A law designed to protect Virginia's growing high-technology industry by shielding trade secrets will go into effect July 1.
Virginia's current trade-secrets law provides only for written agreements not to compete, but the new measure offers protection against improper disclosure of some private information.
"The act is to the business law what a good public transportation system is to transportation -- a modern, clean, efficient and effectively noncontroversial way of protecting the rights and processes of high technology," said state Sen. Wiley F. Mitchell Jr. (R-Alexandria), the sponsor of the act. "It brings Virginia law up to date."
Companies will be able to take legal action against those who obtain their trade secrets by theft, bribery, espionage or misrepresentation. The law will allow courts to stop the use of secret information or force offenders to pay damages or royalties for use of other people's secrets.
It also will allow companies that believe a former employe might disclose trade secrets in a new job to go to court and ask for an injunction that would forbid the disclosure of the secrets.
The law is a version of the Uniform Trade Secrets Act, which 15 other states have passed since 1979.
The act was killed in 1982 and 1984 in the Judiciary Committee of Maryland's House of Delegates, and has not been proposed in the District of Columbia.
"We'll probably make an effort to bring it into the District within the next couple of years, but it will take a while," said John McCabe, legal counsel for the Conference of Commissioners for Uniform State Laws, which drafted the prototype.
The other states that have versions of the law are Minnesota, Arkansas, Kansas, Louisiana, Idaho, Washington, Connecticut, Delaware, Indiana, North Dakota, California, Montana, Oklahoma, West Virginia and Wisconsin.
The law was needed to establish structured protection "for companies whose information assets are of critical importance to their success or failure," said W. Michael Holm, a lawyer who testified for the bill in Virginia.
"The problem was that there wasn't much common law on the subject," Holm said. "It was a crapshoot -- you might not win a trade-secrets case because there wasn't enough law on the subject."
Holm, of Hazel, Beckhorn and Hanes in Fairfax, said he lobbied for the bill to protect the law firm's high-tech clients. The law also would make Virginia more attractive to high-tech companies, he added.
"My sense is that it ought to have a big effect on attracting companies, because common law didn't have enough provisions for protection," Holm said. "As a result, it's a real inducement for companies to come here."
The act is not only for high-tech firms, Holm said. "Other types of businesses are equally concerned about the ability to protect customer lists and other proprietary information, such as manufacturing techniques," he said.
Trade secrets are defined in the law as information that is valuable -- or potentially valuable -- because it is not known by others who might profit from it. To qualify information as a trade secret, the company has to make some effort to keep the facts from becoming widely known.
"It seems to me to put a burden on the company to let its employes know, 'Hey, this is a secret, folks,' " Holm said.
"The act is an attempt to codify the basic principles of common-law trade-secret protection, as well as the results of better-reasoned cases concerning the remedies for trade-secret misappropriation," Holm said.
"Reverse engineering," the technique of starting with a product, taking it apart and working backward to find out how it works, remains legal.
Unlike trade-secret laws in some other states, Virginia's statute does not allow victims to sue for multiple damages. Nor does it allow companies that are accused of stealing trade secrets and acquitted to collect attorney's fees for cases deemed malicious or frivolous by the court.
"Virginia is basically a very conservative state that doesn't like those kind of provisions," Mitchell said. The change in the act "didn't really affect the substance of the bill."
"The law will definitely help a high-tech company in the event that an employe leaves to start his own company," said Donald deLaski, spokesman for Deltek Systems Inc., a producer of computerized accounting systems. "It's the kind of thing we need here in Virginia. It's one of those things that helps a state get a good reputation."