Does our confidentiality clause add anything in Rhode Island, and does the Uniform Trade Secrets Act swallow it?
It adds everything, because the Act expressly saves it while displacing the tort claims around it. R.I. Gen. Laws § 6-41-7 provides that “Except as provided in subsection (b) of this section, this chapter displaces conflicting tort, restitutionary, and other law of this state providing civil remedies for misappropriation of a trade secret”, and that “This chapter does not affect: (1) Contractual remedies, whether or not based upon misappropriation of a trade secret;”. The Supreme Court applied that literally in Wild Horse Concepts, LLC v. Hasbro, Inc.: “The plain and ordinary language of the statute undeniably displaces plaintiffs’ common law claims of fraud, unjust enrichment, deliberate bad faith and wanton, willful bordering on criminal conduct”, and there is nothing underneath it, because “The plaintiffs cannot sidestep the RIUTSA by claiming the information they are seeking to protect is intellectual property and not a trade secret.” The statutory floor is narrow: information is a “Trade secret” only if it “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” (§ 6-41-1(4)). Outside that floor the contract is the only source of duty: in Read & Lundy, Inc. v. Washington Trust Co. of Westerly the Court held that “In the absence of an agreement, there does not appear to be any prohibition against the bank’s use of the information supplied by plaintiffs to consider CSI’s loan application.” Rhode Island’s non-compete statute points the same way: a “nondisclosure or confidentiality agreement” is expressly excluded from the definition of a “noncompetition agreement” (§ 28-59-2(8)(vi)), and § 28-59-3(c) says “Nothing in this section shall preclude an employer from entering into an agreement with an employee not to share any information, including after the employee is no longer employed by the employer, regarding the employer or the employment that is a trade secret.”
The trap
The Rhode Island trap is that the NDA’s own machinery, not the Act, decides the case. In Wild Horse the confidentiality agreement required that “[a]ll information intended by the disclosing party to be protected under this Agreement shall be in writing and clearly identified in writing as confidential at the time of disclosure”, or within thirty days after it; the disclosing party designated nothing, and the Court held “The proper method to hold information confidential pursuant to the Agreement was to specify such information; failing to do so does not open the door to a claim for breach of an implied contract”, because “When ‘there is an express contract between the parties referring to a subject matter, there can be no implied contract arising by implication of law governing the same subject matter.’” A designation formality you write into your own NDA is therefore a condition you must meet, and no implied-contract or unjust-enrichment theory survives to cover the gap. Second, the displacement runs the other way too: if the information IS a trade secret, the tort wrapper (fraud, unjust enrichment, conversion, punitive-damages counts) goes with it under § 6-41-7(a), and there is no common-law misappropriation claim in Rhode Island to fall back on. Third, the Act’s own remedies are time-boxed in ways a drafter should not assume away: an injunction “shall be terminated when the trade secret has ceased to exist, but the injunction may be continued for an additional reasonable period of time in order to eliminate commercial advantage that otherwise would be derived from the misappropriation” (§ 6-41-2(a)), and § 6-41-2(b) can substitute money for the injunction altogether: “[i]n exceptional circumstances, an injunction may condition future use upon payment of a reasonable royalty for no longer than the period of time for which the use could have been prohibited”; the claim must be brought “within three (3) years after the misappropriation is discovered or by the exercise of reasonable diligence should have been discovered” and “a continuing misappropriation constitutes a single claim” (§ 6-41-6, applied in Read & Lundy to bar a claim filed more than three years after a deposition revealed the use); and the Act’s fee provision is not a prevailing-party clause, fees run only where “a claim of misappropriation is made in bad faith”, a motion to terminate an injunction “is made or resisted in bad faith”, or “willful and malicious misappropriation exists” (§ 6-41-4).
18 authorities
- statuteR.I. Gen. Laws § 6-41-7enactment date not established
The words that state the rule
Except as provided in subsection (b) of this section, this chapter displaces conflicting tort, restitutionary, and other law of this state providing civil remedies for misappropriation of a trade secret.
- statuteR.I. Gen. Laws § 6-41-7enactment date not established
The words that state the rule
This chapter 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.
- statuteR.I. Gen. Laws § 6-41-1enactment date not established
The words that state the rule
(4) “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.
- statuteR.I. Gen. Laws § 6-41-2enactment date not established
The words that state the rule
Upon application to the court, an injunction shall be terminated when the trade secret has ceased to exist, but the injunction may be continued for an additional reasonable period of time in order to eliminate commercial advantage that otherwise would be derived from the misappropriation.
- statuteR.I. Gen. Laws § 6-41-6enactment date not established
The words that state the rule
An action for misappropriation must be brought within three (3) 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.
- statuteR.I. Gen. Laws § 6-41-4enactment date not established
The words that state the rule
If: (a) a claim of misappropriation is made in bad faith; or (b) a motion to terminate an injunction is made or resisted in bad faith; or (c) willful and malicious misappropriation exists, the court may award reasonable attorney’s fees to the prevailing party.
- statuteR.I. Gen. Laws § 28-59-3enactment date not established
The words that state the rule
Nothing in this section shall preclude an employer from entering into an agreement with an employee not to share any information, including after the employee is no longer employed by the employer, regarding the employer or the employment that is a trade secret.
The words that state the rule
The plain and ordinary language of the statute undeniably displaces plaintiffs’ common law claims of fraud, unjust enrichment, deliberate bad faith and wanton, willful bordering on criminal conduct.
The words that state the rule
The plaintiffs cannot sidestep the RIUTSA by claiming the information they are seeking to protect is intellectual property and not a trade secret.
The words that state the rule
The proper method to hold information confidential pursuant to the Agreement was to specify such information; failing to do so does not open the door to a claim for breach of an implied contract.
- case840 A.2d 1099Read & Lundy, Inc. v. Washington Trust Co. of WesterlyR.I.decided 2004read it at the source ↗
The words that state the rule
In the absence of an agreement, there does not appear to be any prohibition against the bank’s use of the information supplied by plaintiffs to consider CSI’s loan application.
- statuteR.I. Gen. Laws § 28-59-2enactment date not established
The words that state the rule
(iv) Noncompetition agreements originating outside of an employment relationship; (v) Forfeiture agreements; (vi) Nondisclosure or confidentiality agreements; (vii) Invention assignment agreements;
The words that state the rule
Paragraph two of the Agreement expressly states that “[a]ll information intended by the disclosing party to be protected under this Agreement shall be in writing and clearly identified in writing as confidential at the time of disclosure or within thirty (30) -8- days thereafter ***.”
The words that state the rule
When “there is an express contract between the parties referring to a subject matter, there can be no implied contract arising by implication of law governing the same subject matter.”
- statuteR.I. Gen. Laws § 6-41-1enactment date not established
The words that state the rule
“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 or her 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 or her 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.
- statuteR.I. Gen. Laws § 6-41-2enactment date not established
The words that state the rule
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 the use could have been prohibited.
- case840 A.2d 1099Read & Lundy, Inc. v. Washington Trust Co. of WesterlyR.I.decided 2004read it at the source ↗
The words that state the rule
In a deposition taken on January 25, 1996, however, more than three years before they filed this suit, a bank officer testified that he had information about R & L in the bank’s loan file for CSI for comparison purposes. Therefore, the plaintiffs were aware as early as January 1996 that the bank was using information about R & L to consider CSI’s loan request, yet they failed to file this suit until June 1999.
The words that state the rule
Therefore, this claim must fail as a matter of law. Conclusion For the reasons stated herein, we affirm the judgment of the Superior Court. The papers in this case shall be returned to the Superior Court.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.