Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.
In January 2012, New Jersey enacted its version of the Uniform Trade Secrets Act (UTSA). On December 7, 2012, in SCS Healthcare Marketing, LLC v. Allergan USA, Inc., a New Jersey Superior Court recognized that the New Jersey Trade Secrets Act (NJTSA) modifies the Uniform Trade Secrets Act to preserve New Jersey’s non-conflicting common law relating to trade secrets.
In the case, SCS entered into a contract to provide marketing services to Allergan. When Allergan’s contract with SCS expired, SCS’s direct competitor Medforce entered into a contract with Allergan to perform the same services. SCS contended that, despite its request that Allergan maintain the confidentiality of its systems during the transition process, Allergan provided Medforce with its administrator access information and Medforce subsequently used SCS’s proprietary marketing system in its work for Allergan.
SCS sued Allergan and Medforce for violation of the NJTSA, misappropriation of confidential information, conversion, unfair competition, inevitable disclosure, and tortious interference with contract. The defendants brought a motion to dismiss, arguing that all of the common law causes of action were preempted by the NJTSA. Noting the difference in language between the UTSA and NJTSA regarding their effect on other law, the court held that the common law counts were not preempted.
In particular, the NJTSA provides:
56:15-9. Rights and remedies deemed supplemental; governing law
a. The rights, remedies and prohibitions provided under this act are in addition to and cumulative of any other right, remedy or prohibition provided under the common law or statutory law of this State and nothing contained herein shall be construed to deny, abrogate or impair any common law or statutory right, remedy or prohibition except as expressly provided in subsection b. of this section.
b. This act shall supersede conflicting tort, restitutionary, and other law of this State providing civil remedies for misappropriation of a trade secret.
The UTSA does not have the preservation clause laid out in “a” above.
The essential issue in the case of SCS Healthcare Marketing, LLC was whether, on a motion to dismiss, the court could determine that the “confidential information” concerning the plaintiff’s marketing system rose to the level of a “trade secret” under the NJTSA. The court held that it could not, and that the express intent of the New Jersey Legislature was to preserve, rather than to preempt, New Jersey common law remedies. Therefore, the plaintiff was allowed to proceed on its common law remedies.
Common law remedies may be important to a plaintiff in an unfair competition case because the definition of “trade secrets” under the NJTSA is narrower than the usual definition of “confidential information” drawn up in an employer’s policy. Therefore, the plaintiff company may lose protection of its proprietary information if its common law remedies are preempted. Where factual allegations are aligned to New Jersey’s common law and are distinct from those alleged under the NJTSA, such complaints likely will survive a motion to dismiss if the defendant alleges preemption under the NJTSA. It should also be noted that courts will likely find that breach of contract claims are not preempted by the NJTSA where the employee signed a non-disclosure agreement to protect the employer’s confidential information.
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