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Can a Workforce IP Training Program Limit Liability Under the Uniform Trade Secrets Act?

By Tait Graves and Jason Williams
September 01, 2006

When a lower-level employee uses a former employer's trade secrets after taking a new job, the plaintiff often sues the new employer itself and demands exemplary damages under the Uniform Trade Secrets Act ('UTSA') ' even if the new employer was unaware of, and disapproves of, the employee's conduct. Taking a page from the law of employment discrimination, we believe that companies that provide intellectual property training for their workforce can use the fact of such training during litigation to avoid exemplary damages for the solitary wrongdoing of non-executive-level employees ' and perhaps avoid vicarious liability altogether. Companies, especially technology startups, can reduce trade secret litigation and liability risks by implementing such programs ' programs which today are very rare, even in Silicon Valley.

Trade secret lawsuits sometimes target founders and other high-level executives, and in those cases issues of vicarious liability and responsibility for treble damages are less controversial. But other lawsuits arise because a salesperson uses secret customer information from a former employer to make a sale, or a junior engineer uses secret code from a prior job as part of a software project. Management is often totally unaware of such acts and requires each new hire to sign an employment agreement containing a covenant not to use a former employer's trade secrets.

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