NEW GOODIES FOR THE I.P. PROTECTION TOOLBOX
Virtually every business has intellectual property (IP) assets in need of protection. While some such IP assets enjoy federal protection (via patents, trademarks, and copyrights), trade secrets have historically only been protected by state statutes.[1] Trade secrets, which may be the oldest form of IP, derive their value from being kept secret from others so that certain innovations or information can strengthen a company’s competitive edge in the market.[2] Trade secrets are defined as any valuable business information not generally known and subject to reasonable efforts by the trade secret owner (i.e. company) to preserve such confidentiality.[3] Without proper protectionary mechanisms, these valuable innovations and information could be exploited by those who either obtain access through improper means (where they knew or should have known) or who breach a promise to keep the information confidential.[4] [5] Such exploitation or public exposure could cripple businesses highly reliant on the secrecy of such trade secrets. In fact, theft of trade secrets costs innovators and the economy more than $300 billion a year.[6]
The fate of trade secrets greatly affects our economy. IP-intensive industries make up over 34% of the U.S. gross domestic product ($5+ trillion dollars) and at least 40 million jobs.[7] In early 2013, the Obama administration released the Strategy on Mitigating the Theft of U.S. Trade Secrets, recognizing that trade secret theft threatens not only American businesses and places the security of the U.S. economy in jeopardy, but also undermines national security. [8] [9] [10] Yet, as mentioned, trade secrets has only had the scattered protection of state law—that is, until recently.
As of May 11, trade secret owners now have the same access to federal courts, as well as uniform, reliable protection across state lines long relished by the holders of other types of IP—a huge win for trade secret owners. Specifically, President Obama leveled the playing field for trade secret owners by signing into law the “Defend Trade Secrets Act” (DTSA), enabling companies for the first time to initiate civil suits in federal courts when attempting to defend trade secrets related to products or services used or intended to be used in interstate commerce.[11] [12] [13] The DTSA is not intended to preempt state trade secret law systems in existence, but adds an enhanced toolbox of options for companies’ enforcement of their IP rights.
Significantly, the DTSA creates a new civil seizure mechanism enabling federal courts to “issue an order providing for the seizure of property necessary to prevent the propagation or dissemination of the trade secret that is the subject of the action.”[14] While this has been called the most controversial provision of the Act[15], now companies who are aware of a potential misappropriation of their trade secrets to expeditiously prevent further exposure of proprietary information during the pendency of a formal DTSA case.[16]
In addition to trade secret owners enjoying the newly authorized federal civil cause of action for trade secret theft, if trade secret misappropriation is found to have taken place[17], the DTSA provides for a host of new federal remedies, including equitable relief (i.e., an injunction) to prevent any actual or threatened future misappropriation, payment of a reasonable royalties for future use of a trade secret in “exceptional circumstances,” and damages and/or attorney’s fees where appropriate.[18] Also, the DTSA provides new ex parte (i.e. emergency) civil seizure remedies, which had no comparable remedy in the Uniform Trade Secrets Act where trade secret owners were relegated to traditional injunctive remedies.[19]
Overall, the protective and preventative nature of the DTSA should provide robust tools for companies, as trade secret owners, to deter and protect against unauthorized disclosure of valuable proprietary information. The enhanced country-wide arsenal with the new available remedies will not just deter trade secret theft and exploitation but will also allow trade secret owners to feel more secure, thus encouraging innovation and economic growth. Bottom line—trade secret owners have more goodies in their toolbox and now enjoy uniform, reliable protection like their IP counterparts; and it appears everyone wins.
— By Keobopha Keopong, Esq., Barnes Law
Keo Keopong is an associate attorney with Barnes Law, and is licensed to practice law in California.
The opinions expressed are those of the author and do not necessarily reflect the views of the firm, its clients, or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
[1] http://www.huffingtonpost.com/michelle-k-lee/protecting-americas-secre_b_9904770.html
[2] Ibid.
[3] http://www.ipwatchdog.com/2016/04/09/what-is-a-trade-secret/id=68162/
[4] See, e.g., Uniform Trade Secrets Act: http://www.ipwatchdog.com/tradesecret/uniform-trade-secret-act/; http://www.leginfo.ca.gov/cgi-bin/displaycode?file=3426-3426.11&group=03001-04000§ion=civ.
[5] Uniform Trade Secrets Act defines “improper means” to include “theft, bribery, misrepresentation, breach or inducement of a breach of duty to maintain secrecy, or espionage through electronic or other means.” http://www.ipwatchdog.com/tradesecret/uniform-trade-secret-act/; http://www.leginfo.ca.gov/cgi-bin/displaycode?file=3426-3426.11&group=03001-04000§ion=civ.
[6] Per the Commission on the Theft of American Intellectual Property. http://www.usatoday.com/story/news/politics/2016/05/11/obama-signs-trade-secrets-bill-allowing-companies-sue/84244258/; http://www.huffingtonpost.com/michelle-k-lee/protecting-americas-secre_b_9904770.html
[7] http://www.huffingtonpost.com/michelle-k-lee/protecting-americas-secre_b_9904770.html
[8] http://www.huffingtonpost.com/michelle-k-lee/protecting-americas-secre_b_9904770.html
[9] “In January 2015, the USPTO held a trade secret symposium. Business leaders shared stories of threats of their intellectual property being moved across state and international borders with insufficient protection.” http://www.huffingtonpost.com/michelle-k-lee/protecting-americas-secre_b_9904770.html
[10] "One of the biggest advantages that we've got in this global economy is that we innovate," Obama said at a signing ceremony while flanked by a bipartisan congressional delegation. "We come up with new services, new goods, new products, new technologies. Unfortunately, all too often, some of our competitors, instead of competing with us fairly, are trying to steal these trade secrets from American companies, and that means a loss of American jobs, a loss of American markets, a loss of American leadership." http://www.usatoday.com/story/news/politics/2016/05/11/obama-signs-trade-secrets-bill-allowing-companies-sue/84244258/
[11] http://www.natlawreview.com/article/protections-newly-enacted-defend-trade-secrets-act
[12] The bill was largely uncontroversial and passed in the Senate 87-0 and in the House 410-2. http://www.ipwatchdog.com/2016/04/09/what-is-a-trade-secret/id=68162/
[13] The DTSA creates a federal private civil cause of action for trade secret misappropriation in which ‘[a]n owner of a trade secret that is misappropriated may bring a civil action . . . if the trade secret is related to a product or service used in, or intended for use in, interstate or foreign commerce.’ Defend Trade Secrets Act of 2016, S. 1890, Sec. 2; https://www.congress.gov/bill/114th-congress/senate-bill/1890/text
[14] http://www.abajournal.com/news/article/obama_signs_trade_secrets_law_authorizing_federal_civil_suits_seizure_of_pr
[15] http://www.natlawreview.com/article/protections-newly-enacted-defend-trade-secrets-act#sthash.FNOo9Ckn.dpuf; http://www.abajournal.com/news/article/obama_signs_trade_secrets_law_authorizing_federal_civil_suits_seizure_of_pr
[16] http://www.natlawreview.com/article/protections-newly-enacted-defend-trade-secrets-act#sthash.FNOo9Ckn.dpuf
[17] Relevant findings would be made during DTSA proceedings.
[18] http://www.natlawreview.com/article/protections-newly-enacted-defend-trade-secrets-act#sthash.FNOo9Ckn.dpuf
[19] Ibid.