed the New Jersey Trade Secrets Act into law. This Act is modeled after the Uniform Trade Secrets Act. With this legislation now in effect, only three states - Texas, Massachusetts, and New York - have yet to adopt the UTSA.

The New Jersey version of the Act is very similar to other statutory schemes adopting the UTSA. While the definition of "trade secret" is different, and a little broader, than other states, the basic foundation of trade secret law is still on par with the vast majority of states.

The passage of the UTSA does work a couple of changes. First, preemption now will apply and common law tort claims based on trade secret misappropriation likely will be barred. Second, the UTSA will allow an aggrieved party the opportunity to recover so-called "royalty" damages, a theory previously unavailable under the common law. Previously, a trade secrets plaintiff only could recovery money upon a showing of lost profits or under an unjust enrichment theory. Similarly, a royalty injunction is available, which allows a misappropriating party to use a trade secret into the future provided it pays a reasonable royalty to the trade secret owner.

Finally, the fee shifting provisions common to trade secrets claims - to the plaintiff upon a showing of willfulness, and to the defendant upon a showing of bad faith - will apply.

The New Jersey statute takes effect immediately, though it does not apply to claims of misappropriation arising before January 9, 2012.

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