Lawmakers Pass the Defend Trade Secrets Act


How can my business protect its trade secrets?

Certain forms of intellectual property such as patents, trademarks and copyrights have long enjoyed protection under Federal law. Until recently, this has not been the case for trade secrets. Now that Congressional lawmakers have passed the Defend Trade Secrets Act of 2016 (DTSA), however, owners of trade secrets will have a Federal private cause of action for the misappropriation of this highly sensitive information.

What are Trade Secrets?

Information such as formulas, designs, practices, processes or patterns that are not widely known outside of a business are considered to be trade secrets. These can include things like the formula for Coca-Cola or any of Google’s search algorithms. Essentially, the information must provide the holder with a monetary benefit or a competitive advantage in the market place. The holder must take steps to keep the information private, however, otherwise it will lose its designation as a trade secret and the owner will lose exclusive rights to the information.

Legal Protection of Trade Secrets

Previously, trade secrets had limited protection under the Economic Espionage Act if 1996 (a criminal statute) and a patchwork of state laws that were often contradictory and subject to jurisdictional disputes.  The DTSA provides holders of trade secrets with powerful legal recourse to pursue a civil action in federal court if a trade secret is misappropriated. In addition, a court may issue an ex-parte order for the seizure of stolen property to prevent dissemination or transmission of the trade secret.

Further, the DTSA provides holders with the ability to seek limited injunctive relief to prevent the actual or threatened misappropriation of the trade secret. Most importantly, plaintiffs may seek actual damages as well as unjust enrichment. Finally, pursuing a federal cause of action, does not preempt state trade secret protections.

In short, the DTSA has a number of provisions that will provide business owners with new rights as well as new responsibilities, particularly with respect to their role as a employers. For example, employment contracts will need to include provisions regarding confidentiality and the remedies available to employers in cases of trade secret theft by employees.

Both chambers of Congress approved the bill in April and the president is expected to sign it into law. In the meantime, businesses still need to be proactive in protecting their trade secrets and prepare for the new law by ensuring their protocols are up to date. Those seeking advice on how to keep their sensitive information secret or have had their intellectual property misappropriated should engage the services of an experience business law attorney.