California Trade Secret Demand Letters CA

CUTSA – California Civil Code § 3426

Related Trade Secret Templates

California Uniform Trade Secrets Act (CUTSA)
Civil Code § 3426: CUTSA is California's comprehensive trade secret protection statute. It preempts most other state-law claims for misappropriation of confidential business information, making it the primary vehicle for trade secret protection in California. Federal protection is also available under the Defend Trade Secrets Act (DTSA) for interstate commerce.
What Is a Trade Secret? (§ 3426.1)

A trade secret is information that:

  • Derives independent economic value from not being generally known to, or readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use
  • Is subject to reasonable efforts to maintain its secrecy
Types of Protected Information
Category Examples
Technical Information Formulas, designs, prototypes, source code, algorithms, manufacturing processes
Business Information Customer lists, pricing strategies, supplier terms, marketing plans, financial projections
Compilations Databases, contact lists, research data, market analysis
Know-How Methods, techniques, procedures, best practices developed through experience
Negative Information Failed experiments, approaches that don't work (saves competitors time/money)
What Is Misappropriation? (§ 3426.1)
Type Definition
Improper Acquisition Acquiring a trade secret by theft, bribery, misrepresentation, breach of duty to maintain secrecy, or espionage
Disclosure Disclosing a trade secret without consent by someone who acquired it improperly or knew/should have known it was improperly acquired
Use Using a trade secret without consent by someone who acquired it improperly or knew/should have known of improper acquisition
Breach of Duty Disclosure or use by someone who knew or should have known the information was a trade secret and was acquired under circumstances giving rise to a duty to maintain secrecy
CUTSA Remedies (§§ 3426.2-3426.4)
Remedy Statute Details
Injunction § 3426.2 Enjoin actual or threatened misappropriation; may continue for additional period to eliminate commercial advantage
Actual Damages § 3426.3 Actual loss caused by misappropriation
Unjust Enrichment § 3426.3 Defendant's gains not captured by actual loss calculation
Reasonable Royalty § 3426.3 In lieu of other damages, what a willing buyer would pay
Exemplary Damages § 3426.3 Up to 2× actual damages for willful and malicious misappropriation
Attorney Fees § 3426.4 Awarded to prevailing party if claim made in bad faith, motion to terminate injunction made in bad faith, or willful/malicious misappropriation
Statute of Limitations (§ 3426.6): Claims must be brought within 3 years of when misappropriation was discovered or should have been discovered with reasonable diligence. Continuing misappropriation is a single claim, but a new limitations period can begin with each discrete act of misappropriation.
CUTSA Preemption (§ 3426.7)

CUTSA displaces conflicting tort, restitutionary, and other state-law claims based on misappropriation of trade secrets. However, it does NOT preempt:

  • Contract claims (breach of NDA, employment agreement)
  • Criminal remedies (Penal Code § 499c)
  • Federal claims (DTSA, Computer Fraud and Abuse Act)
  • Claims not based on misappropriation (defamation, interference with contract based on non-trade-secret conduct)
Identifying & Protecting Trade Secrets
The "Reasonable Efforts" Requirement

Information only qualifies as a trade secret if you take reasonable measures to keep it secret. Courts consider:

Protection Measure Examples
Physical Security Locked facilities, badge access, visitor logs, secure storage
Digital Security Passwords, encryption, access controls, activity monitoring, DLP software
Contractual Protection NDAs with employees, contractors, vendors, partners; confidentiality provisions in employment agreements
Marking/Labeling "Confidential" stamps, restricted document classifications, need-to-know designations
Policies & Training Written confidentiality policies, employee training, exit interview protocols
Limited Disclosure Need-to-know basis, compartmentalization, disclosure logs
Common Failures: Trade secret claims often fail because the owner:
  • Never marked documents as confidential
  • Shared information without NDAs
  • Allowed unrestricted access to all employees
  • Posted information publicly (even briefly)
  • Failed to conduct exit interviews or recover materials
Building Your Trade Secret Inventory
  • Identify: Catalog all confidential information that provides competitive advantage
  • Document: Record when developed, by whom, and measures taken to protect
  • Classify: Tier by sensitivity (top secret, confidential, internal only)
  • Access Control: Document who has access to each category
  • Review: Regularly update inventory and access permissions
Employee Lifecycle Protection

Onboarding:

  • Signed confidentiality agreement before access to trade secrets
  • Training on what information is confidential and handling requirements
  • Document any information employee brings from prior employer (and what they can/cannot use)

During Employment:

  • Regular reminders of confidentiality obligations
  • Monitor for unusual access or downloading patterns
  • Update access as roles change

Departure:

  • Exit interview emphasizing ongoing confidentiality duties
  • Return of all company materials and devices
  • Certification that no confidential information retained
  • Remind of post-employment obligations
  • Disable access immediately upon separation
California Non-Compete Ban (B&P § 16600): You CANNOT prevent employees from working for competitors. Your protection is limited to preventing misuse of trade secrets. Focus demands on the information, not the employment relationship.
Evidence Preservation

When you suspect misappropriation, immediately:

  • Preserve access logs: Who accessed what, when, from where
  • Image devices: Forensically copy computers, phones, storage devices before wiping
  • Email logs: Preserve email, including sent items, attachments, and cloud sync
  • Cloud storage: Check personal cloud accounts accessed from company network
  • Badge/building access: Physical access records during relevant period
  • Witness statements: Interview coworkers about suspicious behavior
Drafting Trade Secret Demand Letters
Strategic Objectives
  • Stop the bleeding: Immediate cessation of use and disclosure
  • Return of materials: Recover all confidential documents, files, data
  • Preserve evidence: Litigation hold on relevant documents and devices
  • Assess scope: Determine what was taken and how it's being used
  • Compensation: Damages for past misappropriation
  • Injunction setup: Establish record for TRO/preliminary injunction if needed
Essential Letter Components
Section Content
Identification of Trade Secrets Describe categories of confidential information at issue (don't be so specific you disclose more)
Confidentiality Relationship NDA, employment agreement, fiduciary duty, or other basis for confidentiality obligation
Misappropriation Allegations What defendant did: took files, used information, disclosed to new employer, etc.
Evidence Reference specific evidence: access logs, copied files, witness observations (enough to be credible, not full disclosure)
Legal Consequences CUTSA remedies: injunction, damages, exemplary damages, attorney fees
Demands Cease use, return materials, preserve evidence, provide accounting
New Employer Notice If applicable, notify new employer of claims and their potential liability
Deadline Typically short (7-14 days) given urgency of preventing further disclosure
Tone Considerations
  • Urgent but professional: Trade secret cases often require fast action, but maintain credibility
  • Specific enough to be credible: Show you know what was taken
  • Not so specific you educate defendant: Don't reveal full scope of your evidence
  • Preserve injunction option: Don't delay so long that urgency argument is undermined
New Employer Considerations
Careful with New Employer: Sending demands to defendant's new employer can be powerful leverage but carries risks:
  • Tortious interference: If your claims are wrong, you may be liable for interfering with employment
  • Defamation: False statements about employee to new employer
  • Unfair competition: Using litigation threats to harm competitor
Best practice: Send to new employer only when you have strong evidence and legitimate basis; focus on the company's potential liability for using misappropriated secrets, not attacks on the employee personally.
When to Skip Demand and File Immediately
  • Evidence of ongoing disclosure to third parties
  • Defendant about to launch competing product using your secrets
  • Concern about destruction of evidence
  • Need immediate TRO/preliminary injunction
  • Previous demands ignored or defendant acting in bad faith
Sample Trade Secret Demand Letters
Sample 1: Departing Employee – Standard Demand
[Company Name] [Address] [Email / Phone] [Date] VIA EMAIL AND CERTIFIED MAIL [Former Employee Name] [Address] Re: Misappropriation of [Company] Confidential Information and Trade Secrets Dear [Former Employee]: As you know, your employment with [Company] ended on [Date]. We have reason to believe you have misappropriated [Company]'s confidential information and trade secrets in violation of California law and your contractual obligations. CONFIDENTIALITY OBLIGATIONS During your employment, you signed a Confidentiality and Proprietary Information Agreement dated [Date] (copy enclosed). That agreement requires you to: • Maintain the confidentiality of all proprietary information • Return all company materials upon termination • Not use or disclose confidential information after employment These obligations survive the end of your employment. EVIDENCE OF MISAPPROPRIATION Our investigation has revealed the following: • On [Date], [X] days before your resignation, you accessed and downloaded [description of files/data] from [system/location] • You copied approximately [X] files to [personal email/USB drive/cloud storage] • These files contain [categories of confidential information: customer lists, pricing data, technical specifications, etc.] • You failed to return your company laptop and did not participate in an exit interview This conduct constitutes misappropriation under the California Uniform Trade Secrets Act (Civil Code § 3426) and breach of your Confidentiality Agreement. LEGAL CONSEQUENCES Under CUTSA, [Company] is entitled to: • Injunctive relief prohibiting your use or disclosure of our trade secrets • Actual damages for any losses caused by your misappropriation • Disgorgement of any profits you or your new employer obtain from our trade secrets • Exemplary damages up to TWICE actual damages for willful and malicious misappropriation • Recovery of our attorney fees DEMAND [Company] demands that you immediately: 1. CEASE all use of [Company]'s confidential information and trade secrets; 2. RETURN all [Company] materials in your possession, including your company laptop, any copies of files or documents (whether physical or electronic), and any notes or materials derived from [Company] confidential information; 3. PRESERVE all devices, accounts, and storage media that may contain [Company] information pending potential litigation discovery; 4. CONFIRM IN WRITING within seven (7) days that you have complied with these demands and have not disclosed [Company] trade secrets to any third party, including your new employer. If we do not receive satisfactory confirmation of compliance, [Company] will pursue all available remedies, including seeking an immediate temporary restraining order and preliminary injunction, without further notice. We reserve all rights. Sincerely, [Name] [Title] [Company] Enclosure: Confidentiality Agreement dated [Date]
Sample 2: Notice to New Employer
[Company / Law Firm] [Address] [Date] VIA CERTIFIED MAIL AND EMAIL [New Employer Company] [Address] Attn: General Counsel / CEO Re: Trade Secret Misappropriation by [Employee Name] Dear Counsel: We represent [Company] in connection with the misappropriation of trade secrets by [Employee Name], who we understand recently joined [New Employer] as [Title]. PURPOSE OF THIS LETTER This letter serves to put [New Employer] on notice of [Employee]'s misappropriation and [New Employer]'s potential liability if it uses, benefits from, or allows further disclosure of [Company]'s trade secrets. BACKGROUND [Employee] was employed by [Company] as [Title] from [Start Date] to [End Date]. In that role, [Employee] had access to highly confidential information including [categories without excessive detail: proprietary technology, customer relationships, business strategies, etc.]. [Employee] was bound by a Confidentiality Agreement that survives termination. EVIDENCE OF MISAPPROPRIATION We have substantial evidence that [Employee]: • Downloaded [Company] confidential files shortly before resignation • Retained copies of proprietary materials • Did not return all company property • [Other specific conduct without full disclosure] LEGAL IMPLICATIONS FOR [NEW EMPLOYER] Under California Civil Code § 3426.1, an entity that uses or discloses a trade secret knowing or having reason to know it was acquired under circumstances giving rise to a duty to maintain its secrecy is liable for misappropriation. This letter provides [New Employer] with actual knowledge that [Employee] may possess [Company] trade secrets subject to ongoing confidentiality obligations. If [New Employer]: • Assigns [Employee] to work on competing projects • Uses information [Employee] brought from [Company] • Fails to take reasonable steps to prevent misuse [New Employer] may be jointly liable for injunctive relief, actual damages, exemplary damages, and attorney fees under CUTSA. REQUEST We request that [New Employer]: 1. Ensure [Employee] does not use or disclose any [Company] confidential information 2. Confirm what projects [Employee] has been assigned and what information has been shared 3. Implement appropriate screening procedures 4. Preserve any [Company] materials that may be in [Employee]'s possession We are not asking [New Employer] to terminate [Employee] or prevent [Employee] from working in their field. California law (B&P § 16600) protects employee mobility. However, employee mobility does not include the right to misappropriate trade secrets. We are prepared to discuss reasonable measures that would protect [Company]'s interests while allowing [Employee]'s continued employment. Please respond within ten (10) days. Our client reserves all rights to pursue claims against both [Employee] and [New Employer] if this matter is not resolved. Sincerely, [Attorney Name] Counsel for [Company]
Sample 3: Vendor/Contractor Misappropriation
[Company] [Address] [Date] [Vendor/Contractor Company] [Address] Attn: [CEO/President] Re: Breach of NDA and Trade Secret Misappropriation Dear [Recipient]: [Company] has discovered that [Vendor] has breached the Non-Disclosure Agreement dated [Date] (the "NDA") and misappropriated [Company]'s trade secrets. THE NDA On [Date], [Company] and [Vendor] executed an NDA governing confidential information shared in connection with [project/relationship]. Under that agreement, [Vendor] agreed to: • Use [Company]'s Confidential Information solely for the Purpose defined in the NDA • Maintain confidentiality using at least the same degree of care as [Vendor] uses for its own confidential information • Not disclose Confidential Information to third parties without written consent • Return or destroy all Confidential Information upon request or termination of the relationship BREACH AND MISAPPROPRIATION We have learned that [Vendor]: • [Specific allegation: shared our technical specifications with a competitor] • [Specific allegation: used our customer data to solicit our clients] • [Specific allegation: incorporated our proprietary technology into products sold to third parties] This conduct violates both the NDA and the California Uniform Trade Secrets Act. DAMAGES [Company] has suffered substantial harm as a result of [Vendor]'s conduct, including: • Loss of competitive advantage in [market] • Loss of customer relationships worth $[Amount] • Development costs of $[Amount] for the misappropriated technology Under the NDA, [Vendor] is liable for all damages resulting from breach. Under CUTSA, [Vendor] is liable for actual damages, unjust enrichment, exemplary damages (up to 2×), and attorney fees for willful misappropriation. DEMAND [Company] demands: 1. Immediate cessation of all use and disclosure of [Company] Confidential Information 2. Return of all [Company] materials and certification of destruction of copies 3. Identification of all third parties to whom [Company] information was disclosed 4. Accounting of any revenue or profits derived from use of [Company] information 5. Payment of damages in an amount to be determined Please respond within fourteen (14) days with a proposal for resolution. If this matter is not resolved, we will pursue litigation seeking the maximum remedies available. [Name] [Title] [Company]
Defenses to Trade Secret Claims
Received a Trade Secret Demand? These claims can be serious—potential injunctions can halt your business—but many claims are overreaching. Evaluate carefully before responding.
Common Defenses
Defense Description
Not a Trade Secret Information is generally known, publicly available, or readily ascertainable by proper means
No Reasonable Secrecy Measures Plaintiff failed to take reasonable steps to maintain secrecy—shared freely, didn't mark confidential, no NDAs
Independent Development You developed the information independently without using plaintiff's secrets
Reverse Engineering Information was obtained through legitimate reverse engineering of publicly available products
General Knowledge/Skill Employee's general knowledge, skills, and experience are not trade secrets even if acquired at former employer
Prior Knowledge You knew the information before the confidential relationship began
Public Disclosure Plaintiff disclosed the information publicly (patent filing, publication, trade show)
Statute of Limitations Claim filed more than 3 years after plaintiff knew or should have known of misappropriation
Waiver/Estoppel Plaintiff's conduct indicated consent or waived confidentiality
California-Specific Considerations
B&P § 16600 – No Non-Competes: California law strongly favors employee mobility. You CANNOT be prohibited from:
  • Working for a competitor
  • Using general knowledge and skills
  • Contacting people you know professionally
  • Competing in your field of expertise
Claims that effectively prevent you from working in your field may be disguised non-competes that violate § 16600.
Responding to Demand Letters

Immediate Steps:

  • Preserve all relevant documents and communications
  • Do NOT delete, destroy, or "clean up" anything
  • Identify what materials you actually have from former employer
  • Review any agreements you signed (NDA, employment agreement)
  • Consult counsel before responding substantively

Response Options:

  • Deny and defend: If claims are baseless, respond with substantive defenses
  • Return materials and move on: If you have materials you shouldn't, return them with appropriate assurances
  • Negotiate resolution: Sometimes a certification of non-use and return of materials resolves the matter
  • Seek declaratory relief: File first in favorable forum if you anticipate litigation
Don't Ignore: Trade secret demands often precede TRO/injunction motions. If you don't respond, plaintiff may obtain ex parte orders before you can defend yourself.
General Knowledge vs. Trade Secrets

Courts distinguish between protected trade secrets and unprotectable general employee knowledge:

Protectable Trade Secret General Knowledge (Not Protectable)
Specific customer contact lists with pricing history General knowledge that certain companies are in the market
Proprietary source code or algorithms General programming skills learned on the job
Detailed manufacturing specifications Industry-standard manufacturing techniques
Secret formula with specific ingredients/proportions General knowledge of chemistry or formulation approaches
Specific strategic plans and projections General business acumen and strategic thinking
Attorney Services for Trade Secret Disputes
Trade Secret Emergency?

Trade secret misappropriation requires fast action to prevent irreparable harm. I represent California businesses protecting their confidential information and individuals defending against overreaching claims. Whether you need to stop a departing employee or defend against a former employer, I provide strategic counsel focused on protecting your interests.

For Trade Secret Owners
  • Draft and review NDAs, confidentiality agreements, and employment agreements
  • Conduct employee exit interviews and departure protocols
  • Investigate suspected misappropriation with forensic analysis
  • Send cease-and-desist demands to employees and new employers
  • Obtain emergency TROs and preliminary injunctions
  • Litigate trade secret claims through trial
  • Negotiate settlements and enhanced confidentiality agreements
  • Coordinate with criminal authorities when appropriate (Penal Code § 499c)
For Accused Individuals and Companies
  • Evaluate strength of trade secret claims and available defenses
  • Respond to demand letters with substantive analysis
  • Defend TRO and preliminary injunction motions
  • Assert B&P § 16600 employee mobility rights
  • Negotiate departures and transitions that minimize liability
  • File declaratory judgment actions when strategic
  • Defend trade secret litigation
  • Seek fee awards for bad-faith claims
Why Speed Matters
Trade Secret Timing: Unlike most civil disputes, trade secret cases often require immediate action:
  • TROs can be obtained within days (sometimes ex parte)
  • Preliminary injunctions heard within weeks
  • Delay in seeking relief can undermine "irreparable harm" argument
  • Evidence can be destroyed if not preserved quickly
If you suspect misappropriation, act NOW. If you're accused, respond immediately to avoid default.
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Contact Information

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Frequently Asked Questions
No. California Business & Professions Code § 16600 voids non-compete agreements with very limited exceptions. Your former employer cannot prevent you from working for a competitor or starting a competing business. However, they CAN prevent you from using or disclosing their actual trade secrets. The key distinction is: you can compete using your general skills and knowledge, but you cannot take and use their specific confidential information.
This is a common and difficult issue. General rule: specific information that was clearly marked or treated as confidential (customer lists, pricing sheets, source code, formulas) is likely protected. General skills, industry knowledge, and professional relationships are yours to use. If unsure, err on the side of caution—don't use specific documents or data from your former employer. Consult counsel if the line is unclear for your specific situation.
Act quickly: (1) Conduct an exit interview emphasizing confidentiality obligations, (2) Collect all company equipment and materials, (3) Obtain signed certification of return of materials, (4) Terminate all system access immediately, (5) Review access logs for unusual download activity before departure, (6) Consider forensic imaging of their devices, (7) Send a reminder letter of ongoing confidentiality obligations. If you find evidence of misappropriation, consult counsel about demand letters or injunctive relief.
California courts allow discovery of trade secrets under protective orders that limit disclosure to attorneys and designated experts. You don't have to prove the exact content publicly. In litigation, you'll identify your trade secrets with reasonable particularity (categories and descriptions), then provide specifics under seal or protective order. The court can conduct in camera review if needed. Pre-suit, you need enough evidence of misappropriation (access logs, forensics, circumstantial evidence) to establish a credible claim.
Trade Secret Damages Calculator

Estimate potential damages for trade secret misappropriation claims under California CUTSA (Civil Code Section 3426). This calculator covers actual damages, unjust enrichment, and exemplary damages.

Estimated Trade Secret Damages

Actual Losses: $0
Unjust Enrichment (above actual loss): $0
Alternative: Reasonable Royalty: $0
Base Compensatory Damages: $0
Exemplary Damages (willfulness multiplier): $0
Attorney Fees (if applicable): $0
Estimated Total Recovery: $0
Disclaimer: This calculator provides rough estimates for educational purposes only. CUTSA damages are complex and fact-specific. Exemplary damages (up to 2x) require proof of willful and malicious misappropriation. Attorney fees are available for bad faith claims or willful misappropriation. Injunctive relief value is not included. Consult a trade secret attorney for accurate assessments.