The Past and Present of Trade Secret Legislation

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.

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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.

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Sources referenced:

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

 

 

 

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The Future of Trade Secret Law

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

 

 

Trade Names vs. Trademarks vs. Domain Names

Trade Names vs. Trademarks vs. Domain Names

When we speak informally, we tend to think a company’s legal name, the name under which it is registered with the government, and the domain name it uses to communicate online are the same thing. Legally, this is not true. There is a difference between trade names, trademarks, and domain names. Knowing the difference between these three and knowing about the three different worlds they operate in can make all the difference for your business.

Trade Names

Under our legal system, a business is treated as a separate entity. A business is essentially considered a person. Each business is registered both with a state government and the IRS. A trade name is the name a business uses on contracts and other legal documents. This is also the name you would search for on Google or Yahoo if you are looking to get more information on a business.

Trademarks

A trademark can be the same as a company’s trade name, but it does not need to be the same. Sometimes a company uses different trade names and trademarks because they think one of them is easier for the customer to use and remember. Trademarks can be seen as the company’s “official” title. Let’s take Amazon for an example. Everyone knows Amazon.com as an online retailer, but may not know that the online retailer also operates under different legal entities. For example, they have Amazon.com Baby Inc., Amazon Payment Inc., and Amazon Overseas Holdings, Inc. A trademark would ideally be registered with the US Patent and Trademark Office and at the national trademark offices of  every countries where you do business.

Domain Names

Domain names are the internet protocol addresses associated with your website. For example, insidecounsel.com converts to 184.73.162.106 and domain names are managed by private companies. However, owning a certain domain name does not give you any trademark rights. While trademarks are only registered for specific goods and services, domain names are not. Any person in the world can own any domain name, regardless of if they are selling a service or product. Due to this, Delta Airlines had a lot of trouble obtaining delta.com as their domain name. If you are selling a good or service and you know someone has taken your domain name in bad faith (to divert customers from your business or to resell the domain to make a profit), having trademark rights over the name may help your case.

We hope knowing the difference between trade names, trademarks, and domain names has been helpful to our business clients. Thoroughly understanding the difference between these three can help your business avoid mistake and will help you properly protect your intellectual property rights.

What Might it Cost to Register Your Trademark?

TRADEMARK REGISTRATION COSTS

A frequent question I receive from both existing and prospective new clients, asks for a ballpark estimate on the amount of time obtaining a trademark will take.

This is a pretty broad question and leads to a potentially complex answer.

While time estimates are always dependent on the specifics of each case, there are some general guidelines that can help focus the time estimate.

The time estimate derives from the process.  We outline the process based on several phases of activity, summarized as follows:

  • First, We need to consult with the client. This usually takes at least one (1) or two (2) hours, but can take much more time depending on the client’s specific needs and activities.  The consultation process allows us to determine exactly what the clients proposed trademark is and what classification and description of goods and services will apply. This information not only helps define the scope of legal services, it also establishes the scope of the trademark search report which is obtained in phase two.
  • Second, In phase two we order and obtain a comprehensive trademark search report. We allocate approximately one (1) hour to the report ordering process.  The report typically costs Six Hundred Fifty Dollars ($650.00). This report surveys not only the registrations contained in the United States Patent & Trademark Office database but also reviews all state trademark registration databases, all internet usage and all common law usage throughout the United States.
  • Third, Phase three involves a review of the report which typically takes anywhere from two (2) to four (4) hours, or more, depending on the amount of information contained in the report.
  • Fourth, Phase four contains an additional consultation with the client wherein the results of the report review and analysis are discussed and explained. This process will usually range from one (1) to three (3) hours depending on the extent of potential conflicts gleaned from the report. The analysis may be discussed with the client verbally or it may be memorialized in a written letter when appropriate.
  • Fifth, Phase five is to draft the actual registration application and to submit it electronically at the USPTO. This process takes from one (1) to two (2) hours depending on the extent to which the client furnishes the necessary information that must accompany the application. For example, images of the mark used on the goods or in the connection with the delivery of services must be furnished and samples of any symbol or logo marks must be provided in accordance with the USPTO’s specific criteria.
  • And, Finally, we must allocate costs for the filing fee for registration in a single class.  The USPTO fee for a single mark registered in a single class is currently about $350.00.  (This varies slightly based on the type of application used for the registration process)  The fee is increased, of course, where multiple classes are included in the scope of the application.

From this, a typical trademark registration project can range of anywhere from Three Thousand Two Hundred to Four Thousand Five Hundred Dollars ($3,200-$4,500) for budgeting and cost projection purposes. It should be kept in mind that these cost projections can be off by an order of magnitude of fifty percent (50%) or more. Thus, for example, in very simple and straight forward matters an application can be completed for One Thousand Five Hundred Dollars ($1,500). At the same time, in more complicated matters total fees and costs through and beyond submission of the trademark application can reach or exceed Ten(s) of Thousands of Dollars. Registrations encompassing large portfolios of marks, or registrations covering foreign jurisdictions can cost tens or even hundreds of thousands of dollars.

It is important to keep in mind that filing the application really only begins the review and approval process. The examining attorney might issue an office action that must be dealt with. This action might be resolved with as little as a thirty (30) minute phone call or the action might require multiple hours of research and drafting time to respond to and resolve potential impediments to registration.

Likewise, a third party can file an opposition to the registration after it is approved by the examining attorney and published. Opposition proceedings can turn into litigation matters costing tens of thousands of dollars and taking months or years to resolve. On the other hand, an opposition matter can sometimes be resolved expeditiously with a mutually acceptable, co-existence agreement, negotiated between the parties and implemented with very little effort and work. These are unknowns that ultimately drive the total cost of the project and cannot be fully anticipated at the outset.

Even after the trademark is successfully registered, ongoing maintenance and periodic required filings require an on-going budget to keep and preserve the mark.

Generally, a client seeking a trademark should ask about and establish a clear budget for the process at the beginning of the engagement.  Many firms require an advance retainer deposit of some negotiated amount as a threshold matter to accept a new engagement.

Clients should also be aware that the trademark related discussion typically leads to other areas of legal services needs. For example, the creation of business entities, the creation of contracts and assignments, non-disclosure agreements, lending arrangements, licensing arrangements, copyright protection and trade secret protection, all relating to the underlying business that gave rise to the trademark registration inquiry.

The above discussion is for illustrative and discussion purposes only.  It does not constitute an estimate for any actual or particular client matter.

No legal representation is accepted by the author except in accordance with a written client specific fee agreement.

For potential representation inquiries, please feel free to contact our office for further information.

Supplement Your Trademark

When securing a Federal trademark for a business or product everyone must go through the  the United States Patent and Trademark Office (USPTO). When doing so the hope is to come out with a secured trademark in the principal register, however for some, Plan B might be the way to go when Plan A fails.

The Principal register is most commonly where trademarks are registered. These trademarks are distinctive and clearly set apart the corresponding product or business. Such trademarks are not merely descriptive and have satisfied the qualifications set by the USPTO. At times, certain trademarks, while almost ‘hitting the mark’ just don’t quite reach it. It is at these moments that the USPTO will recommend these “trademarks with potential,” to the supplemental register instead of denying registration altogether.

The supplemental register consists of trademarks that have the potential of reaching distinctive effectiveness and just need an extra something to drive out of the purely descriptive phase. While not the final goal, accepting amendment to the supplemental register does present advantages. You may still bring forth suites of infringement in federal court. Your mark can be sighted by an examiner against similar marks looking to be registered and by being listed on the supplemental register your mark gains priority over other marks seeking registration at a later date. Another perk of accepting supplemental registration is the legality of using the ® mark rather than the ™ label. This grants you federal protection instead of the basic protection of common law. Furthermore it grants a more stable and legitimate aspect to your trademark.  Finally, after five years on the supplemental registration list, reapplication for principal registration is granted and having been on the supplemental list helps prove that your trade mark has gained distinctiveness. This will help secure your principal registration.

A few negative aspects of the supplemental register is that despite its step upward, it is not official. Supplemental registration does not grant exclusive rights to the registered owner. This means that the Department of Treasury cannot stop importation of infringement into the US, the mark does not automatically gain incontestability after five years and the mark is not truly valid until gaining principal registration.

Despite these few downfalls, having the protections the supplemental register provides, over no federal protections at all, may be a better path to follow. When Plan A fails, this Plan B is a good way to go to begin the securing and protection of your brand.

Article Reference:

http://ow.ly/o8zaW

Disclaimers in Trademark Office Actions

In my intellectual property practice I am frequently educating clients in the nuances of trademark and copyright law. I currently have a trademark matter where the issue of using disclaimers as part of the registration process is being explored. Thanks to attorney Galvani for his article: Disclaimers in Trademark Office Actions | Tom Galvani – Arizona Patent and Trademark Attorney http://ow.ly/g0VFs