Defend Trade Secrets Act

May 11, 2016

The President of the United States is expected to sign a bill called the “Defend Trade Secrets Act” (DTSA) which has been passed by both the House of Representatives and the Senate.

This bill is a supplement to the Economic Espionage Act of 1996 which, broadly stated, protects trade secrets from theft by federalizing that theft. This new bill amends federal law to create a private civil cause of action for trade secret misappropriation.

What does that mean? Well, more precisely, DTSA permits the owner of a trade secret to file a civil action in a U.S. district court seeking relief for trade secret misappropriation related to a product or service. It provides traditional remedies, such as an injunction and damages.

What is of most interest is that a trade secret owner may apply for, and a federal court may grant, a seizure order to prevent dissemination of the trade secret if the court makes specific findings, including that an immediate and irreparable injury will occur if seizure is not ordered. As one source notes, “The DTSA allows a federal court to seize property and prohibit the dissemination of the trade secret ‘ex parte’ (without advance notice to the former employee) in ‘extraordinary circumstances’.”[1] That court must take custody of the seized materials and hold a seizure hearing within seven days.

From the other side, any party harmed by the order may move to dissolve or modify the order and may also seek relief against the applicant of the seizure order for wrongful or excessive seizure.

In other words, DTSA allows a firm to stop the further dissemination of a trade secret as soon as it is discovered. What is also important is that while this allows a business to sue in federal court, it does not require it to do so. It can still sue in a state court under state law.

[1] What You Need to Know About the Federal Defend Trade Secrets Act of 2016 by Travis Crabtree, Michael Kelsheimer, David Lisch (Gray Reed & McGraw, P.C.), 5/6/16.

Protecting against the CI activities of others (Part 1)

March 25, 2013

This is a subject on which Carolyn Vella and I have written[i] and spoken[ii]. In that regard is interesting to see a discussion of the interplay between secrecy and patents in recent issue of The Economist[iii].

There, an article dealing with the Economic Espionage Act of 1996, as amended, and patents pointed out that some businesses have elected not to patent critical technology to provide long-term protection. While that sounds counter-intuitive, the feeling is that patent protection is insufficient, or too limited in its duration.

Of course, taking this option this implies that the company itself be able to protect the technology or techniques not only from accidental disclosure, but also from the competitive intelligence efforts of competitors, as well as the widespread industrial hacking now underway.

You do not have to be involved in matters of the highest technology to face this decision. But keep in mind one additional twist: if you develop something, and decline to patent it, and a competitor at a later date patents it, then even though you may have “invented” the process or product, you may be out of luck.

The lesson here is that you must exercise great care in deciding what to do with patents and trade secrets – how you protect them not only from those who violate the law to acquire them, but as well from those who can use effective competitive intelligence to discern some, if not all, of your protected “secrets”.

[i] See Protecting Your Company Against Competitive Intelligence, Praeger, 1998.

[ii] The next time is a webinar on May 15, 2013 sponsored by ComplianceOnline. More details later.

[iii]“Can you keep a secret?”, The Economist, March 16, 2013.