By Nicholas F. Casolaro
As part of its seemingly annual effort to revise or limit the scope of non-competition agreements in Massachusetts, the legislature has introduced a bill for 2018 that would not only change existing non-competition agreement law but also make significant changes to Massachusetts law on trade secrets.
The bill, titled “An Act Relative to the Judicial Enforcement of Noncompetition Agreements,” is likely to pass and would become effective October 1, 2018. The new law would apply to misappropriation of trade secrets claims that arise after the effective date. The bill eliminates the existing limited statutory law on trade secrets claims and would effectively enact a version of the Uniform Trade Secrets Act, putting Massachusetts in line with the vast majority of states that have some version of the UTSA.
The most-significant change that the bill would make to existing law is the definition of “trade secret.” The proposed bill contains a narrow list of categories of information or tangible things that would constitute a trade secret. Specifically, trade secret is defined under the bill as information or things such as “a formula, pattern, compilation, program, device, method, technique, process, business strategy, customer list, invention, or scientific, technical, financial or customer data.”
The bill omits things like designs, prototypes, procedures, software code, and the catch-all category of “other business information.” The key takeaway is that this bill will undoubtedly make it harder for businesses, employers, or trade secret owners to prove that something is in fact a trade secret. Trade secret litigation is difficult enough under existing law. Plaintiffs will now face an even tougher standard to successfully prove that something is a trade secret in court.
The other effect of this bill if it passes is that Massachusetts will have a different definition of trade secrets than the Federal Defend Trade Secrets Act, which was enacted in 2016. The Federal statute has a much more detailed and comprehensive list of information or data that may constitute a trade secret. Thus, if a business is uncertain whether its information or data meets the definition of trade secret under the new Massachusetts state law, it will have to consider whether the information or data meets the broader definition of trade secret under the Federal law. This could lead to an increase in lawsuits filed in federal court in Massachusetts alleging violations of the Federal Defend Trade Secrets Act.