In a rare example of getting something done, the Senate and House of Representatives have passed Defend Trade Secrets Act of 2016 (“DTSA”) and it is now headed to the White House for signature. President Obama has indicated he will likely sign the legislation. With this in mind, it is a good time to review just what proprietary information your business has and how thoroughly it is protected.
Until now, trade secrets have been protected by state law. While the law is relatively standard there are some slight variations state by state. Indeed, 48 states, Florida included, have adopted the Uniform Trade Secrets Act (“UTSA”) in order to provide businesses with uniformity. At the federal level, while providing protection for other forms of intellectual property like patents, trademarks and copyrights, trade secrets had no specific protection. The DTSA is changing this legal landscape.
The DTSA creates a new playing field for trade secret protection. Broadly, the drafters of DTSA classify a “trade secret” as a:
form of intellectual property that allow[s] for the legal protection of commercially valuable, proprietary information” and the purpose of the legislation is to allow owners of trade secrets to protect those rights in Federal court, thus bringing those rights “into alignment with those long enjoyed by owners of other forms of intellectual property.”
The first major benefit of DTSA is authorizing civil suit in federal court for trade secret misappropriation. As business is more national and international in scope than ever before, access to federal courts will provide litigants with fora that are better equipped to address interstate matters and understand the potentially complex technological issues that are often the subject of trade secrets.
A second benefit under DTSA is that a plaintiff, in certain instances, can obtain a seizure order where authorities can actually go to a defendant and seize misappropriated trade secret information. This could mean seizing computer systems housing information or potentially seizing machinery. Though this provision is controversial and will be subject to refinement as courts implement it, the ability to seize misappropriated information can go a long way to help prevent excessive public disclosure of trade secrets.
In addition, DTSA provides a plaintiff with other remedies as well. In addition to potential seizure, DTSA allows for recovery of actual damages, restitution, exemplary damages up to twice the award of actual damages, injunctive relief and attorney’s fees.
Prepare For Implementation of DTSA
DTSA follows the Economic Espionage Act of 1996, which broadly defines “trade secrets” as “all forms and types of financial, business, scientific, technical, economic, or engineering information” if the owner has taken reasonable steps to keep such information secret, and the information derives independent economic value from not being generally known or readily ascertainable through proper means. With DTSA likely to become law shortly, now is a good time for all businesses to review their trade secret policies.
All businesses should look at what valuable, proprietary information they have in their possession and consider how that information is protected. Trade secrets are only enforceable — under federal or state law — if they are maintained in secrecy. Thus, businesses should look at how they protect information and who they provide that information to and evaluate:
- Is it secure?
- How so – is it encrypted?
- Who is it shared with and why?
- Are non-disclosure agreements used?
- Do key employees have non-disclosure and non-compete obligations?
- Does the company have procedures in place to centralize proprietary information and to recognize new information?
Henderson Franklin’s intellectual property attorneys are here to help you understand what information you have that could be protected as a trade secret and provide best practices for protection of those secrets. For more information, see our blog post here or feel free to contact me at firstname.lastname@example.org or 239-344-1153.