On April 4, 2016, the U.S. Senate unanimously passed the Defend Trade Secrets Act of 2016 (“DTSA”) which intends to create a federal civil cause of action for trade secret theft. The bill offers trade secrets owners alternatives to navigating varied state trade secret laws or seeking assistance from the Department of Justice.
In essence, the DTSA would create an alternative jurisdictional basis to litigate trade secret theft in Federal Courts. It would not preempt or supplant available remedies under state law. Under the DTSA, companies could use federal subpoena power during discovery, instead of the more difficult, costly and lengthy process of collecting witnesses and documents across state lines under state law. The DTSA would also enable courts to order ex-parte seizures of property involved in the misappropriation of trade secrets in certain cases.
The Senate bill and an identical bill under review by the U.S. House of Representatives come at a time when companies are increasingly turning to trade secret law as a means of protecting valuable intellectual property beyond the twenty year cap afforded under patent law. Advances in cyber technologies have greatly enabled the theft of trade secrets, which is now estimated to cost the U.S. economy $300 billion dollars annually. Trade secret theft is known to affect a wide range of industries including: automobiles, automobile tires, aviation, chemicals, consumer electronics, defense systems, electronic trading, industrial software, and pharmaceuticals.
Under the Uniform Trade Secrets Act (“UTSA”), a model law adopted by many states, a trade secret is broadly defined as information that (1) derives independent economic value from not being generally known and (2) is the subject to reasonable efforts to maintain its secrecy. The UTSA was published in 1979 by the Uniform Law Commission to provide a consistent legal framework for protecting trade secrets across multiple states. To date, 48 states, the District of Columbia, and the U.S. Virgin Islands have enacted variations of the UTSA. State courts have found trade secrets take a variety of forms, including: formulas, business ideas or strategies, customer lists and profiles, pricing and margins, distribution methods, and manufacturing processes. Available remedies within state courts include injunctive relief, damages, and attorney’s fees.
Although the federal 1996 Economic Espionage Act made the theft of trade secrets a federal crime, it did not provide for private civil remedies. If enacted, the DTSA would bring trade secrets within the realm of federal protection already afforded to patents, copyrights and trademarks and would be the first major piece of intellectual property legislation enacted since the America Invents Act of 2011.