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

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.