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 17. Sections 42 and 42A of chapter 93 of the General Laws are hereby repealed.

SECTION 18. The General Laws are hereby amended by inserting after chapter 93K the following 3 chapters:-

CHAPTER 93L. UNIFORM TRADE SECRETS ACT.

Section 1. As used in this chapter, the following words shall have the following meanings unless the context clearly requires otherwise:

“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; provided, however, that “improper means” shall not include reverse engineering from properly accessed materials or information.

“Misappropriation”, (i) the 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) the 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 the trade secret; or (B) at the time of the disclosure or use, knew or had reason to know that the trade secret was acquired: (1) through a person who had utilized improper means to acquire it; (2) under circumstances giving rise to a duty to limit its acquisition, disclosure or use; or (3) 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 such person’s position, knew or had reason to know that what was disclosed was a trade secret and that such person’s knowledge of the trade secret had been acquired by accident, mistake or through another person’s act described in subclause (A) of clause (ii) or subclauses (1) or (2) of subclause (B) of said clause (ii).

“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.

“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, at the time of the alleged misappropriation: (i) provided an 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) was the subject of efforts that were reasonable under the circumstances to protect against the acquisition, disclosure or use of such information without the consent of the person properly asserting rights therein or such person’s predecessor in interest including, but not limited to, reasonable notice.

Section 2.

(a) Actual or threatened misappropriation may be enjoined upon principles of equity including, but not limited to, consideration of prior conduct and the 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; provided, however, that the injunction may be continued for an additional reasonable period of time if necessary to eliminate any economic advantage that otherwise would be derived from such 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. For the purposes of this subsection, “exceptional circumstances” shall include, but are not limited to, a material and prejudicial change of position prior to acquiring the 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 3.

(a) Except to the extent that a material and prejudicial change of position prior to acquiring the knowledge or reason to know of misappropriation renders a monetary recovery inequitable, a complainant is entitled to recover damages for misappropriation. 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 the 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 4.

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 5.

(a) In an action under this chapter, 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 or ordering any person involved in the litigation not to disclose an alleged trade secret without prior court approval.

(b) In an action alleging misappropriation, a party shall state with reasonable particularity the circumstances thereof, including the nature of the trade secret and the basis for its 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 reasonably enable other parties to prepare their defense.

Section 6.

An action alleging misappropriation must be brought not more than 3 years after the misappropriation was discovered or should have been discovered by the exercise of reasonable diligence. For the purposes of this chapter, a continuing disclosure or use constitutes a single claim.

Section 7.

(a) Except as provided in subsection (b), this chapter shall supersede any conflicting laws of the commonwealth that provide civil remedies for misappropriation.

(b) This chapter shall not affect:

(i) contractual remedies; provided, however, 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 1 and the terms and circumstances of the underlying contract shall be considered in such determination;

(ii) remedies based on submissions to governmental units;

(iii) other civil remedies to the extent that they are not based upon misappropriation; or

(iv) criminal remedies, whether or not based upon misappropriation.

Section 8.

This chapter shall be applied and construed to effectuate its general purpose of making uniform the law with respect to the subject of this chapter among states enacting it.

***

SECTION 56. Chapter 93L of the General Laws, inserted by section 18, 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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