The Defend Trade Secrets Act: a valuable tool for IP owners
On May 11, 2016, President Barack Obama signed the new Defend Trade Secrets Act (DTSA) of 2016 into law. This law creates a new, federal cause of action for trade secret misappropriation. Depending on the commentator, this is perhaps the most significant development in intellectual property law in decades, a relatively simple improvement to an existing law or something in between.
It will likely take several years to fully understand how courts will interpret and implement the new law. However, businesses can predict some of the practical implications by understanding how the new law fits into the existing legal landscape, what is in the law and how it differs from other laws.
For nearly 150 years, the courts and states have had primary authority for developing the law governing commercial trade secret disputes. Trade secret law began as common law, developed by the courts, beginning in the mid-1800s. As time went by there was an effort to begin to gather the various cases into a single, cohesive code. Therefore, in 1939 the Restatement of Torts was published and served as the template that many states used when they drafted their trade secrets laws. The Restatement was later replaced in 1979 by the Uniform Trade Secrets Act (UTSA). Nearly every state has adopted some form of the UTSA.
How does the DTSA fit into this well-developed state environment? Primarily, the DTSA does not preempt or override state trade secret laws. Instead, it provides an additional layer of protection along with existing state laws. So any trade secret owner must understand both their federal and state trade secret law claims before deciding on a course of action for any potential misappropriation.
The DTSA is technically an amendment to the Economic Espionage Act (EEA) of 1996. The EEA, as its name suggests, was a criminal statute intended to curb state-sponsored and corporate trade secret theft at the federal level. However, only the US attorney general was given the power to enforce the act including through a civil action for an injunction in the event of a criminal violation. By amending the EEA, the DTSA adds a private right of action to the EEA, giving owners the right to sue for theft of their trade secrets.
Trade secrets under the DTSA
The DTSA includes three requirements for something to qualify as a trade secret.
First, in terms of the information that may constitute a trade secret, the DTSA includes an extensive, non-exclusive list: “All forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialised physically, electronically, graphically, photographically, or in writing.”
This list appears to be somewhat broader than the eight categories of information that qualify as a trade secret under the UTSA so it is possible that DTSA will protect more information than previous state laws.
Second, the owner must have taken reasonable measures to keep information secret. Like the UTSA, the DTSA is silent on what constitute “reasonable measures”. This “reasonable measures” language will be a fact-intensive inquiry and court rulings will provide guidance over time on what qualifies a reasonable measure. However, looking at the experience under various state laws, such as that in California, the following precautions are often included among those steps that, depending upon the circumstances, represent “reasonable measures”.
