The Illinois Trade Secrets Act

Trade secrets are powerful and valuable pieces of intellectual property, often developed by a company over a period of many years at great expense. Given this, it is not hard to imagine why businesses go to such great lengths to protect their trade secrets from disclosure and ardently litigate against anyone who misappropriates them.

The Illinois Trade Secrets Act (often referred to as “ITSA”), 765 ILCS 1065/1 et seq., is a variation of the Uniform Trade Secrets Act. Dual public policies underlie trade secrets law: the maintenance of commercial morality and the encouragement of innovation and invention. Illinois courts have often expressed that a third major of the ITSA is that a trade secret is an intangible property right which is maintained by the owner so long as secrecy is maintained.

Establishing a Claim under the ITSA

To prevail on a claim under the ITSA, a plaintiff must prove that the defendant (1) misappropriated; (2) the plaintiff’s trade secret; and (3) used that trade secret in the defendant’s business.

The ITSA defines a “trade secret” as “information, including but not limited to, technical or nontechnical data, a formula, pattern, compilation, program, device, method, technique, drawing, process, financial data, or list of actual or potential customers or suppliers that: (1) is sufficiently secret to derive economic value, actual or potential, from not being generally known to 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 or confidentiality.” The most important factor in determining whether a trade secret exists is whether and how the owner acts to keep the information a secret. The existence of a trade secret under the ITSA is a question of fact.

The ITSA defines “misappropriation” as the:

1. acquisition of a trade secret of a person by another 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 a person without express or implied consent by another person who:
   1. used improper means to acquire knowledge of the trade secret; or
   2. at the time of disclosure or use, knew or had reason to know that knowledge of the trade secret was:
      1. derived from or through a person who utilized improper means to acquire it;
      2. acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; or
      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
   3. before a material change of 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.

Unlike with restrictive covenants, trade secrets are not subject to time or territorial restrictions on the duty to protect trade secrets. In other words, as long as a business maintains the secrecy of its trade secrets, the ITSA protects them from misappropriation.

Damages and Attorney Fees

Section 3 of the ITSA provides that a court can award injunctive relief to a successful plaintiff. Section 4(a) provides that a court can award both injunctive and compensatory damages. The Illinois Supreme Court has recognized that injunctive relief is the only truly effective way to preserve a trade secret owner’s exclusive property right in the information. In cases where neither damages nor unjust enrichment is proved by a preponderance of the evidence, a court can still award damages in the form of a reasonable royalty. Because businesses often do not license trade secrets them, damages in trade secret misappropriation cases are calculated based on the competitive value of the information stolen instead of based on evidence of past license agreements—which are often used in copyright infringement cases to determine infringement damages.

Section 4(b) of the Illinois Act provides for the imposition of punitive damages in an amount equal to double the actual damages where the misappropriation is “willful and malicious.” Such an award of exemplary damages requires proof that the defendant’s misappropriation was both malicious and willful. Section 5 of the ITSA also provides the court with the power to award attorney’s fees to the plaintiff if there is “willful and malicious misappropriation,” or to the defendant if the plaintiff’s claim was made in “bad faith.”

Our Chicago trade secret lawyers with offices in Chicago, Wilmette and Elmhurst have defended and prosecuted complex trade secret misappropriation, copyright infringement, and other intellectual property cases for many years. We have successfully litigated many trade secret, trademark, and copyright cases against some of the largest corporations in the United States and the world. Contact one of our Chicago Business Litigation Attorneys for a free consultation toll free at 630-333-0333. You can also contact us online here.