U.S. Senate Passes Federal Trade Secrets Act
April 08, 2016

On April 4, 2016 the United States Senate unanimously passed the Defend Trade Secrets Act (S. 1890).  The bill intends to establish for the first time a uniform national trade secret protection standard.

In general, a trade secret is information that is valuable to its owner, not generally known, and that has been kept secret by the owner.  Typical examples of trade secrets include customer lists, formulas, algorithms, software code, procedures, industrial and manufacturing processes, drawings, recipes, business forecasts, and strategic plans, to name a few.

Presently, federal law provides limited trade secret protection.  The Economic Espionage Act covers criminal theft by foreign nationals for which charges must be brought by the U.S. government.  Also, the Computer Fraud and Abuse Act affords businesses some trade secret remedies, depending on the specifics of their cases.  However, by and large, laws governing trade secrets currently fall within the purview of the states.  Most states have adopted a form of the Uniform Trade Secrets Act, while some states follow common law.

The DTSA, if passed, will allow parties to bring civil lawsuits to enforce trade secrets in federal court, provided that the trade secret is related to a product or service that is “used in, or intended for use in, interstate or foreign commerce.”  However, the DTSA would not preempt state law, and a party would still have the option to file suit in state court.  Also, allegations of intrastate trade secret misappropriation would remain in state court.

Under the DTSA, a party has three years from when misappropriation is discovered or should have been discovered to file suit.  The bill sets a maximum penalty of $5 million or three times the value of the misappropriated trade secret, whichever is greater.

The DTSA has wide industry support, as well as strong support from the White House. It now heads to the House of Representatives, where a similar federal trade secret bill has been introduced.

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