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CUTSA Preemption in Colorado

Posted by James Juo | May 26, 2022 | 0 Comments

The lawyers at Thomas P. Howard LLC successfully moved to dismiss Colorado civil theft and conversion claims as preempted by the Colorado Uniform Trade Secrets Act (“CUTSA”) in CORE Consultants, Inc. v. Ferran, No. 2021CV31719, 2022 WL 1637926 (Colo. Dist. Ct. May 5, 2022).

The Colorado civil theft statute (see C.R.S.§ 18-4-405) provides:

All property obtained by theft, robbery, or burglary shall be restored to the owner, and no sale, whether in good faith on the part of the purchaser or not, shall divest the owner of his right to such property. The owner may maintain an action not only against the taker thereof but also against any person in whose possession he finds the property. In any such action, the owner may recover two hundred dollars or three times the amount of the actual damages sustained by him, whichever is greater, and may also recover costs of the action and reasonable attorney fees; but monetary damages and attorney fees shall not be recoverable from a good-faith purchaser or good-faith holder of the property.

Crimes involving specific kinds of takings, however, “are not automatically subject to a claim for civil theft under section 18-4-405.” Winninger v. Kirchner, 488 P.3d 1091, 1096–97 (Colo. 2021). For instance, the Colorado legislature created separate civil actions for theft of cable service, C.R.S. § 18-4-702, and theft of farm products, C.R.S. § 35-36-314(1). Id. at 1097. The fact the legislature explicitly created these separate civil actions and remedies suggests these crimes do not constitute theft for purposes of the civil theft statute. Id.

And Colorado has a separate criminal statute for theft of a trade secret (see C.R.S.§ 18-4-408(1)).

Any person who, with intent to deprive or withhold from the owner thereof the control of a trade secret, or with an intent to appropriate a trade secret to his own use or to the use of another, steals or discloses to an unauthorized person a trade secret, or, without authority, makes or causes to be made a copy of an article representing a trade secret, commits theft of a trade secret.

In Winninger v. Kirchner, the Colorado Supreme Court held the civil theft statute, C.R.S. § 18-4-405, did not encompass a civil theft claim based on theft of medical records or information, explaining that there is a separate crime for theft of a medical record or medical information under C.R.S. § 18-4-412. Id., 488 P.3d 1097. The Colorado Supreme Court also noted the legislature created a distinct crime for theft of a trade secret under C.R.S.§ 18-4-408(1). Id. The Court found “the theft of medical records statute is more akin to the statutes criminalizing theft of trade secrets and theft of cable services, neither of which supports a civil theft claim under section 18-4-405.” Id. at 1097–98. The Colorado Supreme Court found there was no standing to bring a civil theft claim based on a violation of the theft of medical records statute. Id. at 1098.

When a common law claim restates the same operative facts of a trade secret misappropriation claim, the common law claims are preempted by CUTSA. Wright Medical Tech., Inc. v. Paragon 28, Inc., No. 18-CV-00691-PAB-STV, 2019 WL 4751807, at *5 (D. Colo. Sept. 30, 2019). The question in addressing preemption is whether the challenged common law claim depends on a finding of trade secret status to be actionable. Id. If it does not, the claim is not preempted. Id.

A claim may involve a trade secret misappropriation issue but include additional elements not necessary for a misappropriation claim under CUTSA and would not be preempted. Id. For example, conversion or civil theft claims involving the alleged misappropriation of physical property are not preempted by CUTSA. Id. at *6.

If there is no allegation the allegedly converted or stolen property had value independent of its value as a trade secret, then preemption may bar a conversion or civil theft claim. Wright Medical, 2019 WL 4751807, at *6; see also Powell Prod., Inc. v. Marks, 948 F. Supp. 1469, 1475 (D. Colo. 1996) (“To the extent that plaintiff's claim seeks recovery for defendants' misappropriation of plaintiff's intellectual property, it is seeking to recover for misappropriation of trade secrets. If the design of the plaintiff's machine is not a trade secret, plaintiff has no property right in its design, and it therefore would have no claim.”).

The Court dismissed CORE's civil theft and conversion claims against Mr. Ferran in view of the trade secret misappropriation claim that CORE was asserting under CUTSA (see C.R.S. § 7-74-101).

The trade secret attorneys at Thomas P. Howard, LLC are experienced in litigating cases nationwide including in Colorado.

About the Author

James Juo

James Juo is an experienced intellectual property attorney. He has successfully litigated various intellectual property disputes involving patents, trademarks, copyrights, and trade secrets. He also has counseled clients on the scope and validity of patent and trademark rights.


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