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Trade Secrets Receive Federal Protection

Photo of volumes of the United States Code, symbolizing DTSA protection of trade secretsThis post discusses the civil and criminal protections for trade secrets available since May 12, 2016 under the federal Defend Trade Secrets Act (DTSA).

Relevant definitions in the DTSA roughly follow – with numerous modest differences – those in the Uniform Trade Secrets Act , which has been adopted, with various modifications, by almost all states.

Definitions – Trade Secrets and More

Definitions are set forth in 18 USC Section 1839, as amended. The most important, for the purposes of this post, include the following (emphasis added).

[T]he term “trade secret” means all forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing if—

(A) the owner thereof has taken reasonable measures to keep such information secret; and

(B) the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, another person who can obtain economic value from the disclosure or use of the information[.]

[T]he term “misappropriation” means—

(A) acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or

(B) disclosure or use of a trade secret of another without express or implied consent by a person who—

(i) used improper means to acquire knowledge of the trade secret;

(ii) at the time of disclosure or use, knew or had reason to know that the knowledge of the trade secret was—

(I) derived from or through a person who had used improper means to acquire the trade secret;

(II) acquired under circumstances giving rise to a duty to maintain the secrecy of the trade secret or limit the use of the trade secret; or

(III) derived from or through a person who owed a duty to the person seeking relief to maintain the secrecy of the trade secret or limit the use of the trade secret; or

(iii) before a material change of the position of the person, knew or had reason to know that—

(I) the trade secret was a trade secret; and

(II) knowledge of the trade secret had been acquired by accident or mistake[.]

[T]he term “improper means”—

(A) includes theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means; and

(B) does not include reverse engineering, independent derivation, or any other lawful means of acquisition[.]

Civil and Criminal Enforcement

Under the DTSA, “[a]n owner of a trade secret that is misappropriated may bring a civil action under this subsection if the trade secret is related to a product or service used in, or intended for use in, interstate or foreign commerce.”

Civil remedies under 18 USC Section 1836, as amended, include:

  • Injunctive relief.
  • In extraordinary cases, civil seizure to prevent propagation or dissemination of the trade secret .
  • An award of damages for actual loss, or damages for unjust enrichment, or a reasonable royalty.
  • In the event of willful and malicious misappropriation, exemplary damages in an amount up to twice the damages awarded as specified above.
  • Under certain circumstances, and award of attorneys’ fees to the prevailing party.

Criminal penalties under 18 USC Section 1832(b), as amended, include a fine of not more than the greater of $5,000,000 or three times the value of the stolen trade secret as well as criminal forfeiture of related goods.

Photo credit: Wikipedia

Related post: DTSA (Defend Trade Secrets Act) Requires Notice to Employees

Dana H. Shultz, Attorney at Law  +1 510-547-0545  dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.

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  1. DTSA (Defend Trade Secrets Act) and Employee Notice | Dana ShultzThe High-touch Legal Services® Blog…for Startups! | © 2009-2016 Dana H. Shultz, Attorney at Law

    […] Because of the DTSA, trade secret misappropriation suits with an interstate component now can be filed in federal court. For more information about civil and criminal enforcement, please see Trade Secrets Receive Federal Protection. […]