Massachusetts’ New Trade Secrets Law: the Text

Last week, I posted an article explaining the new noncompete and trade secrets law reform legislation passed by the Massachusetts Legislature. See Massachusetts noncompete and trade secret reform has arrived: What you need to know.

Governor Charlie Baker is expected to sign it into law (by the August 10 deadline). The article above will tell you what you need to know.

However, it occurred to me that people might like to read the actual text of the trade secrets bill (and the noncompete bill – see Massachusetts New Noncompete Law: the Text).

Given that it’s part of a much larger economic development bill, I thought it would be easier to just reprint the text of the bill below (which I’ve done).

To see how it compares to other state trade secrets laws, please see our 50 State Trade Secret Chart. (First prepared in 2010, this chart is updated regularly, when, as will be the case if the Governor signs the bill, state laws change. So, to make sure you are up to the minute, please check for new ones periodically.)

Text of the bill:

SECTION 19. Chapter 93 of the General Laws is hereby amended by striking out sections 42 and 42A, as appearing in the 2016 Official Edition, and inserting in place thereof the following 8 sections:-

Section 42. As used in this section and in sections 42A to 42G, inclusive, the following words, shall unless the context clearly requires otherwise, have the following meanings:

(1) “Improper means”, without limitation, theft, bribery, misrepresentation, unreasonable intrusion into private physical or electronic space or breach or inducement of a breach of a confidential relationship or other duty to limit acquisition, disclosure or use of information; reverse engineering from properly accessed materials or information is not improper means.

(2) “Misappropriation”,

(i) an act of acquisition of a trade secret of another by a person who knows or who has reason to know that the trade secret was acquired by improper means; or

(ii) an act of disclosure or use of a trade secret of another without that person’s express or implied consent by a person who

(A) used improper means to acquire knowledge of the trade secret or

(B) at the time of the actor’s disclosure or use, knew or had reason to know that the actor’s knowledge of the trade secret was

(I) derived from or through a person who had utilized improper means to acquire it;

(II) acquired under circumstances giving rise to a duty to limit its acquisition, disclosure or use; or

(III) derived from or through a person who owed a duty to the person seeking relief to limit its acquisition, disclosure, or use; or

(C) before a material change of the actor’s position, knew or had reason to know that it was a trade secret and that actor’s knowledge of it had been acquired by accident, mistake, or through another person’s act described in clause (A) of paragraph (ii) or subclauses (I) or (II) of clause (B) of said paragraph (ii) of the definition of Misappropriation.

(3) “Person”, a natural person, corporation, business trust, estate, trust, partnership, association, joint venture, government, governmental subdivision or agency, or any other legal or commercial entity.

(4) “Trade secret”, specified or specifiable information, whether or not fixed in tangible form or embodied in any tangible thing, including but not limited to a formula, pattern, compilation, program, device, method, technique, process, business strategy, customer list, invention or scientific, technical, financial or customer data that

(i) at the time of the alleged misappropriation, provided economic advantage, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, others who might obtain economic advantage from its acquisition, disclosure or use; and

(ii) at the time of the alleged misappropriation was the subject of efforts that were reasonable under the circumstances, which may include reasonable notice, to protect against it being acquired, disclosed or used without the consent of the person properly asserting rights therein or such person’s predecessor in interest.

Section 42A.  (a) Actual or threatened misappropriation may be enjoined upon principles of equity including but not limited to consideration of prior party conduct and circumstances of potential use, upon a showing that information qualifying as a trade secret has been or is threatened to be misappropriated. Upon application to the court, an injunction shall be terminated when the trade secret has ceased to exist, but the injunction may be continued for an additional reasonable period of time in order to eliminate any economic advantage that otherwise would be derived from  misappropriation.

(b) In exceptional circumstances, an injunction may condition future use upon payment of a reasonable royalty for no longer than the period of time for which use could have been prohibited. Exceptional circumstances include, but are not limited to, a material and prejudicial change of position prior to acquiring knowledge or reason to know of misappropriation that renders a prohibitive injunction inequitable.

(c) In appropriate circumstances, affirmative acts to protect a trade secret may be compelled by court order.

Section 42B. (a) Except to the extent that a material and prejudicial change of position prior to acquiring knowledge or reason to know of misappropriation renders a monetary recovery inequitable, a complainant is entitled to recover damages for misappropriation of information. Damages can include both the actual loss caused by misappropriation and the unjust enrichment caused by misappropriation that is not taken into account in computing actual loss. In lieu of damages measured by any other methods, the damages caused by misappropriation may be measured by the imposition of liability for a reasonable royalty for a misappropriator’s unauthorized disclosure or use of a trade secret.

(b) If willful and malicious misappropriation exists, the court may award exemplary damages in an amount not exceeding twice any award made under subsection (a).

Section 42C. The court may award reasonable attorney’s fees and costs to the prevailing party if: (i) a claim of misappropriation is made or defended in bad faith, (ii) a motion to enter or to terminate an injunction is made or resisted in bad faith, or (iii) willful and malicious misappropriation exists.  In considering such an award, the court may take into account the claimant’s specification of trade secrets and the proof that such alleged trade secrets were misappropriated.

Section 42D. (a) In an action under sections 42 to 42G, inclusive, a court shall preserve the secrecy of an alleged trade secret by reasonable means, which may include granting protective orders in connection with discovery proceedings, holding in-camera hearings, sealing the records of the action, and ordering any person involved in the litigation not to disclose an alleged trade secret without prior court approval.

(b) In an action under sections 42 to 42G, inclusive, in alleging trade secrets misappropriation a party must state with reasonable particularity the circumstances thereof, including the nature of the trade secrets and the basis for their protection. Before commencing discovery relating to an alleged trade secret, the party alleging misappropriation shall identify the trade secret with sufficient particularity under the circumstances of the case to allow the court to determine the appropriate parameters of discovery and to enable reasonably other parties to prepare their defense.

Section 42E.  An action for misappropriation must be brought within 3 years after the misappropriation is discovered or by the exercise of reasonable diligence should have been discovered. For the purposes of sections 42 to 42G, inclusive, a continuing disclosure or use constitutes a single claim.

Section 42F. (a) Except as provided in subsection (b), sections 42 to 42G, inclusive, shall supersede any conflicting laws of the commonwealth providing civil remedies for the misappropriation of a trade secret.

(b) Sections 42 to 42G, inclusive, do not affect:

(1) contractual remedies, provided that, to the extent such remedies are based on an interest in the economic advantage of information claimed to be confidential, such confidentiality shall be determined according to the definition of trade secret in section 42, where the terms and circumstances of the underlying contract shall be considered in such determination;

(2) remedies based on submissions to governmental units;

(3) other civil remedies to the extent that they are not based upon misappropriation of a trade secret; or

(4) criminal remedies, whether or not based upon misappropriation of a trade secret.

Section 42G.  Sections 42 to 42F, inclusive, shall be applied and construed to effectuate their general purpose to make uniform the law with respect [to] trade secrets.

***

Chapter 93 of the General Laws, inserted by section 19, shall take effect on October 1, 2018 and shall not apply to misappropriation commencing prior to the October 1, 2018, regardless of whether such misappropriation continues after that date.

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