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Massachusetts Adopts the Uniform Trade Secrets Act

Posted on

by Nicholas J. Schneider

On October 1, 2018, lost in the deserved fanfare that the passing of the Massachusetts Noncompetition Agreement Act garnered, Massachusetts also became the second-to-last state to adopt the Uniform Trade Secrets Act (UTSA) (only New York remains). In doing so, Massachusetts statutorily updated both its 80-year-old definition of “trade secret” and legal remedies for misappropriation (which apply only to misappropriation first occurring after October 1). Though the UTSA largely codifies existing Massachusetts trade secret law, it differs in three meaningful ways that are significant for trade secret holders.

First, trade secrets no longer need to have actual economic value to be protectable; trade secrets with only potential economic value are now protectable. This is significant, as under former Massachusetts law only trade secrets in “continuous use” were protectable. In other words, former Massachusetts law allowed competitors to stand on each other’s shoulders and benefit from each other’s research and development — if the trade secret (no matter how long it took to develop, how expensive it was to develop, or how important it was to the development of further trade secrets) was no longer being used, it was not protectable. In contrast, the UTSA protects trade secret holders’ investment in research and development by protecting all trade secrets, regardless of their current use status.

Second, to obtain an injunction against former employees, trade secret holders no longer need to prove actual misappropriation; trade secret holders may now prove only threatened misappropriation. This is also significant, as Massachusetts appeals courts have not adopted the “inevitable disclosure” doctrine prevalent in other states. Under the inevitable disclosure doctrine (which the UTSA seemingly codifies), if a former employee joining a competitor would inevitably lead to the disclosure of a trade secret, the former employer may block that employment.

This seeming codification of the inevitable disclosure doctrine causes an interesting wrinkle in employee mobility (particularly given the passing of the Massachusetts Noncompetition Agreement Act (G.L. ch. 149, § 24L)). Though we will have to wait and see how Massachusetts courts interpret and apply the UTSA, based on other states’ interpretation of it, employers could potentially prevent a former employee from joining a competitor, even if the employee never actually uses the former employer’s trade secrets and even if the employee did not sign a noncompete. This is a win for employers, who saw their ability to enforce noncompetes limited by the passing of § 24L.

Finally, in actions for misappropriation, if trade secret holders can prove the misappropriation was willful and malicious, the UTSA allows courts to award attorneys’ fees; trade secret holders no longer need to rely on 93A for fees to be awarded. But trade secret holders should also be aware that the UTSA fashions misappropriation claims as shields, not swords — if the purported trade secret thief can prove the trade secret holder brought its claim in bad faith (i.e., a false claim), the UTSA empowers courts to award attorney’s fees to the purported thief.