United States: US Federal Trade Secrets Legislation Reaches One-Year Anniversary

Protection of trade secrets, which led to warmly received new EU and US legislation in mid-2016, remains a hot topic in 2017. While the EU Trade Secrets Directive still needs to be implemented into national laws (by 9 June 2018), the US Defend Trade Secrets Act is celebrating its one-year anniversary and is already being tested in court. We advise companies which have not already done so, to look at the new legislation and, where necessary, take action.

About the DTSA

The US Defend Trade Secrets Act of 2016 (DTSA) is a federal law, aiming to create a federal civil remedy for the misappropriation of trade secrets in the US. The DTSA creates a new federal remedy in addition to the possibilities at state level provided by the Uniform Trade Secrets Act (1979) (UTSA), which has been adopted by 47 of the 50 states. This co-existence means that claims can be based on the DTSA, on the UTSA or on both acts, and cases can be brought before federal courts and local state courts. This, of course, depends on the specific facts and circumstances, such as establishing personal jurisdiction. The possible recourse to federal courts is new; considering that it was already possible to bring patent law claims before a federal court, it will be more efficient for parties to be able to file trade secret claims at federal level as well.

Compared to the UTSA, the most remarkable change the DTSA brings is the possibility of obtaining an ex parte seizure order. This means that the court can allow seizure of allegedly stolen trade secrets in the defendant's possession without hearing the defendant first. The DTSA provides that this powerful new tool is only available "in extraordinary circumstances" and if it is "necessary to prevent the propagation or dissemination of the trade secret that is the subject of the action". Several attempts to use this new instrument have been made but – mainly to the disappointment of employers – most publicly available requests have been dismissed.

The DTSA further includes specific provisions on available remedies, which include injunctions and the award of damages. In the event of the wilful misappropriation of trade secrets, the court may award double damages.

For more detailed information on the new federal trade secret law in the US and what this means for your company, please see our earlier article from 2014.

In 2016, most trade secret disputes based on the DTSA included both DTSA and state law trade secret claims. As these laws differ, it will be interesting to see in which cases one can rely on the instruments the DTSA has to offer. Already, several cases touch upon the question of the DTSA's applicability in time; the DTSA applies to acts that occur on or after 11 May 2016 but remains silent on how to interpret this. In the AllCells, LLC v. Zhai case, for example, the alleged trade secrets were acquired by the defendants before 11 May 2016 while the plaintiff argued that the trade secrets were used after 11 May, triggering the applicability of the DTSA. The Court ruled that the DTSA applied by considering that there was at least use of the trade secrets after 11 May 2016, and dismissed the defendants' argument that an act of continuing misappropriation of trade secrets dates back to the first misappropriation. Ultimately it is up to the US Supreme Court to interpret the DTSA's reach.

Developments in the EU

In the EU, the Trade Secrets Directive entered into force in July 2016 and now needs to be implemented into the domestic law of the EU member states. The deadline for implementation is 9 June 2018. Depending on their current national trade secrets legislation, member states may have to amend their national law or develop a new law. So far, Denmark is the only country which is known to be preparing a specific act on trade secrets incorporating the EU directive.

As this article focuses on the DTSA, please see our earlier articles in 2015 and 2016 for more information about the EU directive.

What should you do?

Companies must take appropriate measures to safeguard their trade secrets. This requirement is outlined in Article 39 of the TRIPS agreement and is part of the UTSA, DTSA, current trade secret laws in Europe, and the EU directive. Only companies that fulfil this important requirement will be able to request protection of their trade secrets.

Companies are advised to incorporate at least the following into their strategy and policies if they have not already done so:

  • Instruct personnel to keep trade secrets confidential – this means implementing confidentiality policies and adequately training personnel
  • Close off workspaces and prohibit entry to third parties, unless confidentiality has been agreed
  • Limit the number of people with access to the trade secret, and keep track of who has access
  • Enter into confidentiality agreements with personnel, licensees, suppliers, and other parties with whom information is shared
  • Those agreements should limit not only the disclosure of the information, but also its use

In addition, we recommend that companies consider how to deal with the possibility of accessing the trade secrets of third parties, in order to reduce the risk of third-party claims in the future. For example, if a company hires a former employee of a competitor, it should shield itself from any of that competitor's trade secrets by allowing the employee to exercise only general knowledge at his or her new place of employment. Companies should also be cautious in collaborations with third parties; these should not have the potential to affect the company's existing plans for a product, or the possibilities of obtaining a patent right in the future. Possible protective measures include entering into agreements with employees where they expressly agree not to use any of the previous employer's trade secrets, and carefully drafting agreements with third parties providing the necessary freedom in the relevant field.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.