Trade Secrets: DTSA, UTSA and Related Claims

Trade Secret misappropriation cases can now be filed both in state courts pursuant to UTSA model acts and as of May 2016, in federal courts pursuant to the new Defend Trade Secrets Act 2016 (DTSA) and its civil remedy provisions. Here is a link to the DTSA bill passed by both houses of Congress and signed into law recently: https://www.congress.gov/bill/114th-congress/senate-bill/1890/text. This new federal law is being described as the most sweeping new change in federal law on intellectual property since the passage of the Lanham Act in 1946. For the first time, federal criminal law on economic espionage and trade secret theft has been amended to provide civil legal and equitable relief for theft victims. We have written and spoken about this law in national publications (see USLAW Fall/Winter 2016 Magazine and DRI's In-House Defense Quarterly Winter 2017 magazine) and conferences.

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What are trade secrets?

Trade secrets provide an effective means for a company to protect certain kinds of proprietary and confidential information, and this protection is separate and distinct from that offered through the patent laws (see one of our articles discussing the differences here). However, under the DTSA, UTSA and state statutes like PUTSA, companies need to take appropriate steps before the law will recognize and protect those trade secrets. For instance, only some kinds of information can potentially qualify as a trade secret

These statutes describe trade secrets in relatively similar ways. In order to potentially qualify as a trade secret, the information must:

  1. provide a competitive or business advantage to the company;
  2. must be kept secret with a level of secrecy commensurate with its value to the company; and
  3. must not be generally known in the industry.

The law of trade secrets is generally broad enough to encompass a variety of different kinds of information that provide a company with a competitive advantage, including formulas, recipes, drawings, manufacturing processes, customer lists, business plans, costing information, and vendor lists, among other things.

One of the often overlooked aspects that can cause issues for companies is if they fail to take reasonable steps to maintain the secrecy of their trade secrets. For example, companies need to consider who within the company has access to the information, are their procedures and agreements sufficient to identify and maintain the confidential nature of the information, and how is the information shared (if at all) with outsiders? The law is not inclined to protect information that a company fails to take reasonable steps to protect itself.

Finally, trade secret protection is not like the protections afforded by the patent laws, which allow a patent owner to restrict the use or sale of an invention, regardless of whether the infringer independently developed the invention or even had knowledge of the patent. Trade secret laws will only protect a company from others misappropriating the information (e.g., stealing it, enticing others to break their confidentiality obligations, etc.). Trade secret laws generally do not prohibit others from independently developing or reverse engingeering a product or process.

While the laws vary from state to state, in general, most states provide for the ability to receive compensatory and punitive damages, injunctive relief, and attorney's fees against those who misappropriate another's trade secrets.

Trade Secret Resources:

The following resources discuss Pennsylvania's law on trade secrets (PUTSA), as well as the DTSA and the Uniform Trade Secrets Act:

A new federal trade secret law--the Defend Trade Secrets Act of 2016 (DTSA)--has passed Congress and was signed by the President in May 2016. It creates an additional body of law to protect trade secrets, creates federal jurisdiction for trade secret misappropriation lawsuits and provide for both injunctive and damages relief, including enhanced damages and legal fees, and also enhances the criminal punishment for misappropriation as well by increasing the amount of fines that can be levied. DTSA provides for civil seizure of violating goods and a special master provision to oversee injunctive orders.

Attorneys Henry Sneath,   Kelly Williams, and others have experience representing and advising clients about their business secrets and have litigated these issues in Courts throughout the country. Henry Sneath is an Adjunct Professor of Law at the Duquesne University School of Law on Trade Secret Law and the law of Unfair Competition in business. In addition, the firm has co-authored the Pennsylvania section of DRI's compendium on trade secrets and other articles on Trade Secret law and made presentations on trade secrets throughout the country.

The Pittsburgh attorneys at Picadio Sneath Miller & Norton, P.C. can help guide clients in evaluating the appropriate means to protect their proprietary information and maintain its secrecy.

Contact Our Pennsylvania Intellectual Property Lawyers Today:  Business Litigation. Pittsburgh Strong. ®

Attorney Henry Sneath chairs the firm's Intellectual Property Practice Group. Contact him at 412-288-4013. Our PSMN ® Pittsburgh intellectual property and DTSALaw ™ attorneys help clients navigate intellectual property and other  business disputes by providing them with the knowledge and information needed to make informed decisions.