The Future of Trade Secret Law

As patents are becoming more and more difficult to obtain and enforce, many intellectual property owners are beginning to see trade secret law as a way to protect their IP assets. Congress is also considering providing federal private right of action for trade secret misappropriation. However, before deciding whether you should protect your IP with trade secret law, it is necessary to make sense of the history behind trade secret legislation.

Federal Trade Secret Legislation

The Supreme Court ruled in 1974 that state trade secret laws may “protect inventive subject matter without running afoul of the federal patent system.” After this ruling, states continued what they were doing and also continued to keep an eye out for trade secret misappropriation. When Congress saw that states varied on the type of trade secret legislation, they passed that Uniform Trade Secrets Act (UTSA) in 1979. This permitted companies with operations in several states to function more easily and with more protection. Although most states have adopted the UTSA in part or in whole, state court ruling have often led to differences for trade secret protection.

Commonalities Across States

When looking at trade secret legislation across different states, there are some common features that exist among them. First of all, the definition of trade secrets is common. The majority of the states define trade secrets as “information that derives some independent economic value.” States also agree that it is the duty of IP owners to keep information away from those who would use it for their own economical value.

Similar to the definition, states also agree on the scope of of trade secret law. While the scope of patents is often debated, most states tend to agree that “any information relevant to a business’ economic success” would fall in the category of a trade secret. State also agree that the IP owner must actively takes steps to protect and maintain the secrecy of his/her information. Lastly, states agree in saying that trade secret misappropriation should be criminalized. This is because states find that misappropriation usually occurs through theft, bribery, misrepresentation, or a breach of duty to protect secrecy.

More Trade Secret Legislation

Congress passed the Economic Espionage Act (EEA) in 1996 to criminalize trade secret misappropriation by foreign actors or governments. In addition, the EEA criminalized domestic trade secret misappropriation that impacted interstate commerce. Although high profile convictions under the EEA have increased awareness of misappropriation consequences, only a few number of criminal cases have actually been brought under the EEA.

Congress hoped to amend the EEA to “create a federal private right of action for trade secret owners to obtain redress for misappropriation.”  The Defend Trade Secrets Act (DTSA) would allow a trade secret owners to bring a federal civil action in response to acts of misappropriation or foreign economic espionage. The proposal also highlighted damages, injunctive relief, fee-shifting, and treble damages. The most important part of the DTSA would be that it provides “an ex parte order for preservation of evidence or seizure upon the verified complaint or affidavit of a trade secret owner.”

Another proposal to amend trade secret law was the Trade Secret Protection Act (TSPA) of 2014. The TSPA is fairly similar to the DTSA, but it preserves the right of the Attorney General to seek an injunction through a civil proceeding against someone who commits trade secret misappropriation. Unlike the DTSA, the TSPA puts additional restrictions on the civil seizures. This proposal was made in the House, while the DTSA was proposed in the Senate.

The Future

Federal trade secret law could be expanding in the new future and this is good news for IP owners across the nation. Both the DTSA and the TSPA will create a civil right of action for trade secret misappropriation. We recommend all intellectual property owners to carefully consider the changes DTSA and TSPA will bring to their business and their IP rights.

Source referenced: JD Supra

 

 

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