North Carolina Trade Secret Protections Laws Do Not Apply to Out-of-State Conduct | Parker Poe Adams & Bernstein LLP
Like most states, North Carolina law protects employers from misappropriation of confidential and proprietary trade secrets. Last month, the North Carolina Business Court (a division of the Superior Court that handles complex business cases) dismissed portions of a suit filed by a former employer alleging that the defendant stole trade secrets for use with a competitor. The court concluded that North Carolina laws protecting trade secrets cannot be used to respond to alleged misappropriation that happens outside of the state.
In the decision issued by the Business Court, a former employer filed suit alleging breach of a noncompetition and non-solicitation agreement. The company also alleged that the defendant violated the North Carolina Trade Secret Protection Act and Unfair and Deceptive Trade Practices Act by misappropriating its confidential information. The Business Court agreed to dismiss these statutory claims because the alleged conduct occurred in Illinois and not North Carolina.
Despite this decision, North Carolina employers have legal options when responding to trade secret theft that may occur in another jurisdiction. The Defense of Trade Secrets Act provides a federal remedy for some misappropriation situations. A contractual non-disclosure agreement with employees can provide an additional civil remedy that is not constrained by where the alleged activity occurred. If the FTC’s announced ban on noncompetition agreements takes effect, employers will need to pay careful attention to remaining ways to protect their business interests, especially trade secrets and other proprietary information.
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