THE LOUISIANA TRADE SECRETS ACT:  PURPOSE AND THE PLAINTIFF’S BURDEN OF PROOF

The Louisiana 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 unjust enrichment).

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:”

"Trade 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 its secrecy.

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.

Further, the 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 (10^th 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.

Reasonable 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 (5^th Cir. 2002)

LUTSA defines the term "misappropriation” as:

(a) acquisition 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.

La. R.S. 51:1431(2).

Finally, " ‘[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.