Trade secrets, like all intellectual property, are increasingly valuable in the modern corporate landscape. Companies rely on their trade secrets, be they a product, recipe, design, or any piece of secret information that makes one company different from another, to help differentiate them from their competition, and to drive profitability.

Organisations plough billions of dollars into the development of their intellectual property, including their trade secrets, in the hope that they can give them the competitive edge over rivals. Accordingly, companies should do everything within their power to protect their trade secrets, ensuring that reasonable secrecy measures are in place, no matter the cost.

Given the importance of trade secrets, there can be little surprise that their theft or misappropriation has been climbing exponentially; recent estimates suggest that the theft of IP, including trade secrets, is estimated to cost US firms more than $300bn a year.

With this in mind, steps have been taken to strengthen trade secret protection in the US. In April, the Defend Trade Secrets Act (DTSA) was passed by the US Senate and secured the endorsement of the Obama administration, which noted that the Act would “provide businesses with a more uniform, reliable, and predictable way to protect their valuable trade secrets anywhere in the country”.

On 27 April, the House of Representatives joined the Senate in passing the DTSA, by a 410-2 vote. In many respects, the Act functions as an amendment to the Economic Espionage Act which did not provide a private right of action for trade secret misappropriation, to include provisions that largely follow the trade secret misappropriation provisions of the Uniform Trade Secrets Act, including definitions of ‘misappropriation’ and ‘improper means’. Most states have, to some degree, adopted the Uniform Trade Secrets Act.

The Act will also bring to an end the efforts undertaken by lawmakers to add federal civil causes of action for trade secret misappropriation. The bill will establish, for the first time in the US, a uniform national trade secret protection standard. It will grant trade secret owners, including manufacturers, a federal private right of action for theft of trade secrets.

Jul-Sep 2016 issue

Richard Summerfield