The Tennessee Uniform Trade Secrets Acts: The Basics

In 2000, Tennessee adopted the Uniform Trade Secrets Act (“UTSA”). The UTSA aims to protect trade secrets of businesses and individuals from misappropriation, theft, and misuse. In order to prove someone is liable under the UTSA, a plaintiff must establish that its information which was misappropriated was a “trade secret.”

Not every piece of information in the possession of a Tennessee business will qualify as a trade secret under the UTSA. To be a trade secret under the UTSA, the information must be valuable because it is not generally known or readily ascertainable by proper means. Also, to prove liability under the UTSA, a business must establish that it has made “efforts reasonable under the circumstances to maintain its secrecy.” Importantly, even if someone could properly and lawfully obtain all of the individual pieces of information which comprise the trade secret claimed by the business, nevertheless, under Tennessee law, if the business has integrated and aggregated the pieces of information, it may be considered a trade secret.

To prove liability under the UTSA, a business must prove that the trade secret was “misappropriated.” The definition of misappropriation under the UTSA is expansive. The definition includes, for example, direct taking of trade secrets as well as the receipt of a trade secret by a party who did not directly take it (under the defined circumstances).

For Tennessee lawyers who handle trade secrets cases, the UTSA provides a “big stick” (in terms of damages) either to use or to have to defend against. For a Tennessee business damaged by the misappropriation of its trade secrets, under the UTSA, it can be awarded, if successful, either its actual damages or damages in an amount that is based on how much the defendant profited by misappropriating the trade secrets.

In addition to actual damages, a plaintiff who proves a violation of the UTSA may recover exemplary damages. The UTSA allows a Tennessee court to award up to two times (2x) the plaintiff’s actual damages if the court finds that the misappropriation was willful and malicious. To boot, a court may award a plaintiff its attorneys’ fees if the misappropriation was willful and malicious.

There is not much Tennessee case law interpreting the UTSA. The UTSA is, at least compared to many, many Tennessee statutes, clear and straightforward (which is refreshing for Tennessee lawyers who handle trade secret cases). One case interpreting the UTSA that is worth a read is a 2010 opinion of the Court of Appeals of Tennessee, Hamilton-Ryker Group v. Keymon.

In the Keymon case, a former employee of a labor services firm had emailed herself fifty-six documents which concerned her former employer’s work for Verizon, which work she had supervised. The emails contained Verizon’s estimated production schedule, a profit-loss analysis of the work done for Verizon, and the mailing list which Verizon had forwarded to her former employer so that it could print labels for Verizon. The version of Verizon’s mailing list which her former employer had, and which the former employee had emailed to herself, had been converted by her former employer into a format that allowed labels to be printed.

The court in the Keymon case held that the information the former employee had emailed herself was a trade secret and awarded the former employer a substantial judgment. The judgment amount was based on the gross amount Verizon paid to the former employee, after it stopped working with her former employer and started working with her, multiplied by the former employer’s profit margin.

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