WEST virginia legislature

2019 regular session

Committee Substitute

for

House Bill 2014

By Delegates Foster, Hanshaw (Mr. Speaker), Householder, Shott, Howell, Pack, and Hollen

[Introduced February 12, 2019; Referred
to the Committee on the Judiciary.]

A BILL to repeal §47-22-9 and §47-22-10 of the Code of West Virginia, 1931, as amended; and to amend and reenact §47-22-1, §47-22-2. §47-22-3, §47-22-4, §47-22-6, §47-22-7, and §47-22-8 of said code, all relating to the protection of intellectual property and trade secrets; changing the “Uniform Trade Secrets Act” to the “West Virginia Intellectual Property and Trade Secrets Act”; providing for definitions; setting forth criminal penalties for certain acts associated with the misappropriation of intellectual property and trade secrets; providing for injunctive and civil relief; allowing for punitive damages and attorney’s fees in certain circumstances; and clarifying applicability of amendments.

Be it enacted by the Legislature of West Virginia:

ARTICLE 22. uniform trade secrets act. West Virginia Intellectual property and trade secrets act.

§47-22-1. Definitions Short title.

As used in this article, unless the context requires otherwise:

(a) "Improper means" includes theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy or espionage through electronic or other means.

(b) "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 another person's trade secret without the other's 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; or

(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 the information was a trade secret and that knowledge of it had been acquired by accident or mistake.

(c) "Person" means a natural person, corporation, business trust, estate, trust, partnership, association, joint venture, government, governmental subdivision or agency or any other legal or commercial entity.

(d) "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

This article may be cited as the “West Virginia Intellectual Property and Trade Secrets Act.”

§47-22-2. Injunctive relief Definitions.

(a) Actual or threatened misappropriation may be enjoined. 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.

(b) 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. Exceptional circumstances include, but are not limited to, a material and prejudicial change of position prior to acquiring knowledge or reason to know of a misappropriation that renders a prohibitive injunction inequitable.

(c) In appropriate circumstances, affirmative acts to protect a trade secret may be compelled by court order

As used in this article, unless the context requires otherwise:

(a) “Intellectual property” means information that:

(1) Is a trade secret in the sense that it is not, as a body or in the precise configuration and assembly of its components, generally known among or readily accessible to persons within circles that normally deal with the kind of information in question;

(2) Has commercial value because it is a trade secret; and

(3) Has been subject to reasonable steps under the circumstances, by the person lawfully in control of the information, to keep it secret. 

(b) “Improper means” includes theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy or espionage through electronic or other means.

(c) “Misappropriation” means:

(1) Acquisition of intellectual property or 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 another person's intellectual property or trade secret without the other's express or implied consent by a person who:

(A) Used improper means to acquire knowledge of the intellectual property or trade secret; or

(B) At the time of disclosure or use, knew or had reason to know that his or her knowledge of the intellectual property or trade secret was:

(i) Derived from or through a person who had utilized improper means to acquire it; or

(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 the information was intellectual property or a trade secret and that knowledge of it had been acquired by accident or mistake.

(d) “Person” means a natural person, corporation, business trust, estate, trust, partnership, association, joint venture, government, governmental subdivision or agency or any other legal or commercial entity.

(e) “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.

§47-22-3. Damages Unlawful acts.

(a) Except to the extent that a material and prejudicial change of position prior to acquiring knowledge or reason to know of misappropriation renders a monetary recovery inequitable, a complainant is entitled to recover damages for misappropriation. Damages may include both the actual loss caused by the misappropriation and the unjust enrichment caused by the misappropriation. 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 misappropriator's unauthorized disclosure or use of a trade secret.

(b) If willful and malicious misappropriation occurs, the court may award exemplary damages in an amount not exceeding twice any award made under subsection (a).

Pursuant to the terms of this article, the following acts shall be unlawful:

(a) Acquisition of intellectual property or trade secret of another by a person who knows or has reason to know that the intellectual property or trade secret was acquired by improper means;

(b) Disclosure or use of another person's intellectual property or trade secret without the other's express or implied consent by a person who:

(1) Used improper means to acquire knowledge of the intellectual property or trade secret; or

(2) At the time of disclosure or use, knew or had reason to know that his or her knowledge of the intellectual property or trade secret was:

(A) Derived from or through a person who had utilized improper means to acquire it; or

(B) Acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; or

(C) Derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use;

(c) Breech of a nondisclosure agreement or other employment agreement by an employee, officer, or agent for the purposes of misappropriation of intellectual property or trade secrets;

(d) Willful disregard for a person’s intellectual property or trade secrets;

(e) Any knowing and willful attempt, either directly or indirectly, to access or cause to be accessed a computer or computer network with the intent to obtain the intellectual property or trade secrets of another; or

(f) Any knowing and willful attempt, either directly or indirectly, to disclose intellectual property or trade secrets to any corporation, trust, association, partnership, or other entity organized outside the laws of the United States.

In addition to the civil relief provided for in §47-22-4 of this code, any person violating any provision of this section is guilty of a misdemeanor and, upon conviction thereof, shall be fined not more than $1,000, or confined in jail for not more than one year, or both, for each violation of this act: Provided, That any person violating the provisions of subsection (f) of this section shall be guilty of a felony and, upon conviction thereof, shall be imprisoned in a state correctional facility not less than one year, or fined not less than $1,000, or both.

§47-22-4. Attorney's fees Injunctive and civil relief; damages; attorney’s fees.

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 occurs, the court may award reasonable attorney's fees to the prevailing party.

In addition to the penalties set forth in §47-22-3 of this code, any person whose property or person is injured by reason of actual or threatened misappropriation of the person’s intellectual property or trade secrets may sue therefor in circuit court and may be entitled to recover as follows for each violation:

(a) Injunctive relief. —

(1) Actual or threatened misappropriation shall be enjoined to the extent necessary to effectuate the immediate cessation of use of a person’s intellectual property or trade secret;

(2) Affirmative acts may be compelled by court order to provide for the immediate protection of a person’s intellectual property or trade secret from further disclosure, including, but not limited to, requirement that the person or persons accused of misappropriation remain in the jurisdiction of the court for the remainder of the judicial process;

(3) Upon application to the court, an injunction shall be terminated when the intellectual property or 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; and

(4) In appropriate circumstances, a court may require posting of a bond to secure against future potential damages associated with the misappropriation of the intellectual property or trade secret.

(b) Civil relief. — 

(1) Except to the extent that a material and prejudicial change of position prior to acquiring knowledge or reason to know of misappropriation renders a monetary recovery inequitable, a complainant is also entitled to recover compensatory damages for the misappropriation of the person’s intellectual property or trade secrets, as well as for any breech of a nondisclosure agreement or other employment agreement by an employee, officer, or agent of the complainant for the purposes of misappropriation of intellectual property or trade secrets.

(2) Damages may include the actual loss caused by the misappropriation, as well as the unjust enrichment caused by the misappropriation, and any intangible or future losses caused by the misappropriation. 

(3) 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 mis- appropriator’s unauthorized disclosure or use of the intellectual property or trade secret.

(4) If willful and malicious misappropriation occurs, a person may recover punitive damages in accordance with §55-7-29 of this code. 

(c) Attorney’s Fees. —

(1) The court may award reasonable attorney’s fees to a prevailing party if:

(A) A claim of misappropriation is made in bad faith;

(B) A motion to terminate an injunction is made or resisted in bad faith; or

(C) Willful and malicious misappropriation occurs.

§47-22-6. Statute of limitations.

An action for misappropriation must be brought within three five 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.

§47-22-7. Effect on other law.

(a) Except as provided in subsection (b), of this section, this article displaces conflicting tort, restitutionary, and other law of this state providing civil remedies for misappropriation of intellectual property or a trade secret.

(b) This article does not affect:

(1) Contractual remedies, whether or not based upon misappropriation of intellectual property or a trade secret;

(2) Other civil remedies that are not based upon misappropriation of intellectual property or a trade secret; or

(3) Criminal remedies, whether or not based upon misappropriation of intellectual property or a trade secret.

§47-22-8. Uniformity of application and construction Applicability.

This article shall be applied and construed to effectuate its general purpose to make uniform the law with respect to the subject of this act among states enacting it

The amendments to this article enacted during the regular session of the Legislature, 2019, shall take effect on July 1, 2019, and do not apply to any misappropriations occurring prior to the effective date or to misappropriations which began prior to the effective date and continue past the effective date.

§47-22-9. Short title.

[Repealed.]

§47-22-10. Time of taking effect.

[Repealed.]

NOTE: The purpose of this bill is to create the West Virginia Intellectual Property and Trade Secrets Act.  The bill provides criminal, injunctive and civil protections against the misappropriation of intellectual property and trade secrets.

Strike-throughs indicate language that would be stricken from a heading or the present law and underscoring indicates new language that would be added.