US President Signs New Trade Secrets Law

US President Barack Obama yesterday signed into law a measure aimed at strengthening trade secret protection including by allowing federal courts to hear cases involving trade secret theft.

The Defend Trade Secrets Act of 2016 is available here.

An Intellectual Property Watch analysis of the bill is available here (IPW, North American Policy, 28 April 2016).

New Day for America

USPTO Director Michelle Lee posted to her blog about the bill’s signing, calling it “a new day for American inventors.”

“While trade secrets may be the oldest form of intellectual property, they are also a unique form of IP,” she noted. “Unlike patents, trademarks and copyrights, the value of trade secrets comes from others not knowing about them, in order for their innovation to strengthen their competitive position in the market. Also, unlike the federal protections that have traditionally been afforded patents, trademarks and copyrights, trade secrets have been protected historically not by a federal right but by a patchwork of state statutes.”

Read Lee’s full blog post here.

Jane Schlicht, an intellectual property attorney at Hinshaw & Culbertson LLP, said in a statement that the law “establishes uniform federal protections for trade secrets.”

“Trade secret owners can seek relief from threatened or actual theft of their trade secrets by filing a civil action in federal court,” she said. “Until the passage of this Act, most of these claims had to be filed in state court, where there was little uniformity of outcome from state to state.”

“The Act allows trade secret owners to request ex parte seizure of property that contains the trade secrets, meaning the court can order a law enforcement officer to seize the property without notice to the person who has possession of the property,” Schlicht said. “Until now, only trademark and copyright owners could seek this relief.”

“However, employers should be aware that the Act includes Whistleblower Protections,” she said. “Employers must notify employees in any contract that is related to trade secrets or confidential information of their right to provide confidential information to the government if illegal activity is suspected. Employers who do not provide this notice to employees and who pursue a theft of trade secrets claim, will not be able to recover attorneys fees or exemplary damages if they pursue a claim under the Act and are successful.”

“Given the increasing amount of trade secret theft by foreign nationals who gain access to a business’ trade secrets through consulting or employment relationships, this new law should provide much needed relief,” Schlicht added. “Employers who suspect current or former employees, consultants, or competitors  have misappropriated trade secrets for use in other businesses or with foreign nationals should evaluate their potential claims under this new law.”

The US Chamber of Commerce hailed the bill, saying it worked with 40 associations and companies on passage of the bill in Congress.

“Today marks a significant victory for American innovators and American workers,” said David Hirschmann, president and CEO of GIPC. “This law will provide much-needed protections against the theft of trade secrets – the unique formulas and know-how that set many companies apart. The strong public support for this law is reflected in the broad bipartisan coalition that came together to make it a reality. We applaud President Obama for signing this crucial legislation, and we once more thank Chairmen Hatch, Goodlatte, and Grassley, as well as Senator Coons and Representatives Doug Collins and Jerrold Nadler, for moving this bipartisan bill forward.”

Robert Milligan of Seyfarth Shaw, co-chair of the firm’s Trade Secrets, Computer Fraud & Non-Competes practice group, commented on the new law. Milligan and two others recently posted on this issue.

“Companies now have the ability to sue in federal court when their trade secrets are misappropriated,” he said. “HR [human resources] professionals will want to immediately update their non-disclosure agreements so that companies can avail themselves of the full protections of the new law.”

Milligan said in a statement that the new law demonstrates that trade secrets are extremely significant to US companies. “The livelihood of many businesses depends upon these important intellectual property assets,” he said. “With the new law, they are put in their rightful place among patents, trademarks, and copyrights.”

“Trade secrets will only grow in importance as a result of the new law,” Milligan predicted. “As companies have begun to move from seeking patent protection, the Defend Trade Secrets Act will help fill that void by providing a property right that can be protected in federal court.”

 

Image Credits: "SECRET" stamp by Alex Wellerstein (CC BY 2.0)