IP Law: Trade Secrets

President Obama signed the Defend Trade Secret Act of 2016 (DTSA) into law on May 11, 2016. The purpose of DTSA is to Bolster protections for U.S. trade secret holders, create a private cause of action for the misappropriation of trade secrets, expressly confer jurisdiction of such actions to the U.S. federal district courts, and harmonize the substantial and diverse body of state trade secret law and equip trade secret holders with new tools to safeguard their intellectual property.

The Key Provisions of DTSA include Private Cause of action, Civil Seizure, Remedies Statute Limitations, Whistleblower Exception, Preserving Confidentiality of Trade Secrets in District Courts, and Criminal Penalties for Organizations.

The DTSA reworked old definitions. Peter Pizzi and Christopher Bochert note the differences in their article "Understanding the Defend Trade Secrets Act of 2016: "We're not in State Court Anymore.""  

The changes in definition are: 

Trade Secret: The DTSA slightly narrows the definition of “trade secret.” Previously, a trade secret was defined as, among other criteria, deriving independent economic value from not being generally known to, and not being readily ascertainable through proper means by, “the public' Under the DTSA, a trade secret retains the same definition with the exception that it derives independent economic value from not being generally known to, and not readily ascertainable through proper means by, “another person who can obtain economic value from the disclosure or use of the information.” Pizzi, Borchert, "We're Not in State Court Anymore", 83 Def. Couns. J. 299, 303 (2016).

The DTSA provides a new definition of “misappropriation”: “(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.” Pizzi, Borchert, "We're Not in State Court Anymore", 83 Def. Couns. J. 299, 303 (2016).

The DTSA also provides a new definition of “improper means”: “(A) includes theft, bribery, misappropriation, 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.” Pizzi, Borchert, "We're Not in State Court Anymore", 83 Def. Couns. J. 299, 303 (2016)

References:

Peter J. Pizzi, Christopher J. Borchert, Understanding the Defend Trade Secrets Act of 2016: "We're Not in State Court Anymore", 83 Def. Couns. J. 299 (2016).

Daniel G. Mackrides, Trade Secret Law in the Wake of Defend Trade Secrets Act of 2016, 47 Del. J. Corp. L. 65 (2022)

30 A.L.R. Fed. 3d Art. 9 (Originally published in 2018).

Suggested reading

United States v. Aleynikov, 676 F.3d 71 (2d Cir. 2012)

DTSA was created in response to the unsuccessful prosecution in United States v. Aleynikov where the Second Circuit reversed the conviction of Sergei Aleynikov, a former Goldman Sachs programmer, for theft of trade secrets, finding that proprietary computer code fell outside the scope of  the then-existing federal statutory schemes because it was not “produced ... for interstate or foreign commerce.” Aleynikov had allegedly uploaded Goldman Sachs high-frequency trading code to a server in Germany as he was leaving Goldman's employment for a Chicago hedge fund. In response to Aleynikov and related concerns about international and domestic “hacktivism,” legislation was proposed to amend the Economic Espionage Act, and it is that amendment that President Obama signed into law earlier this month.

See also: Sean Lavin et. al., Intellectual Property Crimes, 56 Am. Crim. L. Rev. 1101 (2019)

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A Legislative History