Imagine this: an employee shared your company’s secret sauce in a pitch meeting or during the course of an exploratory partnership, and the idea is stolen. There’s no NDA in sight. Are you out of luck? Not necessarily. Even without a signed agreement, the law still may protect your trade secret under an implied duty of confidentiality.
Express vs. Implied: What's the Difference?
To win a trade secret case, a plaintiff must prove that the defendant had a duty of confidentiality. These come in two varieties:
· Express Duty: This is the straightforward kind—clearly stated in a written contract or NDA. It’s enforceable and predictable.
· Implied Duty: This arises from the nature of the relationship or the context in which the information was shared. Courts find an implied duty of confidentiality when “the other party has reason to know that the information was in fact confidential.” Valmarc Corp. v. Nike, Inc., No. 3:21-CV-01556-IM, 2024 WL 5056960, at *10 (D. Or. Dec. 10, 2024) (citing Carr v. AutoNation, Inc., 798 F.App’x 129, 130 (9th Cir. 2020); see also Tele-Count Eng’rs, Inc. v. Pac. Tel. & Tel. Co., 168 Cal. App. 3d 455, 466 (1985) (“The basis of the breach of confidence action is an obligation created by law for reasons of justice where no contract otherwise exists.”)
In short, even when nothing is signed, the law can and will read between the lines and recognize a confidentiality expectation based on how and why the information was shared. Both the federal Defend Trade Secrets Act (DTSA) and California’s Uniform Trade Secrets Act (UTSA) acknowledge this implied duty under the right circumstances.
When the Law Implies a Secret:
Cases involving arguments about implied duties unsurprisingly turn on their facts, but certain circumstances make a court more likely to find an implied duty.
· Oral and Written Reminders: Even absent a formal agreement, oral and written reminders to employees or vendors to keep information confidential may be enough to create an implied duty. Starship, LLC v. Ghacham, Inc, 2023 WL 5670788, at *19 (C.D. Cal. July 17, 2023); VBS Distribution, Inc. v. Nutrivita Lab’ys, Inc., 811 F. App’x 1005, 1009 (9th Cir. 2020).
· Deceptive Solicitation: Courts may impose an implied duty when a party deceptively solicits confidential information—such as a buyer coaxing a supplier into revealing product details only to steal the design. Pachmayr Gun Works, Inc. v. Olin Mathieson Chem. Corp., Winchester W. Div., 502 F.2d 802, 807 (9th Cir. 1974); Gunther-Wahl Prods., Inc. v. Mattel, Inc., 104 Cal. App. 4th 27, 36 (2002).
· Joint Venturers: Sharing confidential information to evaluate a business’s value for investment or acquisition can create an implied duty of confidentiality. Thompson v. California Brewing Co., 150 Cal. App. 2d 469, 476 (1957).
· Notice from Affiliate: If a defendant knows that the plaintiff has an NDA with the defendant’s affiliate, then that knowledge may impute a duty of confidentiality—even if the defendant wasn’t directly bound by that NDA. Valmarc Corp. v. Nike, Inc., No. 3:21-CV-01556-IM, 2024 WL 5056960, at *10 (D. Or. Dec. 10, 2024).
When Nothing Secret Is Implied:
However, courts are cautious. They won’t imply a duty of confidentiality in every situation. Here are some where they typically won’t:
· Unsolicited Disclosure: If you submit an idea to a potential business partner without any opportunity for them to reject confidentiality obligations, courts may not find a confidential relationship, even if recipient then shares the idea with a competitor. Faris v. Enberg, 97 Cal. App. 3d 309, 324 (1979).
· NDA Declined: If a recipient expressly declines to sign an NDA—but you share it with them anyway—an implied duty argument becomes a tough sell. Hooked Media Grp., Inc. v. Apple Inc., 55 Cal. App. 5th 323, 333 (2020).
· Failure to Follow NDA Strictures: If you have an NDA but don’t follow its terms (e.g., requirements to mark confidential information as such), the law will not step in to create an implied duty. Convolve, Inc. v. Compaq Computer Corp., 527 F. App’x 910, 925 (Fed. Cir. 2013).
Don't Rely on Hopes and Hunches
Courts don’t imply duties lightly. If you want to protect your secrets, the gold standard is still a well-drafted NDA. But if you forgot—or strategically skipped—an NDA, all is not lost.
To strengthen your case, show that:
· The relationship involved trust;
· The context clearly signaled confidentiality; and
· The recipient knew or should have known that the information was confidential.
And, of course, hire counsel who has experience litigating and winning such issues.
For more information regarding Alto Litigation’s litigation practice, please contact one of Alto Litigation’s partners: Bahram Seyedin-Noor, Bryan Ketroser, Joshua Korr, or Kevin O’Brien.
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