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Will the Defend Trade Secrets Act Protect Your Business?


May 15, 2016
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Will the Defend Trade Secrets Act Protect Your Business?

Earlier this week, the President signed into law the Defend Trade Secret Acts (DTSA). The federal legislation is good news for Monmouth County businesses because it will give them one more tool to combat intellectual property theft.

Federal Trade Secrets Law

According to the Director of the U.S. Patent and Trade office, the theft of trade secrets may be the biggest transfer of wealth in history that costs U.S. innovators an estimated $300 billion a year.

The Value of Trade Secrets

Many businesses overlook the value of protecting trade secrets such as customer lists, marketing strategies, computer algorithms, non-patented inventions, and other confidential, proprietary information. According to the latest statistics, U.S. businesses lose billions of dollars every year due to trade secret theft at the hands of employees, competitors, and even foreign governments.

Trade secrets are currently protected under individual state laws, many of which are based on the Uniform Trade Secret Act, including New Jersey’s, which defines a “trade secret” as:

Information, including a formula, pattern, compilation, program, device, method, technique, or process, that: (i) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

Once proprietary business data is no longer secret, it is no longer protected under trade secret law. Moreover, it generally does not matter whether the disclosure was intentional or accidental. In addition, businesses that fail to take reasonable steps to protect trade secrets do not get the benefit of intellectual property protection. For example, if your trade secrets are stored electronically, you should have robust cyber security and data privacy measures in place, including use of secure passwords that change periodically, limits on employees who are given authorized access to the sensitive information, etc.

Federal Trade Secrets Law 2

Proposed Federal Trade Secrets Act 

The Defend Trade Secrets Act is intended to provide uniform remedies for misappropriation of trade secrets.

While victims of trade secret misappropriation can bring civil suits under state law and the federal government can pursue criminal sanctions under the Economic Espionage Act (EEA), there was previously no federal private right of action.

The Defend Trade Secrets Act is intended to provide uniform remedies for misappropriation of trade secrets. The statute allows civil claims for trade secret misappropriation to be filed in federal court and also provides for injunctive relief to prevent any actual or threatened misappropriation of trade secrets. The statute of limitations would be five years, and treble damages and/or attorneys’ fees would be available in cases of willful and malicious misappropriation.

With broad bi-partisan support, the DTSA gained momentum and passed. In recent weeks, the Obama administration rallied behind the proposed trade secret law, stating that the DTSA would “provide businesses with a more uniform, reliable, and predictable way to protect their valuable trade secrets anywhere in the country.”

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