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Can a Workforce IP Training Program Limit Liability Under the Uniform Trade Secrets Act?
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.
When the plaintiff nonetheless sues the employer (sometimes without even suing the employee individually) and demands treble damages under the UTSA, the question arises whether an employer is liable in the first place for the solitary acts of the rank and file, much less for exemplary damages based on 'willful and malicious' conduct. As we will conclude below, the law is not clear, but implementing an IP training program could very likely work to bar exemplary damages and perhaps limit vicarious liability as well.
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