Businesses today rely more than ever on the secrecy of their data, financial information, special techniques and their business opportunities to differentiate themselves in the marketplace and gain a competitive advantage.

If this information is treated properly, it can be considered a valuable trade secret of a business and add intangible value to the bottom line. The problem with trade secrets as a form of intellectual property in the past has been how to treat that information appropriately so that all 50 states in the U.S. will agree that the information is a trade secret and enforce the trade secret against thieves.

Unlike patent, trademark or copyright protection, there is no set time period for trade secret protection. A trade secret is protected as long as it is kept secret. However, once a trade secret is lost, it is lost forever. Fortunately, Congress agrees that this multi-state approach is difficult for businesses, so it is working to pass the Defend Trade Secrets Act.

On April 4, 2016, the United States Senate unanimously approved the Defend Trade Secrets Act, which would amend the Economic Espionage Act of 1996 to create a federal right of action for trade secret theft. The proposed legislation would authorize a private civil suit in federal court for the theft or unlawful public disclosure of a trade secret that is related to a product or service used in, or intended for use in, interstate or foreign commerce.

The proposed legislation seeks to do the following:  (1) create a uniform standard for trade secret misappropriation by expanding the 1996 Act; (2) extend the statute of limitations on trade secret actions from the current 3 years in most states to 5 years; (3) provide parties with opportunities to stop the theft from continuing and obtain enhanced money damages (triple damages instead of the typical double damages available under state law now) to account for the significant economic harm to the trade secret owners caused by the disclosure or theft; and (4) create remedies for trade secret misappropriation similar to those in place for other forms of intellectual property.

The Defend Trade Secrets Act will not preempt state laws, so trade secret owners can choose whether to proceed under state law in state court or to use the new Defend Trade Secrets Act in federal court.

Interestingly, the Defend Trade Secrets Act (in its current form) will provide for the use of ex parte seizure orders to allow for seizure of the trade secret from a defendant without notice to that defendant. This option can be very helpful in the case of foreign actors, who otherwise could leave the country and abscond with the trade secret before court action under the traditional system would authorize a seizure. This proposed seizure protection goes well beyond what a court is typically willing to order under existing state law.

The bill is expected to pass the House and to be signed into law soon, as the Obama Administration strongly supports the Defend Trade Secrets Act. The Defend Trade Secrets Act is expected to support innovation by giving trade secret owners stronger protection.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader’s specific circumstances.

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