By Thomas Long, J.D.
President Obama today signed Senate Bill 1890, the “Defend Trade Secrets Act of 2016.” The bipartisan measure amends the Economic Espionage Act of 1996 to create a federal civil remedy for trade secrets theft. The legislation will, according to its sponsors, help American innovators protect their intellectual property. Trade secrets include such vital proprietary information as confidential formulas, manufacturing techniques, and customer lists. The legislation passed the House on April 27 and passed unanimously in the Senate on April 4. The law takes effect immediately and applies to any acts of trade secrets misappropriation taking place after the date of enactment.
The Defend Trade Secrets Act (DTSA) creates a uniform federal standard for trade secret misappropriation. The DTSA defines a “trade secret” as “all forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible.” To obtain protection, the owner must take reasonable measures to keep the information secret. Additionally, trade secrets are covered by the DTSA only if they derive independent economic value, actual or potential, from not being generally known or ascertainable. The DTSA’s definition of “misappropriation” resembles that of the Uniform Trade Secrets Act, but it does not prohibit “reverse engineering, independent derivation, or any other lawful means of acquisition.” The DTSA does not preempt state law.
The statute will allow companies to craft one set of nondisclosure policies, rather than the piecemeal approach required previously, when civil remedies for trade secret misappropriation were available only under state laws, with varying standards and requirements. The DTSA provides for injunctions and damages, including ex parte seizure authority when it is needed to prevent the disclosure or further dissemination of a stolen trade secret. The statute authorizes monetary and injunctive relief, while safeguarding the freedom of employees to move from one job to another and providing limited immunity to whistleblowers. The DTSA also amends the RICO Act, 18 U.S.C. §1961(1), to add violation of the Economic Espionage Act as a predicate act of racketeering.
The statute of limitations for the DTSA is three years “after the date on which the misappropriation with respect to which the action would relate is discovered or by the exercise of reasonable diligence should have been discovered.” A continuing misappropriation is considered a single claim of misappropriation.
At the signing today, President Obama thanked the bill’s sponsors and other members of Congress who ensured the measure’s bipartisan success, as well as the U.S. Trade Representative and the U.S. Patent and Trademark Office.
“As many of you know, one of the biggest advantages that we've got in this global economy is that we innovate, we come up with new services, new goods, new products, new technologies,” President Obama said. “Unfortunately, all too often, some of our competitors, instead of competing with us fairly, are trying to steal these trade secrets from American companies. And that means a loss of American jobs, a loss of American markets, a loss of American leadership. What these members of Congress have done is to, on a bipartisan basis, pass a strong enforcement bill that allows us not only to go after folks who are stealing trade secrets through criminal actions, but also through civil actions, and hurt them where it counts in their pocketbook.”
According to Senator Orrin Hatch (R-Utah), the bill’s primary sponsor, “Enacting the Defend Trade Secrets Act is the most significant intellectual property development in years, and it demonstrates that Republicans and Democrats can work across the aisle in seeking to advance important public policies that will benefit the American people and boost our nation’s economy.”
Senator Christopher Coons (D-Del), one of the bill’s co-sponsors, said, “I’m thrilled that despite the gridlock in Congress, we’re able to celebrate today a real, bipartisan achievement that will help American businesses grow, innovate, and protect their hard earned intellectual property.”
The legislation was vigorously supported by many industry stakeholders, including the American Intellectual Property Law Association (AIPLA), the Intellectual Property Owners Association (IPO), the National Association of Manufacturers (NAM), the Software & Information Industry Association (SIIA), the Telecommunications Industry Association (TIA), and the U.S. Chamber of Commerce. Microsoft, General Electric, and other companies applauded the signing.
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