What Happens If A Trade Secret Is Disclosed During Litigation?

In legal proceedings, the potential for a trade secret to be disclosed is a significant concern for businesses. Once a trade secret is disclosed during litigation, it can lose its protected status and may be accessible to competitors or the public. However, there are safeguards in place to protect trade secrets during legal disputes, including protective orders and confidentiality agreements, which can help mitigate the risk of public disclosure.

What Happens if a Trade Secret Is Disclosed During Litigation?

Loss of Trade Secret Protection:

Once a trade secret is publicly disclosed or becomes part of the public record in a legal proceeding, it may lose its protected status as a trade secret. The key requirement for maintaining trade secret protection is the continuous maintenance of secrecy.

If a trade secret is disclosed in a court filing or other public document, it may no longer qualify for trade secret protection under the law, as it is no longer considered confidential information.

Protective Orders and Confidentiality Agreements:

Protective Orders:

Courts often issue protective orders to prevent the public disclosure of trade secrets during litigation. A protective order is a legal document that restricts the sharing of sensitive information to only certain parties involved in the case and mandates that trade secrets be kept confidential throughout the proceedings.

Confidentiality Agreements:

Parties involved in the litigation may also be required to sign confidentiality agreements to ensure that the trade secrets disclosed during the case are not further shared or used for any purpose other than the case at hand.

These measures aim to prevent trade secrets from being exposed to the public or competitors during litigation and help to limit access to sensitive information.

Limited Access to Trade Secrets:

When a trade secret must be disclosed in court, the information is typically shared under restricted access, meaning only the judge, attorneys, and specific individuals involved in the case can view the information. The information is not made available to the general public.

In some cases, courts may hold in-camera hearings (private sessions) where only select parties are allowed to review the trade secret material.

Sealing Court Records:

If trade secrets are introduced as part of the litigation, a party may request that the court seal the records containing those trade secrets. Sealing the records ensures that the trade secret information is not made publicly available and remains confidential, even though it is part of the legal proceedings.

While the court may grant a request to seal certain documents, the decision depends on the court’s assessment of whether the trade secret is vital to the case and whether sealing the documents is necessary to protect business interests.

Injunctions and Legal Remedies:

If a trade secret is disclosed or misused during litigation, the harmed party can seek an injunction to prevent further disclosure or use of the trade secret. An injunction may require the party who disclosed the information to cease using it, return any copies of the trade secret, and take corrective actions to prevent further harm.

In addition to injunctive relief, the injured party may seek damages for any harm caused by the unauthorized disclosure or use of the trade secret.

Example:

A software company is involved in a legal dispute with a former employee who allegedly misappropriated the company’s trade secrets. The company’s proprietary code is central to the case.

• The company requests a protective order from the court, limiting access to the code during litigation and ensuring that it is not disclosed to the public.
• The court agrees and issues the order, and the code is only shared with the parties involved in the litigation under strict confidentiality terms.
• During discovery, the court may also decide to seal specific documents containing the code to prevent competitors from gaining access to it.
• If the code is disclosed inappropriately, the company can seek an injunction to prevent its use and demand remedies for any damages caused by the breach.

Conclusion:

The disclosure of a trade secret during litigation can be damaging to the business that owns the secret, potentially causing it to lose its protected status. However, legal mechanisms such as protective orders, confidentiality agreements, and sealed court records are in place to mitigate the risk of public disclosure during legal proceedings. Businesses involved in litigation can request these safeguards to help protect their trade secrets from unauthorized access and ensure that sensitive information remains confidential throughout the case. Additionally, if a trade secret is disclosed inappropriately, legal remedies like injunctions can be sought to prevent further harm.