Does our confidentiality clause survive Virginia's trade-secrets statute, and what does the statute protect?
Yes, the clause survives: the Virginia Uniform Trade Secrets Act displaces competing tort remedies but expressly preserves contractual ones. "Except as provided in subsection B of this section, this chapter displaces conflicting tort, restitutionary, and other law of this Commonwealth providing civil remedies for misappropriation of a trade secret", and subsection B says the chapter does not affect "1. Contractual remedies whether or not based upon misappropriation of a trade secret; or 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" (Va. Code § 59.1-341). What the Act itself protects is narrower than what a confidentiality clause usually covers: "'Trade secret' means information, including but not limited to, a formula, pattern, compilation, program, device, method, technique, or process, that: 1. 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 2. Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy" (§ 59.1-336). The plaintiff carries the burden of proving misappropriation within the meaning of the Act (MicroStrategy Inc. v. Li, where the Supreme Court of Virginia affirmed a holding that it had not been carried: "we hold that the chancellor's factual findings fully support his resolution of all the trade secret misappropriation issues presented in this appeal", and "we will affirm the chancellor's judgment". The Court expressly did NOT reach the other element, saying it "need not address MicroStrategy's remaining assignments of error that involve the Act's other required element, the existence of a trade secret", so MicroStrategy decides nothing about what qualifies as a trade secret), and, in Dionne v. Southeast Foam Converting & Packaging, secrecy is not an absolute standard: "The secrecy need not be absolute; the owner of a trade secret may, without losing protection, disclose it to a licensee, an employee, or a stranger, if the disclosure is made in confidence, express or implied" (Dionne, 240 Va. 297). The Act also defines the wrong it displaces other law for: "misappropriation" is acquisition by one who knows or has reason to know the secret was obtained by improper means, or disclosure or use without consent by one who used improper means, or who knew or had reason to know the knowledge came through improper means, under a duty of secrecy, or by accident or mistake (§ 59.1-336), and "improper means" includes breach or inducement of a breach of a duty to maintain secrecy, which is where the confidentiality clause and the Act meet.
The trap
Because § 59.1-341(B)(1) preserves contractual remedies, the confidentiality clause is not surplusage and is often the stronger claim. It can reach "proprietary or confidential information" that fails the statutory two-part definition, where a tort claim for the same conduct would be displaced by subsection A. The related Virginia point is in the non-compete statute: Va. Code § 40.1-28.7:8(H)(1) says nothing in that section limits "Nondisclosure agreements intended to prohibit the taking, misappropriating, threatening to misappropriate, or sharing of certain information to which an employee has access, including trade secrets, as defined in § 59.1-336 , and proprietary or confidential information", so the covenant that survives the § 40.1-28.7:8 bans (on non-competes with a low-wage employee or a health care professional, and on any non-compete where the employer discharged without severance) is the confidentiality covenant, not the non-compete.
14 authorities
- statuteVa. Code § 59.1-336enactment 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: 1. 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 2. Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
- statuteVa. Code § 59.1-341enactment date not established
The words that state the rule
A. Except as provided in subsection B of this section, this chapter displaces conflicting tort, restitutionary, and other law of this Commonwealth providing civil remedies for misappropriation of a trade secret.
- statuteVa. Code § 59.1-341enactment date not established
The words that state the rule
B. This chapter does not affect: 1. Contractual remedies whether or not based upon misappropriation of a trade secret; or 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.
The words that state the rule
In this appeal, we consider whether the chancellor erred in holding that the plaintiff failed to meet its burden of proving that the defendants misappropriated certain trade secrets, within the meaning of the Virginia Uniform Trade Secrets Act (the Act), Code §§ 59.1-336 through –343.
- case240 Va. 297Dionne v. Southeast Foam Converting & Packaging, Inc.Va.decided 1990read it at the source ↗
The words that state the rule
The secrecy need not be absolute; the owner of a trade secret may, without losing protection, disclose it to a licensee, an employee, or a stranger, if the disclosure is made in confidence, express or implied.
- statuteVa. Code § 40.1-28.7:8enactment date not established
The words that state the rule
H. Nothing in this section shall serve to limit the creation or application of: 1. Nondisclosure agreements intended to prohibit the taking, misappropriating, threatening to misappropriate, or sharing of certain information to which an employee has access, including trade secrets, as defined in § 59.1-336 , and proprietary or confidential information; or
- statuteVa. Code § 59.1-336enactment date not established
The words that state the rule
"Misappropriation" means: 1. 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 2. 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 (1) Derived from or through a person who had utilized improper means to acquire it; (2) Acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; (3) Derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use; or (4) Acquired by accident or mistake.
- statuteVa. Code § 59.1-336enactment date not established
The words that state the rule
As used in this chapter, which may be cited as the Uniform Trade Secrets Act, unless the context requires otherwise: "Improper means" includes theft, bribery, misrepresentation, use of a computer or computer network without authority, breach of a duty or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means.
The words that state the rule
As we observed in Dionne, "the proponent must bear the burden of proving a trade-secret claim." 240 Va. at 303 n.2, 397 S.E.2d at 113 n.2. This burden does not shift, even when a plaintiff has presented a prima facie case. Therefore, we hold that MicroStrategy, as plaintiff, had the burden of proving by a preponderance of the evidence that the defendants misappropriated MicroStrategy's trade secrets, and that the defendants were not required to prove their product was independently derived.
The words that state the rule
These findings support the chancellor's conclusion that with regard to the metadata schema, "MicroStrategy failed to establish that the [defendants] misappropriated a trade secret." Therefore, we hold that the chancellor's factual findings fully support his resolution of all the trade secret misappropriation issues presented in this appeal.3 For these reasons, we will affirm the chancellor's judgment. Affirmed.
The words that state the rule
Based on our holding that MicroStrategy failed to establish one of the two required elements under the Act, that of misappropriation, we need not address MicroStrategy's remaining assignments of error that involve the Act's other required element, the existence of a trade secret.
- statuteVa. Code § 40.1-28.7:8enactment date not established
The words that state the rule
B. No employer shall enter into, enforce, or threaten to enforce a covenant not to compete with any low-wage employee or health care professional.
- statuteVa. Code § 40.1-28.7:8enactment date not established
The words that state the rule
C. No covenant not to compete between an employer and an employee is enforceable if such employer discharges such employee from employment without providing severance benefits or other monetary payment to such employee, unless such employer discharges such employee for cause.
- statuteVa. Code § 59.1-343enactment date not established
The words that state the rule
This chapter shall become effective on July 1, 1986, and shall not apply to misappropriation occurring prior to the effective date. With respect to a continuing misappropriation that began prior to the effective date, the chapter also shall not apply to misappropriation that occurs after the effective date.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.