Will Massachusetts join 46 states, District of Columbia, Puerto Rico, and the U.S. Virgin Islands in adopting the Uniform Trade Secrets Act (the “UTSA”)?
In January 2013, the Massachusetts Legislature proposed House Bill No. 27: An Act Making Uniform the Law Regarding Trade Secrets. The bill seeks to repeal Sections 42 and 42A of chapter 93 of the Massachusetts General Laws and insert a form of the UTSA as chapter 93K. Only New York, Texas, North Carolina, and Massachusetts have not yet adopted the UTSA. New Jersey was the last state to adopt the UTSA last year. The bill was referred to the Joint Committee on the Judiciary on January 2, 2013, and the Massachusetts Senate concurred on February 14, 2013.
According to proponents of the bill, the adoption of the UTSA would improve fair, competitive innovation in the Commonwealth by providing enforceable rules to protect against the misappropriation of confidential information that are more inclusive and predictable than the antiquated measures currently available. Specifically, the bill seeks to replace the definitions, procedures, and remedies set forth in chapter 93A (the Massachusetts unfair competition statute) with respect to claims for misappropriation of trade secrets.
The Massachusetts bill follows the text of the 1985 Official Text of the UTSA, with modifications first developed by the Intellectual Property Committee of the Business Section of the Boston Bar Association. The bill departs from the Official Text of the UTSA in several significant ways. First, it makes clear that all types of confidential business information can be protected as a “trade secret,” but such information must derive actual or potential economic value at the time of alleged misappropriation. Second, only information that at all times has been the subject of reasonable efforts to give notice that it should not be and to ensure that it is not acquired, disclosed or used without the owner’s consent will benefit from trade secret status. Thus, information that is readily ascertainable from public records cannot be a trade secret and cannot be misappropriated under the bill.
The Massachusetts version of the UTSA provides for both injunctive and monetary remedies. Under the current Massachusetts Trade Secrets Act, chapter 93 § 42, and the unfair competition statute, chapter 93A, only actual damages, which may be doubled or trebled, are recoverable for the misappropriation of trade secrets. In contrast, the UTSA authorizes awards of twice the entire recovery for “willful and malicious misappropriation,” which could include “actual loss caused by misappropriation and unjust enrichment [to a competitor] caused by misappropriation that is not taken into account in computing actual loss.” In lieu of damages measured by other methods, the damages caused by misappropriation under the UTSA may be measured by the imposition of a liability for a reasonable royalty based on the unauthorized disclosure or use of a trade secret. Finally, the UTSA also provides for the recovery of attorney’s fees. The bill therefore adopts an authorization for exemplary damages that may exceed that of the current law.
With the possibility for increased protection of confidential business information, improved predictability in the outcome of judicial proceedings, and higher financial stakes, enactment of the UTSA may soon garner increased attention from litigators in the Commonwealth. This is particularly true given the pending non-compete legislation in Massachusetts, which many expect to be passed this year.