The Past and Present of Trade Secret Legislation

In order to better understand the past and present state of trade secret legislation, it is important to understand what a trade secret is and why it is often viewed differently from other intellectual property rights.

What is a Trade Secret?

Trade secrets can include a broad range of proprietary information, including product development plans, customer information, and even formulae. In order to have your trade secret protected, you:

• must be using the trade secret
• the trade secret must be conferring you with an economic advantage
• the trade secret must not be generally known in the industry
• the trade secret must be protected in a way that safeguards its confidentiality

If all of these elements are met, the owner of the trade secret may file a suit when the secret is acquired, used, or disclosed by illegal means.

Why are Trade Secrets different from other IP rights?

Unlike patents and copyrights that are governed by federal statutes, trade secret rights fall under state law. This usually makes trade secrets the “odd man out.” Congress is now considering making a federal civil action for trade secret misappropriation, including remedies that are currently unavailable under state law. Not only does Congress believe state law for trade secrets is inadequate, they also have expressed concern about the threat posed by international espionage.

History of Trade Secret Legislation

Trade secret laws developed from common law principles of agency, trusts, and torts. Since these principles varied from state to state, the Uniform Trade Secrets Act (UTSA) was adopted by many states beginning in the 1980’s. 47 states have adopted the UTSA today.

The statute directed at trade secrets is the Economic Espionage Act of 1996, in which the EEA created criminal penalties for trade secret misappropriation. However, there was no room to bring were civil action for damages. Congress amended the EAA in 2012 to clarify that the EAA applied to trade secrets in use or intended to be in use. They also increased the range of available criminal penalties.

Proposed Legislation on Trade Secrets

House Bill 5233, known as the “Trade Secrets Protection Act of 2014” hoped to make a path for civil action for misappropriation of trade secrets. The bill also proposed a civil seizure remedy that would authorize the court to enter an Ex Parte Seizures to preserve evidence or to prevent the “propagation or distribution” of a misappropriated trade secret. Lastly, the bill hoped to create expanded remedies, including compensatory and punitive damages.

The Senate hoped to pass a similar bill, the Defend Trade Secrets Act of 2014, and both the House and the Senate had the support of many industry groups, who believed such a bill would protect trade secrets and combat any industrial espionage efforts. Critics argued that Congress did not need to step in if the current system of state laws worked. These critics further added that adopting federal statutes would erode state activity in the trade secret areas, resulting in fewer trade secret laws in the future. However, President Obama  made some changes to trade secret legislation in the past few days.

Defend Trade Secrets Act of 2016 (DTSA)

On May 11, President Obama signed into law the DTSA. This enables companies to go to federal court to sue for misappropriation of trade secrets. The DTSA now allows for Ex Parte Seizures in “extraordinary circumstances.” The law also expands remedies, such as adding Exemplary Damages and rewarding attorney’s fees. Injunctive relief is also provided and expanded with the DTSA.

With the passing of the DTSA, private parties do not have to rely solely on state law when it comes to protecting their trade secrets. The hope is that this new trade secret protection will allow trade secrets to function like other intellectual property rights and provide secret holders with more protection.

Sources referenced:

1. JD Supra (2014)
2. JD Supra (2016)

 

 

 

4th Circuit: No Warrant Needed to Track Cellphone Location

A three-judge panel in the 4th Circuit Court had previously ruled that police officers needed a warrant to track location services and access information on a subject’s cellphone. The court was split on this decision, but the three-judge panel prevailed in limiting law enforcement authority. On May 30, the en banc 4th Circuit Court reversed its own decision and said no warrant is required for law enforcement officials to track location information for a subject’s cellphone. The court said all that would be required would be showing the court that the cell phone is relevant to the subject’s case. As long as the cell phone is relevant, law enforcement authorities will be able to get information about the cell towers through which the calls were made and received.

The US Supreme Court mandated precedent saying that information voluntarily provided to third parties, such as cell phone service providers, lacks requisite confidentiality. Therefore, no warrant is needed to access this information. Cellphone location information can be seen as similar to hotel bills and credit card statements, which are also not considered confidential. The Supreme Court did mention that this “third-party doctrine” may be modified or eliminated in the future. Congress has the power to require a warrant for cell-site location, but the controlling law does not require a warrant for cellphone location. It has been argued that allowing authorities to gain access to a subject’s cellphone does not violate the Fourth Amendment.

Many attorneys and legal scholars are concerned that this decision by the 4th Circuit gives law enforcement authorities unlimited power to gain access to every American cellphone user without a warrant. Cellphones for many Americans contain intimate information and they may not want the government to see everything they see on their personal devices. Attorney Meghan Skelton intends to appeal the 4th Circuit decision to the Supreme Court. As an attorney for the defendants in the Baltimore case the 4th Circuit ruled on, Skelton believes her appeal to the highest court in the nation will better protect Americans. Although Skelton is optimistic, it is unlikely the Supreme Court will even hear the case. All of the circuit courts in the nation now agree that cell tower information is not private and it is very unlikely the Supreme Court will disagree with them.

We have previously blogged about a Supreme Court decision where they found that GPS tracking does count as a search and therefore must require a warrant. In that case, a unanimous decision said that if the government attaches anything to your body or your property, it counts as a search. Once again, the Fourth Amendment and advances in technology seem to be contradicting. However, tracking the location of your cellphone is different from attaching something to your body to track you. Perhaps this was the reason the 4th Circuit Court reversed their previous decision and now allows law enforcement officials to get cell tower information without a warrant. While unlikely to succeed, it would be interesting to how an appeal to the Supreme Court would play out.

Source referenced: ABA Journal

Why Your Office Needs Stand-up Desks

Stand-up desks are a glimpse into the future of office spaces. Many of us have heard about the benefits of using a balance ball instead of a regular chair when sitting at the desk. However, a new study out of Texas A&M shows that there is no need for any type of chair. The study found that employees were 46% more productive at their call center job while at a stand-up desk. The study lasted for six months and focused on 167 workers. Texas A&M measured the productivity of the workers by looking at the number of calls each worker completed per hour. The office workers were split into two groups. 74 workers used stand capable work stations, while 93 worked at their desk with a chair. At the end of the day, those at the stand-up desks spent 1.6 extra hours standing. Looking simply at this information, it may seem like standing up led workers to be more productive. However, researchers believe there may be another reason for the increased productivity.

Over the six month study, those using stand-up desks said they experienced less discomfort. This would be saying that sitting at a desk is more uncomfortable than standing up. Since these workers experienced less discomfort, they were feeling a lot better and feeling good leads to better customer service over the phone. In this age of technology where many of us are constantly glued to our phones, anything that forces us to stand and be physical is good for our bodies and makes us happier workers.

While this study was conducted at a call center and may not apply to all work environments, it never hurts to try out or modify something to see if it works for you. Mark Benden, director of Texas A&M’s Ergonomics Center, said he would be thrilled to even get 23% more productivity out of his workers. He and many other believes a small investment in changing the workplace layout and furniture may pay off very well in the future.

We hope this post has been informative and has hopefully inspired business owners to make some changes around the office. Not only have stand-up desks proven to increase employee’s productivity, they also decrease discomfort for the employee. Sitting on a chair all day can definitely be tiring. Perhaps changing around the furniture in your office can help your business run more efficiently in the future.

Source referenced: ABA Journal

Is Cloud Computing Ethical?

In this age of increased technology, attorneys are turning to “virtual law offices” (VLO) and cloud technologies to maintain office files and information. There have been concerns raised about whether maintaining files online still complies with an attorney’s ethical obligations. Cloud computing is accepted by the Business and Professions Code and the Rules of Professional Conduct, but attorneys may be required to take additional steps to confirm that he or she is fulfilling ethical obligations with the cloud. There are no new or greater duties imposed on VLO, but attorneys are asked to be more cautious when taking this approach.

In a VLO, attorneys are able to communicate with clients through a secure internet portal. The attorney’s website can store information regarding the client’s case. The information on the client matters are password protected and encrypted. The State Bar of California understands the flexibility and convenience of legal services provided through VLO. However, this does not mean a client’s confidentiality could be sacrificed. Every lawyer, they believe, has a duty to “maintain inviolate the confidence, and at every peril to himself or herself, preserve the secrets of his or her client.”

Whether or not an attorney violates his or her duties to confidentiality when using technology will depend on the particular technology being used. Before using an technology in the course of representing a client, an attorney must evaluate:

1. The level of security attendant to the use of that technology, including considerations of whether reasonable precautions may be taken using it.
2. The legal ramifications to a third party who intercepts or accesses the electronic information.
3. The degree of sensitivity of the information.
4. The possible impact on the client of an inadvertent disclosure of confidential information.
5. The urgency of the situation.
6. The client’s instructions and circumstances.

We hope both our clients and other attorneys found this post useful in understanding the changing nature of the legal field. While the State Bar does not impose additional rules or restrictions on VOL, attorneys are asked to be more cautious when using a cloud. The information provided above comes from specific ethical guidelines from California’s State Bar. Opinions by other Bar Associations may vary.

Sources referenced:

1. State Bar of CA Formal Opinion 2010-179
2. CA State Bar Formal Opinion 2012-184