New Federal Trade Secret Law Enhances Trade Secret Protection

On Wednesday, May 11, 2016, President Obama signed the Defend Trade Secret Act of 2016. This new law, along with the Theft of Trade Secrets Clarification Act of 2012, significantly improves the ability to protect Trade Secrets.

The Theft of Trade Secrets Clarification Act of 2012 broadened the scope of the Economic Espionage Act of 1996 to cover trade secrets that are related to a product or service used in or intended for use in interstate or foreign commerce. The Act encompasses a broader range of trade secrets provided they are connected to a product or service that is intended for some kind of interstate or foreign usage. The clarifications provided by the Theft of Trade Secrets Clarification Act afford businesses broader protection of their trade secret information.

The Defend Trade Secrets Act of 2016 creates a federal, private civil cause of action for misappropriation of trade secrets, among other things. Thus, a trade secret owner may file a civil action in U.S. District Court seeking damages or injunctive relief for misappropriation of trade secrets related to a product or service used in, or intended for use in, interstate or foreign commerce. The federal Defend Trade Secrets Act also allows a trade secret owner to seek an ex parte order for the seizure of property necessary to prevent the dissemination of the trade secret. If seizure is ordered, the court is responsible for securing and protecting the seized property.

Prior to the enactment of the federal Defend Trade Secrets Act, businesses had to rely on State common law or the Uniform Trade Secret Act (UTSA), where adopted. While the provisions of the Acts are similar, the Defend Trade Secrets Act has more advantageous applications in the intellectual property world. The Defend Trade Secrets Act is a uniform national standard, whereas the UTSA has state-by-state variations in the statutory text and interpretation or application of that text. Additionally, the Defend Trade Secrets Act permits trade secret litigation in federal court, allowing companies to achieve a result more efficiently than in state court. The statute of limitation for the Defend Trade Secrets Act was originally drafted to be five years from discovery, but Congress wanted the statute of limitation to be consistent with the UTSA. Thus, the statute of limitation for both the Defend Trade Secrets Act and the UTSA is three-years from the date the misappropriation was discovered or with reasonable diligence should have been discovered.

Most notably, the Defend Trade Secrets Act requires a notice in any contract or agreement with an employee or independent contractor/consultant, where the contract or agreement governs the use of a trade secret or other confidential information. Failure to comply with the notice requirement will limit a business’ remedies under the new law. Consequently, to take full advantage of the Defend Trade Secrets Act benefits, all businesses should review their confidentiality agreements to be sure they comply with these new notice requirements.

As always, if you have a concern, e-mail or call one of the Intellectual Property Team members at 920-437-0476 to discuss the best way to protect your trade secrets and other intellectual property from misappropriation.

Written By:
Law Firm of Conway, Olejniczak & Jerry, S.C.