The theft of trade secrets act is a piece of legislation that was passed to provide companies the ability to use the federal court system to protect proprietary information and to seek remedies when this information is stolen.

Facts About the Defend Trade Secrets Act

In 2016, the Defend Trade Secrets Act (DTSA), which is also known as the theft of trade secrets act, was signed by President Obama. The DTSA was meant to create a new method for protecting intellectual property from theft and also amended the Economic Espionage Act of 1996. In the House of Representatives, only two votes were cast against the DTSA, and the Senate passed the DTSA unanimously.

Now that the DTSA is in place, companies will be able to access the federal court to defend their intellectual property and to seek damages when this property has been stolen or used without permission.

Economic Espionage Act of 1996

Stealing or misappropriation of trade secrets has been a federal crime since the Economic Espionage Act took effect on January 1, 1997. When convicted of trade secret theft under the provisions of the Economic Espionage Act, an individual can be fined up to $250,000. Corporations can be fined as much as $5 million. A ten-year prison sentence is also possible.

If trade secret theft is done on behalf of a foreign government or agent, the punishment will be much more severe. The individual fine increases to $500,000 and the corporate fine will be $10 million. The maximum possible prison sentence will be 15 years instead of 10.

The Economic Espionage Act contains two crime categories: economic espionage and trade secret theft. Several different ways that trade secret theft can occur are when:

  1. A trade secret is stolen or is taken without authorization.
  2. A trade secret is copied without authorization.
  3. A person buys or receives a trade secret knowing that it has been stolen.

When someone was convicted of trade secret theft under the Economic Espionage Act, criminal forfeiture was also required, meaning the convicted person would need to turn over the property that they have stolen. The reason for this criminal forfeiture requirement is that it is possible to quickly spread information through the internet without authorization.

In this act, there is also language that states the act applies to activity outside the United States based on several circumstances:

  • The person who committed trade secret theft is either a permanent resident alien or natural citizen of the United States.
  • The organization involved was formed under United States laws.
  • A political subdivision or state of the United States was involved.

Defend Trade Secrets Act Provisions

Before the DTSA was passed and signed into law, companies were forced to pursue remedies for trade secret misappropriation in state court. The biggest disadvantage of this was that laws related to trade secret theft varied between states, both in their provisions and how they were applied by the courts.

Some of the differences that existed between states included:

  • The definition of a trade secret.
  • The statute of limitations for trade secret theft.
  • The remedies available for victims of trade secret theft.

Thanks to the DTSA, there is now a nationwide statute that can be applied in federal court. To be clear, existing state laws are not preempted by the DTSA. The only purpose of this act is to give companies the ability to sue for trade secret theft in federal court, which is very beneficial for large companies that operate on a national scale.

This act also gives federal courts the same jurisdiction over trade secret theft that they have over copyright, patent, and trademark infringement. Another benefit of this act is that it has created clear definitions for both misappropriation and trade secret theft. The DTSA uses a very broad definition of trade secret theft so that a wide range of proprietary information is covered by the statute.

Prospective litigants also appreciate that the DTSA provides a uniform definition of misappropriation:

  1. Acquiring a trade secret that you know was first obtained through improper means.
  2. Disclosing a trade secret without approval.
  3. Using a trade secret without approval.

A statute of limitations of three years is in place under the DTSA. The remedies available in the act are similar to those currently available in state law.

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