Defend Trade Secrets Act

By, Gregg R. Smith

On May 11, 2016 President Obama signed into law the Defend Trade Secrets Act which created a private cause of action for the owner of a trade secret that has been misappropriated. Prior to the enactment of this federal legislation trade secret law was left to the individual states, resulting in 48 variations of the Uniform Trade Secret Act and two states that relied upon common law.

The Defend Trade Secrets Act requires the owner of a trade secret to take reasonable steps to secure and protect its confidential tangible or intangible business, financial, scientific or other information from becoming publically known. The information that is to be protected as a trade secret must also derive  independent economic value as a consequence of the owner maintaining its secrecy.  A trade secret does not include reverse engineering of a legally acquired product, independent discovery or something that is the result of generally known information.

A key difference between the Defend Trade Secrets Act and the Uniform Trade Secrets Act found in most states, is the ability of the owner of a trade secret, in extraordinary circumstances, to seek an order that allows for the seizure of property that is necessary to prevent the disclosure of the misappropriated trade secret. The courts are beginning to analyze what is required to establish the basis for an order directing the seizure of property without a full hearing. 

Owners of trade secrets will benefit from the Defend Trade Secrets Act with its truly uniform definitions and expanded protections, when compared to state trade secret laws. In those circumstances where a party would also benefit from a provision of the state laws, it would be possible for a lawsuit brought in federal court to state a cause of action under both the federal legislation as well as the laws of the state where the trade secret misappropriation took place. 

Public Law 114-153,
114th Congress