California Unfair Competition

The law of unfair competition is primarily comprised of torts that cause an economic injury to a business, through a deceptive or wrongful business practice. Unfair competition can be broken down into two broad groups or categories. Unfair competition can refer to business practices that confuse consumers as to the source of a given product or service. Or, unfair competition can include such business activities as false advertising, bait and switch selling tactics, unauthorized substitution of one brand of goods for another, use of confidential and protected information by former employees, or independent contractors to solicit customers of a former employer, theft of trade secrets, breach of a restrictive covenant, trade libel, and false representation of products or services.

In California, many business owners are concerned about employees that leave the company and then either go to work for a competitor, or open up a competing business. Employers are concerned that the now ex-employee may have taken the customer list or other protected trade secrets when the employee left the company.

A civil lawsuit may be brought against a former employee who takes and makes use of a trade secret belonging to his former employer. Under certain circumstances, an employer can seek immediate injunctive relief to stop the former employee from competing unfairly.

The theft of trade secrets is also a crime. A person is guilty of theft who, with intent to deprive or withhold from the owner the control of a trade secret or with intent to appropriate a trade secret to his or her own use or the use of another, steals, takes, or carries away any article representing a trade secret, fraudulently appropriates any article representing a trade secret entrusted to him or her, or makes or causes to be made a copy of any article representing a trade secret without authority on obtaining access to the article unlawfully or in breach of a relationship of trust and confidence on obtaining access through such relationship.

As used in Pen. Code, § 499c, (1) "article" means any object, material, device, or substance or copy thereof, including any writing, record, recording, drawing, sample, specimen, prototype, model, photograph, microorganism, blueprint, or map; (2) "representing" means describing, depicting, containing, constituting, reflecting, or recording; (3) "trade secret" means information, including a formula, pattern, compilation, program, device, method, technique, or process that derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and is the subject of efforts that are reasonable under the circumstances to maintain its secrecy; (4) "copy" means any facsimile, replica, photograph, or other reproduction of an article, and any note, drawing, or sketch made of or from an article; and (5) "benefit" means gain or advantage, or anything regarded by the beneficiary as gain or advantage, including benefit to any other person or entity in whose welfare he or she is interested.

Also criminally liable is every person who promises, offers, or gives, or conspires to promise, offer, or give to any present or former agent, employee, or servant of another a benefit as an inducement, bribe, or reward for conveying, delivering or otherwise making available an article representing a trade secret owned by his or her present or former principal, employer, or master, to any person not authorized by such owner to receive or acquire it. Similarly liable is every person who, being such an agent, employee, or servant, solicits, accepts, receives, or takes such a benefit.

However, there is no trade secret protection for information known either to the public at large or to those skilled in the particular field. It is an essential element of the offense that an item fraudulently appropriated by the defendant would give one who uses it an advantage over competitors who do not know of or use the trade secret; this element requires more than merely conclusory and generalized allegations.

At the business law firm of Jacobs & Dodds we protect our clients from all forms of unfair competition.

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