Trade Secrets in Wisconsin

by:  Barry W. Szymanski

Wisconsin trade secret law is the same as Iowa and Minnesota. The law states that a trade secret is defined as information. The law further defines information to include:

• formulas,
• patterns,
• compilations,
• programs,
• devices,
• methods,
• techniques, or
• processes,

to which all of the following apply: 

1. The information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use.
2. The information is the subject of efforts to maintain its secrecy that are reasonable under the circumstances.

Therefore information includes computer software, plans, customer lists, marketing programs, cost methods, and the like.

The information must be secret in that it is not known by people on the street, or, for best protection, by all employees.

The information is not easily discoverable. If a search through technical journals, trade publications, or reference materials in the library or on the internet produces the information, then it is not given the protection of trade secret law. Obviously a customer list taken from the yellow pages is not a trade secret.

The information must have actual or potential economic value. In a Court setting the questions which may be asked are how much effort and cost were expended to develop the information, and how much effort and cost would have to be expended to duplicate the information.

If a competitor develops the same information and makes it public, then the trade secret protection is lost for both the original trade secret holder as well as the new developer. If a competitor engineers the information by reverse discovery, then the trade secret is also lost.

The holder of a trade secret must take reasonable efforts to maintain the secrecy of the trade secrets. Marking books and documents ‘Confidential - Trade Secret’, maintaining them under lock and key, and using shredders when destroying them to avoid ‘waste publication’, are all considered reasonable efforts to maintain secrecy.

Information can be disclosed by employees, contractors and vendors you work with, and consultants who are given access to your trade secrets. Requiring these groups to execute confidentiality agreements and clearly specifying that certain information is a trade secret and is to remain so under penalty is a reasonable effort. In a Court setting the employee, contractor, vendor, or consultant may be questioned as to his or her perception of whether the company expected the information to be maintained as trade information in secrecy.

When employee, contractor, vendor and consultant relationships are terminated, confidentiality agreements should be reviewed, and if those agreements have continuing

• non-disclosure covenants,
• non-competition covenants, and/or
• assignment of patent or invention covenants,

then the parties should be reminded of them in writing as part of the exit interview. The parties should sign the exit interview agreement showing they understand what is a trade secret and their agreement not to disclose it/them.

If you are involved in litigation, then the Courts, upon Motion, may grant Protective Orders to protect trade secrets. Court involvement will be sought if a person misappropriates a trade secret. Misappropriation, under the law, takes place if a person does any of the following:

(a)         Acquires the trade secret of another by means which the person knows or has reason to know constitute improper means.

(b)          Discloses or uses without express or implied consent a trade secret of another if the person did any of the following:

1.            Used improper means to acquire knowledge of the trade secret.

2.            At the time of disclosure or use, knew or had reason to know that he or she obtained knowledge of the trade secret through any of the following means:

a.           Derived it from or through a person who utilized improper means to acquire it.

Improper means includes industrial or electronic espionage and bribery; and can be federal or state criminal or civil in nature.

b.           Acquired it under circumstances giving rise to a duty to maintain its secrecy or limit its use.

c.            Derived it from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use.

d.            Acquired it by accident or mistake.

The Courts may grant an injunction against a person who the law in order to eliminate a commercial advantage so that the person who violated the law would not derive a benefit from the violation. In exceptional circumstances, the Court may grant an injunction conditioned upon future use of a trade secret by the person who violated the law upon payment of a reasonable royalty by that person to the owner of the trade secret.

The court may also award damages to the complainant in addition to, or in lieu of, injunctive relief. Damages may include both the actual loss caused by the violation as well as unjust enrichment caused by the violation that is not taken into account in computing actual loss. Damages may be measured exclusively by the imposition of liability for a reasonable royalty for a trade secret law violation if the complainant can not easily prove an amount of damages which exceeds the reasonable royalty.

In addition, if a Court determines that a trade secret violation was wilful and malicious, then the court may award punitive damages in an amount not exceeding twice the damage award.

Also the Court is given the power to award reasonable attorney fees to the prevailing party if a claim is either made in bad faith, or if a trade secret violation is wilful and deliberate.

These notes are prepared to give a general overview of Wisconsin legislation. These notes are not intended to provide the type of legal advice that is given when an Attorney confers with a Client and is able to discover exactly the needs and requirements, and thereafter provide professional advice as to the best legal format for the Client’s benefit.