Colorado § 7-74-102 - Definitions.

§ 7-74-102. Definitions.

As used in this article, unless the context otherwise requires:

(1) "Improper means" includes theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means.

(2) "Misappropriation" means:

(a) 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

(b) 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 such person's knowledge of the trade secret was:

(A) Derived from or through a person who had utilized improper means to acquire it;

(B) Acquired 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 such person's 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(3) Repealed.

(4) "Trade secret" means the whole or any portion or phase of any scientific or technical information, design, process, procedure, formula, improvement, confidential business or financial information, listing of names, addresses, or telephone numbers, or other information relating to any business or profession which is secret and of value. To be a "trade secret" the owner thereof must have taken measures to prevent the secret from becoming available to persons other than those selected by the owner to have access thereto for limited purposes.

Source: L. 86: Entire article added, p. 460, § 1, effective July 1. L. 2003: (3)(b) added by revision, pp. 2356, 2357, §§ 347, 348. L. 2004: IP(2)(b)(II) and (2)(b)(III) amended, p. 1459, § 180, effective July 1.

Editor's note: Subsection (3)(b) provided for the repeal of subsection (3), effective July 1, 2004. (See L. 2003, pp. 2356, 2357.)

Cross references: For additional definitions applicable to this article, see § 7-90-102.

ANNOTATION

Law reviews. For article, "The Legality of Generative AI -- Part 2", see 52 Colo. Law. 30 (Sept. 2023).

The following factors are considered in determining whether certain information is a trade secret: (1) The extent to which the information is known outside the business; (2) the extent to which the information is known to those inside the business; (3) the precautions taken by the holder of the trade secret to guard the secrecy of the information; (4) the savings effected and the value to the holder in having the information as against competitors; (5) the amount of effort or money expended in obtaining and developing the information; and (6) the amount of time and expense it would take for others to acquire and duplicate the information. Harvey Barnett, Inc. v. Shidler, 143 F. Supp. 2d 1247 (D. Colo. 2001).

Indispensable to an effective allegation of a trade secret is proof that the matter is, more or less, secret. Hertz v. Luzenac Group, 576 F.3d 1103 (10th Cir. 2009).

The act of keeping a design secret does not necessarily mean that it is a trade secret. Rather, the design itself must be secret; focusing on the act of protecting the design's secrecy skips the first and fundamental step in the analytical process. Hawg Tools, LLC v. Newsco Int'l Energy Servs., 2016 COA 176M, 411 P.3d 1126.

A trade secret can exist in a combination of characteristics and components each of which, by itself, is in the public domain, but the unified process, design, and operation of which, in unique combination, affords a competitive advantage and is a protectable secret. Harvey Barnett, Inc. v. Shidler, 338 F.3d 1125 (10th Cir. 2003); Hertz v. Luzenac Group, 576 F.3d 1103 (10th Cir. 2009).

A trade secret can include a system where the elements are in the public domain, but there has been accomplished an effective, successful, and valuable integration of the public domain elements and the trade secret gave the claimant a competitive advantage that is protected from misappropriation. Rivendell Forest Prods., Ltd. v. Georgia-Pacific Corp., 28 F.3d 1042 (10th Cir. 1994).

Information can be a trade secret notwithstanding the fact that some of its components are well-known. Harvey Barnett, Inc. v. Shidler, 338 F.3d 1125 (10th Cir. 2003); Hertz v. Luzenac Group, 576 F.3d 1103 (10th Cir. 2009).

Both actual and prospective customer lists can be a trade secret since both can be of value to the owner. Hertz v. Luzenac Group, 576 F.3d 1103 (10th Cir. 2009).

It is error for the court to rule as a matter of law that customer lists are not trade secrets particularly when presentation of evidence and offers of proof were not permitted. Network Telecomm. v. Boor-Crepeau, 790 P.2d 901 (Colo. App. 1990).

Adoption of a per se rule that a bid on a contract cannot be a trade secret as a matter of law is also declined. The statutory definition of "trade secret", together with evidence of value and of measures to protect disclosure, is broad enough to include a bid on a contract. Ovation Plumbing, Inc. v. Furton, 33 P.3d 1221 (Colo. App. 2001).

Precautions taken pursuant to subsection (4) must be more than normal business procedures. Such efforts may include advising employees of the existence of a trade secret, limiting access to a need-to-know basis, and controlling access to locations where the information may be learned. Harvey Barnett, Inc. v. Shidler, 143 F. Supp. 2d 1247 (D. Colo. 2001).

Subsection (4) applied in Colo. Supply Co., Inc. v. Stewart, 797 P.2d 1303 (Colo. App. 1990); In re S & D Foods, Inc., 144 B.R. 121 (Bankr. D. Colo. 1992).

No claim for misappropriation of trade secret. Nothing protectable was used by former employee when he took general business knowledge from one job to the next. Although misappropriation can be established without any copying or physical appropriation, business practices at best hold a tenuous claim to being trade secrets. Rivendell Forest Prods. v. Georgia-Pacific, 824 F. Supp. 961 (D. Colo. 1993).

State claims not preempted by federal copyright law. Plaintiff's claims of trade secret misappropriation under Colorado law require proof of a breach of trust or confidence - proof which is not required under the Copyright Act, therefore state claims are not preempted by the federal law. Gates Rubber Co. v. Bando Chem. Indus., Ltd., 9 F.3d 823 (10th Cir. 1993).

The Uniform Trade Secrets Act contains no requirement that there be actual use or commercial implementation of a misappropriated trade secret for damages to accrue. Misappropriation consists only of the improper disclosure or acquisition of a trade secret. Sonoco Prod. Co. v. Johnson, 23 P.3d 1287 (Colo. App. 2001).

Applied in Gold Messenger, Inc. v. McGuay, 937 P.2d 907 (Colo. App. 1997); Saturn Sys., Inc. v. Militare, 252 P.3d 516 (Colo. App. 2011).