Iowa's Uniform Trade Secrets Act

By harley erbe

Office

A seldom used, but fairly powerful Iowa law, is Iowa's Uniform Trade Secrets Act, Iowa Code Chapter 550.  A trade secrets claim can arise under any circumstances.  Common situations for a trade secrets claim are business relationships and employment relationships.

The trade secrets act defines "trade secret" as "information, including but not limited to a formula, pattern, compilation, program, device, method, technique, or process."  To constitute a trade secret, the information 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.  Further, the person claiming a trade secret must make efforts that are reasonable under the circumstances to maintain its secrecy.

Iowa's trade secrets act allows an injured party to seek injunctive relief and money damages for the misappropriation of a trade secret.  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.   There are several different types of misappropriation:

  • Acquisition of a trade secret by a person who knows that the trade secret is acquired by improper means.
  • Disclosure or use of a trade secret by a person who uses improper means to acquire the trade secret.
  • 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.
  • 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.
  • 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.
  • 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.

Damages may include the actual loss caused by the misappropriation of the trade secret, and the unjust enrichment caused by the misappropriation to the extent that's not taken into account in computing the actual loss.  In lieu of damages measured by any other methods, the damages caused by misappropriation may be measured by imposition of liability for a reasonable royalty for a person’s unauthorized disclosure or use of a trade secret.  If a person commits a willful and malicious misappropriation, the court may award punitive damages in an amount not exceeding twice the compensatory damage award.  In certain circumstances attorney fees may also be recovered.

The fighting issues in a trade secret case usually concern whether the information actually constituted a trade secret or whether actionable misappropriation occurred.  Damages are also usually contested, especially if the plaintiff cannot prove actual damages and instead seeks damages for unjust enrichment or a reasonable royalty, types of damages that are often difficult to prove with any level of specificity.  Iowa's trade secrets statute also has an affirmative defense available if the person disclosing a trade secret made the disclosure with the implied or express consent of the owner of the trade secret.

Please feel free to contact us if you need the assistance of a Des Moines business practices lawyer.

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