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Defend Trade Secrets Act – What You Need to Know

On May 11, 2016, President Obama signed into law the Defend Trade Secrets Act of 2016 (hereafter, the “DTSA”). While the Economic Espionage Act of 1996 provided federal criminal sanctions for trade secret misappropriation, there was no federal civil remedy available to combat trade secret theft in the United States. Trade secret theft was left to state jurisdictions, which created a variety of issues, including different obligations for trade secret owners.

What is a trade secret? A trade secret is a formula, pattern, compilation, program, code, device, method, technique or process, (1) that has independent economic value, (2) not generally known to the public, (3) not readily ascertainable through proper means and (4) reasonable efforts are taken to maintain its secrecy. For example, the Coca-Cola formula is considered a trade secret because Coca-Cola has gone to great lengths to protect the secrecy of its valuable soda formula. While many have tried, no one has been able to recreate the exact formula.

Under the DTSA, for the first time, an owner of a trade secret may bring a lawsuit in federal court against an individual and/or a company by establishing:

  1. The trade secret was misappropriated;
  2. The trade secret is related to a product or service; and
  3. The product or service is used OR intended for use in interstate or foreign commerce.

The DTSA provides the owner of the trade secret the ability to seek a “civil seizure” of the trade secret without notifying the accused.  This is an enormously powerful remedy available to the owner of the misappropriated trade secret. Stopping others from disseminating the trade secret through this seizure protects the value of the trade secret. Other remedies include injunctive relief, monetary and punitive damages.

If a trade secret has been misappropriated, the owner of that trade secret must file a lawsuit in federal court no more than 3 years from the date the misappropriation was discovered OR should have been discovered by reasonable diligence.

The DTSA has been hailed as a strong step in protecting trade secrets. During the signing of the DTSA, President Obama said:

Unfortunately, all too often, some of our competitors, instead of competing with us fairly, are trying to steal these trade secrets from American companies.  And that means a loss of American jobs, a loss of American markets, a loss of American leadership.

What these members of Congress have done is to, on a bipartisan basis, pass a strong enforcement bill that allows us not only to go after folks who are stealing trade secrets through criminal actions, but also through civil actions, and hurt them where it counts in their pocketbook.

Trade secrets are an important component of any intellectual property portfolio. While patents, trademarks and copyrights have been afforded federal protection and remedies for decades, it is about time trade secrets are afforded the same level of protection. In many cases, however, individuals and/or companies that believe they have a “trade secret” fail to take reasonable steps to ensure the trade secret remains a secret.

One thing we suggest to all our clients is to have an intellectual property audit performed on an annual basis. One aspect of the audit is to assess trade secrets and make sure reasonable steps are taken to maintain secrecy. For example, all companies should require its employees to sign a non-disclosure agreement. That way, the employee is on notice and agrees not to disclose any trade secrets he or she may have learned while employed at the company. The goal of these audits are to prevent your company from ever engaging in litigation; however, if litigation is necessary, individuals and companies now have a federal civil remedy for trade secret theft.

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John M. Burke is a trademark attorney who assists clients in selection, screening, registration, licensing and enforcement of trademarks and service marks. In addition to trademark prosecution and enforcement, John works with clients to identify, manage and license their intellectual property. Through Caseiro Burke’s Litigation Practice, John also provides intellectual property litigation service.

Caseiro Burke is an intellectual property law firm providing legal services to individuals and businesses around the world. We offer clients creative, cost-effective and reliable legal solutions in all intellectual property matters. Our dedication to the practice of intellectual property law provides our clients with the focus of attention necessary to establish, protect and commercialize their innovations. Whether you are a sole inventor looking for patent protection for your invention, a distillery protecting its brand or a manufacturing company asserting or defending a patent infringement claim, Caseiro Burke will work with you to achieve effective results.

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