Trade secret law provides protection for information that its owner takes reasonable measures to keep secret and that derives independent economic value from not being generally known or readily ascertainable. If a trade secret is misappropriated by another, the owner may be entitled to damages, an injunction preventing further use or disclosure of the trade secret, and in some cases the recovery of attorneys’ fees.

Trade secret protection is not a substitute for patent protection but can be an effective tool in certain circumstances. For technology that is or will someday be in the public eye, such a new product or product feature, patent protection is the way to go. However, technology and information that a company uses internally and discloses only under secrecy agreements may be protectable indefinitely under trade secret law. Trade secret law is particularly useful for protecting categories of information, such as business and customer information, that may not meet the requirements for patentability.

Patents are limited in term to twenty years from filing and require the applicant to disclose the invention to the public in exchange for a monopoly. Trade secret protection has the advantages of potentially lasting forever and not requiring any public disclosure. However, a key difference is that, unlike patents, trade secrets cannot be enforced against another who comes up with the same or similar technology on their own. Further, trade secret law does not prevent another innovator from obtaining a patent on the very same technology, provided that it was not derived from the trade secret owner.

Trade secrets have long been governed by state laws adopted from the Uniform Trade Secrets Act (UTSA) of 1979. However, in 2016, the Defend Trade Secrets Act (DTSA) was enacted creating, for the first time ever, a federal cause of action for trade secret misappropriation. The new law has led to a significant increase in trade secret enforcement actions in federal court.

The DTSA is similar to state trade secret laws in many respects, with a few notable exceptions. The DTSA includes an ex parte seizure remedy for trade secret owners. In extraordinary circumstances, a judge can order federal law enforcement to seize property necessary to prevent propagation of a trade secret without giving notice to the accused party.[1] It must be clear that an immediate and irreparable injury will occur if the ex parte seizure is not ordered, and the accused party must be given a hearing after the seizure.

The DTSA also includes immunity provisions for disclosing another’s trade secrets in some cases.[2] An individual cannot be held liable for disclosing a trade secret to law enforcement or an attorney to report or investigate a violation of the law or for disclosing a trade secret in a sealed court filing. Similarly, there is a whistleblower immunity provision to allow an employee to disclose their employer’s trade secrets in sealed court filings when bringing an anti-retaliation lawsuit. For trade secret owners, the DTSA requires judges to preserve the confidentiality of trade secrets in court proceedings.[3]

While the DTSA has been around for a few years now, the body of case law interpreting the DTSA is still developing. The DTSA only applies to acts of misappropriation that occurred on or after May 11, 2016, therefore it has taken some time for cases to become ripe and filter through the federal courts.

One issue that has been coming up in recent cases is that, in order to bring a claim under the DTSA in federal court, the trade secret must be related to a product or service used in, or intended for use in, interstate or foreign commerce. This is generally a low bar that can be met by alleging some nexus between the trade secret and interstate commerce in the complaint.[4]

Probably the most important consideration for those seeking to take advantage of trade secret protection, either under state law or the new federal law, is that reasonable measures must be taken to keep the information secret. Protection measures may vary depending on the types of information, but often include, at a minimum, restrictions on access and non-disclosure agreements with employees and others who have access. As some of the recent cases illustrate, failure to protect a trade secret can result in it no longer being protectable.

In the Southern District of California, a claim for trade secret misappropriation was recently dismissed where the trade secret information had been disclosed in application for U.S. copyright registration.[5] The Eleventh Circuit Court of Appeals recently upheld an award for summary judgement in favor of a former employee sued for using confidential information of his former employer where there was no employment agreement, the employee was encouraged to keep confidential information on personal phone and laptop, and the employee was not asked to delete the information upon his departure from the company.[6] The Southern District of Florida recently found that the plaintiff’s stage designs were no longer a trade secret after the plaintiff failed to have vendors responsible for installing the stage designs sign non-disclosure agreements.[7]

A trade secrets protection program can, if executed correctly, provide indefinite protection for a company’s vital information, particularly information that is not intended to be made public and may not meet the requirements for patentability. With the introduction of the DTSA, trade secrets can be enforced under federal law. However, as always, significant care must be taken to make sure measures are in place to keep the information secret or protection can be forfeited.