Every major intellectual property area – patents, trademarks and copyrights – has long been the domain of federal law. The one notable exception has been trade secrets, which historically have been governed by state law. Now, in recognition of the global nature of commerce and the need for broader remedies to protect what the U.S. Chamber of Commerce estimates to be our nation’s trillions of dollars in trade secrets, the Defend Trade Secrets Act (DTSA) is on its way to obtaining the president’s signature and becoming law.
What this means for business is that, if you are the unfortunate victim of trade secret theft, the legal options and remedies available to you just became much stronger.
For starters, the law has been codified in Chapter 18. That means it’s housed within the federal criminal code. For the first time, civil litigants (i.e., companies who have experienced or believe they are about to experience trade secret theft) may bring a claim under the federal Economic Espionage Act. This claim would be brought in federal, not state court. And the federal courts have the authority under the new law to issue ex parte seizure orders to prevent dissemination of a trade secret. Ex parte meaning one-sided, i.e., the opposing party is not in court to defend itself. (Although concerns that such orders may be unduly draconian caused last-minute language to be added to the bill mandating that such ex parte orders issue only in “extraordinary cases”).
However, if a company can meet the standards required for a seizure order, swift action can be taken to prevent trade secrets from being disseminated. In the past, procedures were more cumbersome and took longer, forcing many companies to address the issue after the horse had already left the barn, at which point damage already had been done.
The DTSA does not replace state law on trade secrets; however, it adds additional layers of protection. And by using the DTSA, one can get claims heard in federal court – including not only the trade secret misappropriation claim, but also state law claims that ride along with it (such as an employee breaching his or her employment agreement in connection with taking trade secrets to a competitor).
What a trade secret is under the DTSA is broadly defined and in largely the same way that it has been under the states that follow the Uniform Trade Secrets Act. That is, a trade secret is:
- Any form of financial, business, scientific, technical, economic or engineering information
- that the business has taken reasonable measures to keep secret
- and that derives value from not being known to or reasonably discoverable by, those who could obtain value from the information (e.g., a competitor)
The best way to protect your company’s valuable assets is to contact legal counsel if you have even a hint that your company is at risk for losing a trade secret, and to do so at the earliest possible time. Your counsel will guide you through the steps to protect your company, which may include bringing an action under the newly minted and important Defend Trade Secrets Act.