Will our Kansas confidentiality clause protect this information as a trade secret?
Only if the information meets the act's definition, but the contract claim survives either way. A trade secret is information, including a formula, pattern, compilation, program, device, method, technique or process, that derives independent economic value, actual or potential, from not being generally known to and not being readily ascertainable by proper means by other persons who can obtain economic value from its disclosure or use, and is the subject of efforts that are reasonable under the circumstances to maintain its secrecy (K.S.A. 60-3320(4)). Misappropriation includes disclosure or use of a trade secret without consent by a person who at the time knew or had reason to know that his knowledge of it was acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use (K.S.A. 60-3320(2)): the branch a confidentiality agreement supplies. An action for misappropriation must be brought within three years after the misappropriation is discovered or by the exercise of reasonable diligence should have been discovered, and a continuing misappropriation is a single claim (K.S.A. 60-3325).
The trap
Kansas has the displacement section that several states left out, and it has an express contract carve-out. K.S.A. 60-3326(a) provides that, except as subsection (b) says, the act "displaces conflicting tort, restitutionary and other law of this state providing civil remedies for misappropriation of a trade secret"; subsection (b) then preserves "Contractual remedies, whether or not based upon misappropriation of a trade secret", other civil remedies not based on misappropriation, and criminal remedies. So a well-drafted confidentiality covenant is not swept away by the act, and it is often the surer claim, because it does not require the information to satisfy the statutory definition. The displacement is real, not theoretical, though the posture is worth knowing: the trade-secret claimant's own brief conceded that the act “certainly does displace traditional tort remedies with respect to trade secrets” and, as the Court recorded, "essentially abandons any of its claims" for those losses, and the Court decided the question for itself anyway. In Wolfe Electric, Inc. v. Duckworth it held that whether tort claims seeking recovery for loss of trade secrets were preempted "is answered in the affirmative by K.S.A. 60-3326", because "tort causes of action cannot include a claim to recover for trade secrets; KUTSA is the exclusive remedy." The same Court expressly did not decide whether the act displaces tort claims for information that is NOT a trade secret, so a confidentiality covenant is the claim that does not depend on that question. Note too that reasonable efforts to maintain secrecy are part of that definition, so information the business does not actually guard is not a trade secret whatever the agreement calls it.
9 authorities
- statuteK.S.A. 60-3320enactment date not established
The words that state the rule
"Trade secret" means information, including a formula, pattern, compilation, program, device, method, technique, or process, that: (i) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
- statuteK.S.A. 60-3320enactment date not established
The words that state the rule
"Improper means" includes theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means.
- statuteK.S.A. 60-3325enactment date not established
The words that state the rule
An action for misappropriation must be brought within three years after the misappropriation is discovered or by the exercise of reasonable diligence should have been discovered. For the purposes of this section, a continuing misappropriation constitutes a single claim.
- statuteK.S.A. 60-3326enactment date not established
The words that state the rule
(a) Except as provided in subsection (b), this act displaces conflicting tort, restitutionary and other law of this state providing civil remedies for misappropriation of a trade secret. (b) This act does not affect: (1) Contractual remedies, whether or not based upon misappropriation of a trade secret; (2) other civil remedies that are not based upon misappropriation of a trade secret; or (3) criminal remedies, whether or not based upon misappropriation of a trade secret.
- statuteK.S.A. 60-3320enactment date not established
The words that state the rule
(2) "Misappropriation" means: (i) acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or (ii) disclosure or use of a trade secret of another without 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 disclosure or use, knew or had reason to know that his 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 maintain its secrecy or limit its use; or (III) derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use; or (C) before a material change of his position, knew or had reason to know that it was a trade secret and that knowledge of it had been acquired by accident or mistake.
The words that state the rule
Whether Wolfe Electric’s trade secret claims based upon tort were preempted by KUTSA requires statutory interpretation, a question of law subject to de novo review. See Zimmerman v. Board of Wabaunsee County Comm’rs, 289 Kan. 926 , Syl. ¶ 1, 218 P.3d 400 (2009). *401 This question is answered in the affirmative by K.S.A. 60-3326.
The words that state the rule
Now we conclude in Issue 2 that the trial court also erroneously — and perhaps ironically — allowed Wolfe Electric to include a request for damages for trade secrets under the two tort causes of action. This is error because tort causes of action cannot include a claim to recover for trade secrets; KUTSA is the exclusive remedy. See K.S.A. 60-3326.
The words that state the rule
As for Wolfe Electric’s assertion that KUTSA does not displace other tort causes of action for recovery of damages for nontrade secrets, we do not address it for several reasons.
The words that state the rule
Wolfe Electric’s brief concedes that KUTSA “certainly does displace traditional tort remedies with respect to trade secrets” and essentially abandons any of its claims for recoveiy for loss of trade secrets through these two tort causes of action.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.