Will our Iowa confidentiality clause protect this information as a trade secret?
Only if the information meets chapter 550's definition. A trade secret is information, including a formula, pattern, compilation, program, device, method, technique or process, that both derives independent economic value, actual or potential, from not being generally known to and not being readily ascertainable by proper means by a person able to obtain economic value from its disclosure or use, and is the subject of efforts that are reasonable under the circumstances to maintain its secrecy (Iowa Code § 550.2(4)). Misappropriation includes disclosure or use of a trade secret by a person who at the time of disclosure or use knows that the trade secret is acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use (§ 550.2(3)(d)), the branch a confidentiality agreement supplies. The definition has six branches, and the one after it reaches a step further down the chain: disclosure or use by a person who at the time of disclosure or use knows that the trade secret is derived from or through a person who owes a duty to maintain its secrecy or limit its use (§ 550.2(3)(e)). The other branches turn on improper means, which § 550.2(1) defines as theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage. Every branch turns on knowledge, and the chapter does not confine that to what the defendant actually knew: a person knows a thing where "a person has actual knowledge of information or a circumstance or that the person has reason to know of the information or circumstance" (§ 550.2(2)). An action for misappropriation under the chapter must be brought within three years after the misappropriation is discovered or should have been discovered by the exercise of reasonable diligence, and a continuing misappropriation constitutes a single claim (§ 550.8).
The trap
Reasonable efforts to maintain secrecy are part of the definition, so the confidentiality clause is evidence for the statutory claim as well as a contract term; information the business does not in fact guard is not a trade secret whatever the agreement calls it. Two things this rule does NOT say. Iowa's chapter 550 as published runs from § 550.1 to § 550.8 and contains no provision displacing other civil remedies for misappropriation, so whether an Iowa contract claim on the confidentiality clause stands alongside a chapter 550 claim is a question the chapter does not answer and this rule does not answer either. And the three-year period in § 550.8 governs a statutory misappropriation action; on its words it does not set the period for a breach-of-contract claim on the clause.
5 authorities
- statuteIowa Code § 550.2enactment date not established
The words that state the rule
“Trade secret” means information, including but not limited to a formula, pattern, compilation, program, device, method, technique, or process that is both of the following: a. Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by a person able to obtain economic value from its disclosure or use. b. Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
- statuteIowa Code § 550.2enactment date not established
The words that state the rule
“Misappropriation” means doing any of the following: a. Acquisition of a trade secret by a person who knows that the trade secret is acquired by improper means. b. Disclosure or use of a trade secret by a person who uses improper means to acquire the trade secret. c. Disclosure or use of a trade secret by a person who at the time of disclosure or use, knows that the trade secret is derived from or through a person who had utilized improper means to acquire the trade secret. d. Disclosure or use of a trade secret by a person who at the time of disclosure or use knows that the trade secret is acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use. e. Disclosure or use of a trade secret by a person who at the time of disclosure or use knows that the trade secret is derived from or through a person who owes a duty to maintain the trade secret’s secrecy or limit its use. f. Disclosure or use of a trade secret by a person who, before a material change in the person’s position, knows that the information is a trade secret and that the trade secret has been acquired by accident or mistake.
- statuteIowa Code § 550.2enactment date not established
The words that state the rule
“Improper means” means theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage, including but not limited to espionage through an electronic device.
- statuteIowa Code § 550.8enactment date not established
The words that state the rule
An action for misappropriation under this chapter must be brought within three years after the misappropriation is discovered or should have been discovered by the exercise of reasonable diligence. For purposes of this section, a continuing misappropriation constitutes a single claim.
- statuteIowa Code § 550.2enactment date not established
The words that state the rule
“Knows” or “knowledge” means that a person has actual knowledge of information or a circumstance or that the person has reason to know of the information or circumstance.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.