Intellectual Property Law Blog

The Defend Trade Secrets Act: What IP-Driven Companies Need to Know

May 3rd, 2016

Trade-SecretsBy Alan S. Nadel, Esq.

When we wrote recently about trade secrets, we noted that enforcement in the United States fell largely to state laws modeled on the Uniform Trade Secrets Act (UTSA), first drafted in 1979. With its signing in February 2016 of the Trans-Pacific Partnership, though, the United States obliged itself to enact legislation that gives trade secret protections teeth at the federal level.

Out of that effort came the Defend Trade Secrets Act of 2016 (DTSA), which in April passed the U.S. Senate unanimously and fell only two votes shy of doing the same in the House. President Obama signed the bill, as expected, on May 11.

The Defend Trade Secrets Act has important implications for all inventors and businesses that depend on intellectual property protections.

New alternative for hard-to-obtain patents?

Implementing a uniform, federal trade secret law is expected to make trade secret protection (or the lack thereof) more certain, as opposed to the variable approaches under the diverse state-level laws. As such, the Act and its effects at the federal level will allow intellectual property attorneys to make a more careful consideration with our clients of whether to keep an invention as a trade secret or to file a patent application to protect the invention.

This may offer a viable alternative to patent protection for business method, computer-implemented and certain life sciences inventions. Patents on these types of inventions have become more difficult to obtain and enforce, in the wake of Alice v. CLS Bank and other recent court decisions.

More teeth in enforcement

The DTSA actually is an amendment to the Economic Espionage Act of 1996. While that law authorized the criminal prosecution of trade secret theft, it did not allow for trade secret owners to pursue civil litigation. The DTSA now gives trade secret owners that potential remedy, putting them on the same legal footing long enjoyed by holders of trademarks, copyrights, and patents.

At the same time, state trade secrets laws will remain in force; the DTSA does not preempt or supercede them. This gives intellectual property owners the flexibility to argue for whatever combination of state and federal legal provisions best protects their trade secrets. Courts, meanwhile, also will analyze any disputes under both the DTSA and any applicable state laws.

In some instances, a trade secret holder may want to pursue parallel cases – under the DTSA in federal court and under the applicable law in a state court – particularly if the potential relief is different in state and federal jurisdictions. This may increase the cost of enforcing trade secret protections, but the potential outcome could very well be worth the expense.

Plaintiffs can request seizure

The DTSA enables plaintiffs to ask a federal court to seize trade secrets in a defendant’s possession under “extraordinary circumstances.” Those circumstances may involve the possibility of the trade secret being further disseminated or the party accused of misappropriation destroying evidence of the theft.

Plaintiffs should be careful about seeking such seizures, however, because the law similarly allows defendants the opportunity to convince a federal court that the circumstances are not, in fact, extraordinary. If the court finds that the plaintiff’s request for seizure comprises an overreach, the plaintiff could be civilly liable to the defendant.

These added threats on both sides should cause serious reflection on the parts of plaintiffs and defendants and may provide incentive to settle trade secret disputes before they escalate.

Is trade secret protection right for your invention?

The newly strengthened protections for trade secrets give inventors and businesses more reason to consider whether trade secret designation might be the most efficient or cost-effective approach to safeguarding their intellectual property.

The Defend Trade Secrets Act will make trade secret protection a more viable choice than ever before. However, it has made enforcing that trade secret protection more complex and, arguably, more vital. The Philadelphia and Delaware patent and trade secret attorneys at Panitch Schwarze Belisario & Nadel have decades of experience navigating the high-stakes sea of IP laws. If you have questions about how the Defend Trade Secrets Act might affect your intellectual property, call us at 1-888-291-5676.

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