Business Torts

Business tort cases involve some kind of wrongdoing that takes place in a business context and affects business interests. For example, disputes can allege or involve:

■  Unfair competition
■  Breaches of covenants not to compete
■  Misappropriation of trade secrets
■  Inducing one party to breach a contract
■  Intentional interference of prospective economic advantage
■  Negligent interference with prospective economic advantage
■  Trade libel
■  Tortious breach of contract
■  Defamation

In contrast to a dispute involving a breach of contract, a business tort lawsuit may involve the recovery of punitive damages.

When Employees Take Customer Lists and Other Confidential Business Information (Misappropriation of Trade Secrets)

One of the most common business torts involves employees who take customer lists and other proprietary information belonging to their employer. Under California’s version of the Uniform Trade Secrets Act, a trade secret is defined as “a formula, pattern, compilation, program, device, method, technique, or process that:

1. Derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and

2. Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.” California Civil Code § 3426.1(d).

Other examples of trade secrets include formulas for manufacturing products, assembly techniques, recipes, designs and plans such as blueprints, circuitry charts and manufacturing plans and computer software and databases. Operational information such as sources of supply, pricing, distribution and marketing plans, cost information, salary information, bidding strategies and methods, business plans and project binders are also subject to trade secret protection.

Trade secrets cases arise where employees improperly utilize their employers’ confidential business information in violation of a confidentiality agreement. Misappropriation of trade secret cases can also arise when a customer improperly utilizes confidential business information. Given the speed with which a trade secret can be disclosed, an attorney should be consulted as soon as possible so that provisional relief, such as temporary restraining orders or preliminary injunctions, can be requested. We can take the necessary action to stop the disclosure of trade secrets before they inflict harm to your business.

Unfair Competition

We also represent business in connection with Business and Professions Code § 17200, which regulates unfair competition and prohibits unfair business practices. Unlawful business practices can involve fraud or misleading advertising. Causes of action under Section 17200 can also arise when a business violates enacted statutes. For example, a valid cause of action would be present when one business intentional sells its goods or services below cost in order to injure its competitors.

Harm to Business Reputation (Trade Libel)

For many companies, one of their most valuable assets is their reputation with customers and clients and within their industry. Our practice encompasses the representation of businesses whose products were disparaged by a competitor. Trade libel can arise in a variety of contexts such as a restaurant losing customers because of negative comments to its patrons by a competitor or a landlord losing prospective tenants because of disparaging remarks about the premises. There are often situations where trade libel may be difficult to prosecute because of the problems associated with proving economic losses. In these situations, a libel per se theory may be appropriate and we can advise you on the most appropriate strategy for addressing the damage to your business from a competitor’s statements.

To obtain more information about how we may be able to assist you in connection with any potential or actual business tort disputes in the Los Angeles area, please contact the Law Office of Michael Chung at 213-700-0198.