S*285 Session 112 (1997-1998)
S*0285(Rat #0057, Act #0038 of 1997) General Bill, By Alexander and J.V. Smith
Similar(H 3403)
A BILL TO AMEND CHAPTER 8, TITLE 39, CODE OF LAWS OF SOUTH CAROLINA, 1976,
RELATING TO THE "UNIFORM TRADE SECRETS ACT", SO AS TO, AMONG OTHER THINGS,
CHANGE THE NAME AND SCOPE OF THE CHAPTER TO THE "SOUTH CAROLINA TRADE SECRETS
ACT", CHANGE THE DEFINITION OF VARIOUS TERMS, ADD NEW DEFINITIONS, AND ADD
CERTAIN PROVISIONS OF LAW.
01/30/97 Senate Introduced and read first time SJ-7
01/30/97 Senate Referred to Committee on Labor, Commerce and
Industry SJ-7
04/10/97 Senate Committee report: Favorable with amendment Labor,
Commerce and Industry SJ-16
04/15/97 Senate Amended SJ-27
04/15/97 Senate Read second time SJ-27
04/15/97 Senate Unanimous consent for third reading on next
legislative day SJ-27
04/16/97 Senate Read third time and sent to House SJ-25
04/16/97 House Introduced, read first time, placed on calendar
without reference HJ-64
04/24/97 House Read second time HJ-43
04/24/97 House Unanimous consent for third reading on next
legislative day HJ-44
04/25/97 House Read third time and enrolled HJ-5
05/15/97 Ratified R 57
05/21/97 Signed By Governor
05/21/97 Effective date 05/21/97
06/03/97 Copies available
06/03/97 Act No. 38
(A38, R57, S285)
AN ACT TO AMEND CHAPTER 8, TITLE 39, CODE OF LAWS
OF SOUTH CAROLINA, 1976, RELATING TO THE "UNIFORM
TRADE SECRETS ACT", SO AS TO, AMONG OTHER THINGS,
CHANGE THE NAME AND SCOPE OF THE CHAPTER TO THE
"SOUTH CAROLINA TRADE SECRETS ACT", CHANGE
THE DEFINITION OF VARIOUS TERMS, ADD NEW DEFINITIONS,
AND ADD CERTAIN PROVISIONS OF LAW.
Be it enacted by the General Assembly of the State of South Carolina:
Trade Secrets chapter amended
SECTION 1. Chapter 8 of Title 39 of the 1976 Code, as added by Act
437 of 1992, is amended to read:
"CHAPTER 8
Trade Secrets
Section 39-8-10. This chapter may be cited as the 'South Carolina
Trade Secrets Act'.
Section 39-8-20. As used in this chapter, unless the context requires
otherwise:
(1) 'Improper means' include theft, bribery, misrepresentation, breach
or inducement of a breach of a duty to maintain secrecy, duties imposed
by the common law, statute, contract, license, protective order, or other
court or administrative order, or espionage through electronic or other
means.
(2) 'Misappropriation' means:
(a) acquisition of a trade secret of another by a person by improper
means;
(b) 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
(c) disclosure or use of a trade secret of another without express or
implied consent by a person who:
(i) used improper means to acquire knowledge of the trade
secret; or
(ii) at the time of disclosure or use, knew or had reason to know
that his knowledge of the trade secret was:
(A) derived from or through a person who had utilized
improper means to acquire it;
(B) acquired by mistake or 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; or
(iii) before a material change of his 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.
(3) 'Owner' means the person or entity in whom or in which rightful
legal or equitable title to the trade secret is reposed.
(4) 'Person' means an individual, corporation, business trust, estate,
trust, partnership, association, joint venture, government, governmental
subdivision or agency, or any other legal or commercial entity.
(5) 'Trade secret' means:
(a) information including, but not limited to, a formula, pattern,
compilation, program, device, method, technique, product, system, or
process, design, prototype, procedure, or code that:
(i) derives independent economic value, actual or potential, from
not being generally known to, and not being readily ascertainable by
proper means by the public or any other person who can obtain economic
value from its disclosure or use, and
(ii) is the subject of efforts that are reasonable under the
circumstances to maintain its secrecy.
(b) A trade secret may consist of a simple fact, item, or procedure,
or a series or sequence of items or procedures which, although
individually could be perceived as relatively minor or simple, collectively
can make a substantial difference in the efficiency of a process or the
production of a product, or may be the basis of a marketing or commercial
strategy. The collective effect of the items and procedures must be
considered in any analysis of whether a trade secret exists and not the
general knowledge of each individual item or procedure.
Section 39-8-30. (A) A trade secret endures and is protectable and
enforceable until it is disclosed or discovered by proper means.
(B) Every employee who is informed of or should reasonably have
known from the circumstances of the existence of any employer's trade
secret has a duty to refrain from using or disclosing the trade secret
without the employer's permission independently of and in addition to any
written contract of employment, secrecy agreement, noncompete
agreement, nondisclosure agreement, or other agreement between the
employer and the employee.
(C) A person aggrieved by a misappropriation, wrongful disclosure,
or wrongful use of his trade secrets may bring a civil action to recover
damages incurred as a result of the wrongful acts and to enjoin its
appropriation, disclosure, use, or wrongful acts pertaining to the trade
secrets.
(D) A contractual duty not to disclose or divulge a trade secret, to
maintain the secrecy of a trade secret, or to limit the use of a trade secret
must not be considered void or unenforceable or against public policy for
lack of a durational or geographical limitation.
(E) This chapter applies to any and all civil remedies which are based
upon misappropriation of a trade secret or upon protection of a trade
secret except as provided in Section 39-8-110(B) and (C).
Section 39-8-40. (A) A complainant is entitled to recover actual
damages for misappropriation of trade secrets. A material and prejudicial
change of position before acquiring knowledge or reason to know of
misappropriation may render full monetary recovery inequitable and may
form the basis for reducing monetary recovery.
(B) Damages may include both the actual loss caused by
misappropriation or the unjust enrichment caused by misappropriation
that is not taken into account in computing 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
misappropriator's unauthorized disclosure or use of a trade secret.
(C) Upon a finding of wilful, wanton, or reckless disregard of the
plaintiff's rights, the court may award separate exemplary damages in an
amount not exceeding twice any award made under subsection (A).
Section 39-8-50. (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. Such reasonable period of time shall take into account
the average rate of business growth that would have been gained from
nonmisappropriated use of the misappropriated trade secret.
(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 use could have been prohibited. Exceptional
circumstances include, but are not limited to, a material and prejudicial
change of position before acquiring knowledge or reason to know of
misappropriation that renders a prohibitive injunction inequitable.
(C) In appropriate circumstances, affirmative acts to protect a trade
secret may be compelled by court order.
Section 39-8-60. (A) In an action under this chapter, a court shall
preserve the secrecy of an alleged trade secret by reasonable means,
which may include granting protective orders in connection with
discovery proceedings, holding hearings in-camera, sealing the records of
the action, and ordering any person involved in the litigation not to
disclose an alleged trade secret without prior court approval.
(B) In any civil action where discovery is sought of information
designated by its holder as a trade secret, before ordering discovery a
court shall first determine whether there is a substantial need by the party
seeking discovery for the information.
'Substantial need' as used in this section means:
(1) the allegations in the initial pleading setting forth the factual
predicate for or against liability have been plead with particularity;
(2) the information sought is directly relevant to the allegations
plead with particularity in the initial pleading;
(3) the information is such that the proponent of the discovery will
be substantially prejudiced if not permitted access to the information; and
(4) a good faith basis exists for the belief that testimony based on
or evidence deriving from the trade secret information will be admissible
at trial.
(C) Direct access to computer databases containing trade secret
information, so-called 'real time' discovery, shall not be ordered by the
court unless the court finds that the proponent of the discovery cannot
obtain this information by any other means and provided that the
information sought is not subject to any privilege.
(D) Upon motion of the holder of the trade secret information, a court
may condition the production of trade secret information on the posting
of an appropriate bond.
(E) Information produced pursuant to this section must be governed
by an appropriate written protective order of the court.
(F) Information produced pursuant to this section may only be
disclosed to persons identified in the written protective order of the court
and may be used or disclosed only in the action in which it is produced.
Litigation-sharing orders pertaining to trade secret information must not
be entered by the court.
(G) A person receiving trade secret information pursuant to this section
is subject to the jurisdiction of the courts of this State.
(H) When information produced pursuant to this section is discussed
or otherwise disclosed at a trial or hearing, the owner of the produced
trade secret information is allowed to obtain individually signed
confidentiality agreements from all parties that are present in the
courtroom or are party to any procedures where trade secret information
is discussed, presented, or otherwise made known to any party not already
under a confidentiality agreement with the trade secret owner.
(I) All trade secret information and any copies, duplicates, or other
writings which reflect or contain the trade secret information, or excerpts
therefrom, must be returned to the holder of the trade secrets at the
conclusion of the litigation.
(J) This section applies to any civil action brought within or without
this State where discovery is sought of trade secret information present in
this State.
Section 39-8-70. An action for misappropriation must be brought
within three 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.
Section 39-8-80. If (1) a claim of misappropriation is made in bad
faith, (2) a motion to terminate an injunction is made or resisted in bad
faith, or (3) wilful misappropriation exists, the court may award
reasonable attorney's fees to the prevailing party.
Section 39-8-90. (A) A person, with intent to or reason to believe
that it will injure an owner and benefit a person other than the owner,
shall be fined not more than $100,000 or imprisoned not more than ten
years, or both, if he:
(1) steals, wrongfully appropriates, takes, carries away, or conceals,
or by fraud, artifice, or deception obtains trade secrets;
(2) wrongfully copies, duplicates, sketches, draws, photographs,
downloads, uploads, alters, destroys, photocopies, replicates, transmits,
delivers, sends, mails, communicates, or conveys trade secrets;
(3) receives, buys, or possesses trade secrets, knowing the trade
secrets have been obtained by any means described in items (1) or (2);
(4) attempts to commit any offense described in items (1) through
(3);
(5) wrongfully solicits another to commit any offense described in
items (1) through (3); or
(6) conspires with one or more other persons to commit any offense
described in items (1) through (3), and where one of the conspirators
performs an act to further the conspiracy.
(B) In a prosecution for any violation of subsection (A) of this section
the court must, pursuant to Section 39-8-100, preserve the secrecy of an
alleged trade secret.
Section 39-8-100. (A) If the court finds that a trade secret may be
disclosed during a criminal proceeding, the court must issue a protective
order limiting the use and dissemination of the trade secret including, but
not limited to, articles disclosing that secret, provided that the issuance of
a protective order would not conceal fraud or work an injustice. The
protective order may, in the court's discretion, include the following
provisions:
(1) that the information produced pursuant to this section may be
disclosed only to persons identified in the written protective order of the
court and may be used or disclosed only in the action in which it is
produced;
(2) that the defendant may view the secret only in the presence of
his counsel or at counsel's office;
(3) that a party seeking to show the trade secret, or articles
containing the trade secret, to a person not designated by the protective
order must first obtain court approval to do so.
(a) The court must require that the person receiving the trade
secret do so only in the presence of counsel for the party requesting
protection.
(b) The court must require the person receiving the trade secret
to sign a copy of the protective order and a confidentiality agreement with
the trade secret owner and to agree to be bound by its terms. The order
may include a provision recognizing the owner of the trade secret to be a
third-party beneficiary of that agreement.
(c) The court shall require a party seeking disclosure to an expert
to provide that expert's name, employment history, and any other relevant
information to the court for examination. The court must evaluate the
expert and determine whether the expert poses a significant risk of
compromise.
(4) that no articles disclosing the trade secret may be filed or
otherwise made a part of the court record available to the public without
approval of the court and prior notice to the owner of the secret. The
owner of the secret may give permission to accept the notice on the
owner's behalf;
(5) other orders as the court considers necessary to protect the
integrity of the trade secret.
(B) During proceedings where trade secrets may be disclosed, the
court may, in its discretion, take other appropriate measures to protect
against disclosure of trade secrets.
Section 39-8-110. (A) Except as provided in subsections (B) and (C),
this chapter displaces conflicting tort, restitutionary, and other law of this
State providing civil remedies for misappropriation of a trade secret.
(B) This chapter does not affect:
(1) contractual remedies, whether or not based upon
misappropriation of a trade secret or protection of a trade secret;
(2) the provisions of the South Carolina Tort Claims Act.
(C) Any and all other civil remedies that are not based upon
misappropriation of a trade secret or upon protection against
misappropriation of a trade secret are governed by the rules of procedure,
rules of evidence, regulations, and the common law applicable to the
administrative law tribunal or court where the action is filed.
Section 39-8-120. If any provision of this chapter or its application to
any person or circumstances is held invalid, the invalidity does not affect
other provisions or applications of the chapter which can be given effect
without the invalid provision or application, and to this end the provisions
of the chapter are severable.
Section 39-8-130. This chapter does not apply to a misappropriation
occurring before July 1, 1997, or a continuing misappropriation that
began before July 1, 1997."
Time effective
SECTION 2. This act takes effect upon approval by the Governor.
Approved the 21st day of May, 1997. |