Jun 23, 201601:00 PMLegal Login
with Mindi Giftos and Andrew Schlidt
What every business needs to know about the Defend Trade Secrets Act
(page 1 of 2)
On May 11, 2016, President Obama signed the Defend Trade Secrets Act (DTSA) into law. The law became effective upon signing. Among other things, the DTSA creates a private cause of action for trade secret misappropriation under federal law. Previously, trade secret misappropriation claims were governed by individual state statutes, which largely followed the Uniform Trade Secrets Act (UTSA).
The DTSA has substantial political and business support, as it provides businesses with a new way to protect their valuable competitive information. The DTSA has many similarities to the UTSA, but also has some important differences. This post highlights six important things that every company should know about the DTSA.
1. The DTSA provides for civil action in federal court
The DTSA amends the Economic Espionage Act of 1996 to provide that: “[a]n owner of a trade secret that is misappropriated may bring a civil action under this subsection if the trade secret is related to a product or service used in, or intended for use in, interstate or foreign commerce.” This broad language provides a basis for jurisdiction even if the trade secret was still in development, provided it was related to a product intended to be sold/used in interstate commerce. Like the UTSA, the statute of limitations for bringing a claim under the DTSA is three years. There are many benefits to federal jurisdiction for misappropriation claims, including the technical expertise of federal courts, as well as uniformity and predictability of outcomes.
2. Trade secrets are defined broadly
The DTSA uses the definition of trade secret that is already set forth in the Economic Espionage Act rather than the definition used in the UTSA. “Trade secret” means 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 memorialized physically, electronically, graphically, photographically, or in writing if:
- The owner has taken reasonable measures to keep such information secret; and
- The information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, another person who can obtain economic value from the disclosure or use of the information.
This definition is important, as it highlights that trade secret information must not only be proprietary, but also that the owner is actively taking steps to protect the confidentiality of the information.
The definition of “misappropriation” under the DTSA is almost identical to the UTSA definition. Misappropriation under the DTSA, in general, includes: without permission a) obtaining a trade secret that was knowingly obtained through improper means; or b) disclosing or using a trade secret without knowing either 1) that it is a trade secret; or 2) that it was obtained through improper means. “Improper means” include “theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means.” However, misappropriation does not include “reverse engineering, independent derivation, or any other lawful means of acquisition.”