On May 11, 2016 President Obama signed the Defend Trade Secrets Act into law, effective immediately.  The Defend Trade Secrets Act is the largest expansion of federal protection of intellectual property in over 70 years.

Generally, trade secrets laws protect information that is not publicly known or is not readily available, such that the information would be of value to a competitor.  Originally, protection afforded to owners of trade secrets for misappropriation was provided at the state level through common law.  Later, some 48 states (not New York or Massachusetts) modeled their own trade secrets statutes based on the Uniform Trade Secrets Act.  While these statutes replaced common law rulings with statutory protections, they are not identical from state to state, and problems still remained resolving cases of misappropriation of trade secrets involving interstate or international commerce.

In 1996, the Economic Espionage Act was implemented to provide criminal penalties for the theft of trade secrets.  While providing a needed federal layer of protection, the Economic Espionage Act did not provide a private cause of action, thus, the U.S. Government could prosecute a federal case for the theft of trade secrets, but a private party could not initiate one.  These changes with the Defend Trade Secrets Act, which provides for an owner of trade secrets to bring an alleged misappropriater of trade secrets to federal district court.

While the addition of a civil cause of action is the largest expansion in the law, the Defend Trade Secrets Act also modifies the criminal provisions to increase penalties for the theft of trade secrets, requires courts to provide additional protections to prevent the revealing of trade secrets in related to court proceedings, and charges the U.S. Attorney General with reporting on the impact of the theft of trade secrets from U.S. companies abroad.

Some Impacts of the Defend Trade Secrets Act

  • A federal cause of action for misappropriation of trade secrets
  • Parties found to have misappropriated trade secrets may be subject to federal injunctions, damages, and civil seizures
  • Parties may be subject to exemplary damages up to twice the amount of actual damages awarded if the misappropriation is willful and malicious
  • State protection for misappropriation of trade secrets remains available (not preempted), but the scope of coverage may be different from the federal protection
  • Employers who have contracts or agreements with employees, contractors, or consultants that involve trade secrets or other confidential information are required to provide notice of limited immunity from prosecution to said employees, contractors, or consultants for confidential disclosures of trade secrets to the government or in court filings
  • The Criminal penalties limit has been increased from $5 million to the greater of $5 million or 3 times the value of the stolen trade secret to the organization found guilty of trade secret theft

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