1. About the DTSA
2. Trade Secrets and Misappropriation

The DTSA definition of trade secret covers all forms and types of business, financial, technical, scientific, engineering, or economic information that includes the following:

  • Plans
  • Patterns
  • Compilations
  • Procedures
  • Programs
  • Codes
  • Program devices
  • Designs
  • Formulas
  • Prototypes
  • Techniques
  • Methods

This information can be tangible or intangible, and it may be stored, memorialized, or compiled in various forms. As long as the trade secret's owner has taken reasonable steps to keep the information secret and the information has a value due to its secrecy, it's considered a trade secret.

The Defend Trade Secret Act (DTSA) gives a broad definition to “trade secret,” so a wide array of proprietary information falls under trade secret protection.

About the DTSA

In the spring of 2016, the U.S. Senate and House of Representatives passed the DTSA. President Obama then signed it into law.

The DTSA is different from 1996's Economic Espionage Act. The DTSA provides for civil remedies for misappropriation of trade secrets. Litigants can try their case in federal court.

Before the DTSA passed, trade secret misappropriation was handled by the states. Even though almost all states followed some version of the Uniform Trade Secrets Act (UTSA), they also operated differently, so applying the law wasn't uniform across jurisdictions.

The DTSA doesn't preempt various state rights regarding trade secrets, but it does open up the federal court system to victims of trade secret misappropriation. The Act provides companies the chance to protect and remedy misappropriation of their vital proprietary information in federal court.

Trade Secrets and Misappropriation

The DTSA has uniform definitions for the terms “trade secret” and “misappropriation.”

Trade secrets must meet the following guidelines:

  • The information is indeed secret, meaning that no one else knows it or can easily ascertain it, for the purpose of gaining some economic value from using or disclosing the information.
  • The owner of the secret has taken reasonable measures to keep the secret.
  • The secret has an actual independent value.

The DTSA provides that information which is simply stored in someone's memory can also be used as the subject in a civil claim for misappropriation. By comparison, the UTSA has specific types of trade secret information, such as pattern, compilation, formula, method, program device, technique, or process.

Trade secret owners should take steps to protect themselves, such as carefully drafting written policies and having signed agreements that not only specify what is confidential information, but also how to handle that information. They should include in their written policies provisions that mark secret information as confidential and limit access to authorized individuals. Confidential information and trade secrets should be treated as if they're valuable. Owners should keep them in a secure environment.

Just as the DTSA defines trade secrets, misappropriation is also specifically defined. This is welcome news to litigants.

Individuals who are accused of misappropriation often attempt to show that the owners of the secrets didn't take reasonable measures to keep the secret, or they let the secret leak.

In many instances, company employees create trade secrets. They may also work with them on the job. If an employee acquires a secret by breach or theft, it's likely they obtained it using improper means. Companies should give employees tools that will keep the proprietary information confidential. These tools may include the following:

  • Training
  • Clear policies
  • Secure electronic devices
  • Secure interfacing methods

If a company wishes to take the most advantage of the DTSA, it should have specific nondisclosure agreements with employees, along with others who have access. These agreements should include clear procedures on how to maintain the information's confidentiality and how to return the information immediately after a project ends or employment ends. Agreements should make clear the obligation to maintain confidentiality.

Companies and employees should enter into agreements at the start of employment (or the beginning of a business relationship). Preferably, the agreement is in writing. Breaching the agreement may constitute improper means, which will often lay the foundation for a misappropriation claim.

Because trade secrets can be incredibly valuable, they're worth protecting as much as possible. Trade secret owners and companies have several ways to maintain secrecy. As long as they take reasonable measures to protect confidential information, they usually can seek remedies under the DTSA.

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