Mass. Bill Would Replace Existing Trade Secrets Law With UTSA

Proposed legislation in Massachusetts would repeal the state’s idiosyncratic trade secrets laws and replace them with a version of the Uniform Trade Secrets Act.

Rep. Eugene L. O’Flaherty sponsored the bill, H.2846, entitled “An Act Making Uniform the Law Regarding Trade Secrets.” The bill was referred to the Massachusetts House of Representatives Joint Committee on the Judiciary on January 24, 2011.

If enacted, the bill would repeal §§ 42 and 42A of Chapter 93 of the Massachusetts General Laws and add an incarnation of the Uniform Trade Secrets Act (UTSA) as Chapter 93H. The updated law would differ from present law in several respects.

First, §§ 42 and 42A currently rely on the definition of trade secrets provided by Chapter 266, Section 30 of the General Laws, which stipulate: “The term ‘trade secret’ as used in this paragraph means and includes anything tangible or intangible or electronically kept or stored, which constitutes, represents, evidences or records a secret scientific, technical, merchandising, production or management information, design, process, procedure, formula, invention or improvement.” The replacement definition will add further detail to this definition by statutorily enshrining the “economic value” and “reasonable efforts to maintain secrecy” requirements in proposed Chapter 93H §§ 2(4)(i) and (ii), respectively.

Second, the adoption of the UTSA will add detail to Massachusetts’ trade secrets regulation by specifying what types of monetary damages are available to plaintiffs. The current § 42 provides only that a misappropriator “shall be liable in tort to [a trade secrets holder] for all damages resulting therefrom.” The UTSA, on the other hand, indicates that awarding both actual damages and damages for unjust enrichment deriving from the misappropriation are appropriate, and that in the case of difficult measurement of damages, damages equal to a reasonable royalty may be granted. Additionally, the current § 42 simply provides that the court may double damages “in its discretion.” The UTSA will add that this should be limited to cases of “willful” or “malicious” misappropriation. The UTSA will also reaffirm the availability of injunctive relief that § 42A currently provides.

Third, the UTSA adds that “a court shall preserve the secrecy of an alleged trade secret by reasonable means,” whereas the current Massachusetts laws do not require protection for the duration of judicial proceedings. Such means “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.”

Finally, the UTSA will add a three-year statute of limitations on trade secrets misappropriation claims, where the current §§ 42 and 42A do not specify a time limit.

The Massachusetts criminal statute concerning trade secrets, General Laws Chapter 266 § 30(4), would survive the repeal of §§ 42 and 42A. The statute makes “unlawful” trade secrets theft a form of larceny and provides for a jail term of up to 5 years (or of up to 2 years if accompanied by a maximum $25,000 fine).