LOUISIANA TRADE SECRETS ACT: PURPOSE AND THE PLAINTIFF’S BURDEN OF PROOF
By: W. Corey Grimley
Trade Secrets Act ("LUTSA”) is codified at La. R.S. 51:1431 et seq. The purpose of LUTSA is to prevent one person
or business from profiting from a trade secret developed by another, because
the first person would thus be acquiring a free competitive advantage. Stork-Werkspoor
Diesel V.V. v. Koek, 534 So.2d 983 (La.App. 5 Cir. 1988) (a person or a business can obtain injunctive
relief from the Louisiana courts for either "[a]ctual or threatened
misappropriation" of their trade secrets or damages for actual losses and
The complaining party must bear the
burden of proof to show that the trade secrets have been misappropriated. This requires the complaintant to prove that
(1) a trade secret existed, and (2) that the trade secret was misappropriated
by the alleged infringing party. Advance Products & Systems, Inc. v.
Simon, 2006-609 (La.App. 3 Cir. 12/6/06), 944 So.2d 788.
LUTSA provides a specific
definition for the term "trade secret:”
secret" means information, including a formula, pattern, compilation, program, device, method, technique, or
process, that ... 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, and ... is the subject of efforts that are reasonable under the circumstances to maintain
La. R.S. § 51:1431(4). [A] trade secret is information that has
independent economic value because it is not generally known or readily
ascertainable and efforts are taken to maintain the information's
secrecy." SDT Industries, Inc. v.
Leeper, 793 So.2d 327, (La.App. 2 Cir. 6/22/01), 34,655.
LUTSA extends protection to a business owner who has not yet had an opportunity
or acquired the means to put a trade secret to use. The definition of "trade
secret” in the LUTSA includes information that has commercial value from a
negative viewpoint. La. R.S. § 51:1431, Comment (c). For example, the results of lengthy and
expensive research which proves that a certain process will not work could be
of great value to a competitor. Telex
Corp. v. IBM Corp., 510 F.2d 894 (10th Cir. 1975) (liability
imposed for developmental cost savings with respect to product not marketed). Id. Because a trade secret need not be exclusive
to confer a competitive advantage, different independent developers can acquire
rights in the same trade secret. Id.
Comment (e) to La.
R.S. § 51:1431 explains that information is considered "readily ascertainable”
if the information is available in trade journals, reference books, or
published materials. "Often, the nature of a product lends itself to being
readily copied as soon as it is available on the market. On the other hand, if
reverse engineering is lengthy and expensive, a person who discovers the trade
secret through reverse engineering can have a trade secret in the information
obtained from reverse engineering.” La. R.S. § 51:1431, Comment (e).
Comment (f) under
[La. R.S. § 51:1431] shows that LUTSA adopts the concept of "relative secrecy”
rather than "absolute secrecy.” Sheets v.
Yamaha Motors Corp., U.S.A., 849 F.2d 179, 183 (5th Cir.1988). " ‘The
efforts required to maintain secrecy are those reasonable under the
circumstances, and courts do not require extreme and unduly expensive
procedures to be taken to protect trade secrets.’ ” Id. (quoting Tubular Threading, Inc. v. Scandaliato,
443 So.2d 712, 714 (La.Ct.App.1983)). "A disclosure of a trade secret to others
who have no obligation of confidentiality extinguishes the property right in
the trade secret.” Id. at 183-84.
efforts to maintain secrecy have been held to include advising employees of the
existence of a trade secret, limiting access to a trade secret on a "need to
know basis”, and controlling plant access. On the other hand, public disclosure
of information through display, trade journal publications, advertising, or
other carelessness can preclude protection.... Reasonable use of a trade secret
including controlled disclosure to employees and licensees is consistent with
the requirement of relative secrecy. Tubos de Acero de Mexico, S.A. v. American
Intern. Inv. Corp., Inc., 292 F.3d 471 (5th Cir. 2002)
LUTSA defines the term
of a trade secret of another by a person who knows or has reason to know that
the trade secret was acquired by improper means; or (b) disclosure or use of a
trade secret of another without express or implied consent by a person who: (i)
used improper means to acquire knowledge of the trade secret; or (ii) at the
time of disclosure or use, knew or had reason to know that his knowledge of the
trade secret was: (aa) derived from or through a person who had utilized
improper means to acquire it; (bb) acquired under circumstances giving rise to
a duty to maintain its secrecy or limit its use; or (cc) derived from or
through a person who owed a duty to the person seeking relief to maintain its
secrecy or limit its use; or (iii) before a material change of his position,
knew or had reason to know that it was a trade secret and that knowledge of it
had been acquired by accident or mistake.
‘[i]mproper means' includes theft, bribery, misrepresentation, breach, or
inducement of a breach of a duty to maintain secrecy, or espionage through
electronic or other means.” La. R.S. 51:1431(1).
The analysis of
whether a trade secret has been misappropriated under the LUTSA is, due to the
language of the statute, very fact dependent.
Notwithstanding, LUTSA represents an effort by the legislature to
provide business owners with a practical tool for recovering the damages caused
by theft of trade secrets.