Austin TX Business Law Blog

Monday, April 4, 2016

Lawmakers Consider Enhanced Protection of Trade Secrets

What is the status of The Defend Trade Secrets Act?

American companies have been faced with a wave of infiltration by domestic and foreign industrial spies who steal valuable trade secrets and leak them to competitors. Now lawmakers on Capitol Hill are taking steps to enhance the protection of trade secrets. The Senate Judiciary Committee recently voted in favor of The Defend Trade Secrets Act (DTSA). The proposed law is designed to fight trade-secret theft by creating a harmonized, uniform, federal standard to protect trade secrets.

The Cost of Trade Secret Theft

According to lawmakers, trade secret theft cripples innovation, impedes economic growth, and causes U.S. businesses to lose billions of dollars each year. The current law in place, The Economic Espionage Act of 1996 (EEA) does not adequately protect against this crime, and trade secrets are the only form of IP that lacks remedies under federal law. While there is a mosaic of state laws in this regard, pursuing claims in state courts is subject to conflicting multi-state procedural and jurisdictional issues. Moreover, the Department of Justice is not adequately funded to prosecute trade secret cases under the EEA. Ultimately, companies are at a strategic disadvantage in protecting and recovering secret information.

What are trade secrets?

Trade secrets are formulas, designs, practices, processes, or patterns that are not widely known or cannot be reasonably ascertained. Trade secrets usually consist of information that confers some type of monetary benefit on the holder of the trade secret. Trade secrets can usually be protected without registration or other formalities. However, in order to be protected:

  • The information must be secret
  • It must have commercial value
  • The holder of the information must have taken steps to keep it private

In short, owners of trade secrets must take explicit steps to protect them. By failing to do so, the state courts may not deem them to be a secret at all and the owner may lose the rights to the trade secrets.

The Defend Trade Secrets Act

The DTSA amends the EEA by creating a federal private right of action for trade secret theft. The bill provides a number of remedies, including injunctions, civil seizure orders, and damages. The definition of trade secret under the EEA would also be revised in accordance with the definition of the term under the Uniform Trade Secret Act. The provision for damages includes actual damages, unjust enrichment, reasonable royalties, and exemplary damages. In addition, the proposed law includes protection of whistleblowers who disclose trade secrets to the government or in connection with a retaliation lawsuit.

The DTSA will next be presented to the entire Senate for consideration and, if approved, will then be sent to the House of Representatives. While the legislative wheels may turn slowly, it appears that enhanced federal protection of trade secrets is on the horizon. In the meantime, if you have been the victim of trade secret theft or have been accused of stealing trade secrets, you should consult with an attorney who has expertise in intellectual property law.


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