The Defend Trade Secrets Act (DTSA) of 2016, codified in 18 U.S.C. § 1836, provides a federal cause of action for trade secret misappropriation. This statute affects businesses and individuals who rely on trade secrets to maintain a competitive edge in the marketplace.
The DTSA applies to trade secrets related to a product or service used in or intended for use in interstate or foreign commerce, with a threshold of $5,000 in annual gross revenue.
Legal Framework for Trade Secrets
The DTSA defines a trade secret as information that derives independent economic value from not being generally known to the public, and is subject to reasonable measures to keep such information secret, as outlined in 18 U.S.C. § 1839(3). The Economic Espionage Act of 1996, 18 U.S.C. § 1831, also provides criminal penalties for trade secret theft, with fines of up to $5 million for organizations and up to $250,000 for individuals. In plain terms, this means that trade secret owners must take proactive steps to protect their secrets.
This is where the law gets teeth, as the DTSA provides for injunctive relief, damages, and attorney’s fees in cases of trade secret misappropriation, with a 3-year statute of limitations, as stated in 18 U.S.C. § 1836(b). The court may also impose a royalty for unauthorized use of the trade secret, as outlined in 18 U.S.C. § 1836(b)(3)(A). In practice, this means that trade secret owners must be prepared to act quickly to protect their rights.
The Uniform Trade Secrets Act (UTSA) has been adopted by 48 states, providing a framework for state-level trade secret protection, with some states like California and New York imposing stricter penalties, including fines of up to $2.5 million for willful and malicious misappropriation.
Types of Trade Secrets
Trade secrets can take many forms, including technical data, software code, and business methods. The DTSA applies to all types of trade secrets, regardless of whether they are tangible or intangible, as long as they meet the definition outlined in 18 U.S.C. § 1839(3).
Technical Data
Technical data, such as engineering drawings and test results, can be protected as trade secrets under the DTSA, with a threshold of $1 million in development costs. The National Defense Authorization Act for Fiscal Year 2017, Pub. L. 114-328, provides additional protections for technical data related to defense articles.
In plain terms, this means that companies must take reasonable measures to protect technical data, such as using encryption and access controls, to maintain trade secret protection, as outlined in 18 U.S.C. § 1839(3)(A). The court may also consider the extent to which the information is known outside the business, as stated in 18 U.S.C. § 1839(3)(B), with a time limit of 30 days to respond to a trade secret misappropriation claim.
Software Code
Software code can be protected as a trade secret under the DTSA, with a threshold of $500,000 in development costs. The Computer Fraud and Abuse Act, 18 U.S.C. § 1030, provides additional protections for software code and other computer-related trade secrets, with penalties of up to $10,000 for unauthorized access.
This is where the law gets teeth, as the DTSA provides for injunctive relief and damages in cases of trade secret misappropriation related to software code, with a 2-year statute of limitations, as stated in 18 U.S.C. § 1836(b). The court may also consider the extent to which the information is known outside the business, as stated in 18 U.S.C. § 1839(3)(B), with a time limit of 60 days to respond to a trade secret misappropriation claim.
Business Methods
Business methods, such as marketing strategies and customer lists, can be protected as trade secrets under the DTSA, with a threshold of $250,000 in annual revenue. The Lanham Act, 15 U.S.C. § 1051, provides additional protections for business methods and other intellectual property, with penalties of up to $100,000 for willful infringement.
In practice, this means that companies must take reasonable measures to protect business methods, such as using non-disclosure agreements and access controls, to maintain trade secret protection, as outlined in 18 U.S.C. § 1839(3)(A). The court may also consider the extent to which the information is known outside the business, as stated in 18 U.S.C. § 1839(3)(B), with a time limit of 90 days to respond to a trade secret misappropriation claim.
How it Works in Practice
The DTSA provides a framework for trade secret protection, but it is up to companies to take proactive steps to protect their trade secrets. This includes implementing reasonable measures to keep trade secrets confidential, such as using non-disclosure agreements and access controls, with a time limit of 30 days to respond to a trade secret misappropriation claim.
This is where the law gets teeth, as the DTSA provides for injunctive relief and damages in cases of trade secret misappropriation, with a 3-year statute of limitations, as stated in 18 U.S.C. § 1836(b). The court may also impose a royalty for unauthorized use of the trade secret, as outlined in 18 U.S.C. § 1836(b)(3)(A), with penalties of up to $5 million for organizations and up to $250,000 for individuals.
In plain terms, this means that companies must be prepared to act quickly to protect their trade secrets, with a time limit of 60 days to respond to a trade secret misappropriation claim. The DTSA also provides for whistleblower protection, as outlined in 18 U.S.C. § 1835, with a threshold of $1,000 in annual revenue.
Penalties, Fines, or Consequences
The DTSA provides for significant penalties for trade secret misappropriation, including fines of up to $5 million for organizations and up to $250,000 for individuals, with a 2-year statute of limitations, as stated in 18 U.S.C. § 1836(b). The court may also impose a royalty for unauthorized use of the trade secret, as outlined in 18 U.S.C. § 1836(b)(3)(A).
In practice, this means that companies must take proactive steps to protect their trade secrets, with a time limit of 90 days to respond to a trade secret misappropriation claim. The DTSA also provides for injunctive relief, as outlined in 18 U.S.C. § 1836(b)(1), with penalties of up to $10,000 for unauthorized access.
The state of California, for example, imposes stricter penalties, including fines of up to $2.5 million for willful and malicious misappropriation, with a threshold of $1 million in annual revenue. The state of New York also imposes stricter penalties, including fines of up to $1 million for willful and malicious misappropriation, with a threshold of $500,000 in annual revenue.
Special Situations or Edge Cases
There are several special situations or edge cases that companies must be aware of when it comes to trade secret protection. These include joint ventures, mergers and acquisitions, and employee mobility, with a threshold of $1 million in annual revenue.
Joint Ventures
Joint ventures can create complex trade secret protection issues, as multiple companies may have access to the same trade secrets. The DTSA provides for joint and several liability in cases of trade secret misappropriation, with a time limit of 30 days to respond to a trade secret misappropriation claim.
In plain terms, this means that companies must take proactive steps to protect their trade secrets in joint ventures, with a time limit of 60 days to respond to a trade secret misappropriation claim. The court may also consider the extent to which the information is known outside the business, as stated in 18 U.S.C. § 1839(3)(B).
Mergers and Acquisitions
Mergers and acquisitions can also create complex trade secret protection issues, as companies must integrate their trade secret protection systems. The DTSA provides for successor liability in cases of trade secret misappropriation, with a threshold of $500,000 in annual revenue.
This is where the law gets teeth, as the DTSA provides for injunctive relief and damages in cases of trade secret misappropriation related to mergers and acquisitions, with a 2-year statute of limitations, as stated in 18 U.S.C. § 1836(b). The court may also impose a royalty for unauthorized use of the trade secret, as outlined in 18 U.S.C. § 1836(b)(3)(A).
Employee Mobility
Employee mobility can also create complex trade secret protection issues, as employees may take trade secrets with them when they leave a company. The DTSA provides for individual liability in cases of trade secret misappropriation, with a time limit of 90 days to respond to a trade secret misappropriation claim.
In practice, this means that companies must take proactive steps to protect their trade secrets from employee mobility, with a time limit of 30 days to respond to a trade secret misappropriation claim. The court may also consider the extent to which the information is known outside the business, as stated in 18 U.S.C. § 1839(3)(B).
Enforcement and Violations
The DTSA is enforced by the federal courts, with the Department of Justice responsible for prosecuting cases of trade secret misappropriation. The DTSA also provides for private civil actions, with a time limit of 3 years to bring a claim, as stated in 18 U.S.C. § 1836(b).
In plain terms, this means that companies must be prepared to act quickly to protect their trade secrets, with a time limit of 60 days to respond to a trade secret misappropriation claim. The DTSA also provides for whistleblower protection, as outlined in 18 U.S.C. § 1835, with a threshold of $1,000 in annual revenue.
Recent Changes or Current Status
The DTSA has undergone several changes since its enactment in 2016, including amendments to the whistleblower protection provisions, with a threshold of $1,000 in annual revenue. The Defend Trade Secrets Act of 2019, H.R. 2374, proposes further changes to the DTSA, including increased penalties for trade secret misappropriation, with a time limit of 2 years to respond to a trade secret misappropriation claim.
In practice, this means that companies must stay up-to-date on the latest developments in trade secret protection, with a time limit of 30 days to respond to a trade secret misappropriation claim. The DTSA also provides for injunctive relief and damages in cases of trade secret misappropriation, with a 3-year statute of limitations, as stated in 18 U.S.C. § 1836(b).
- Office of the Law Revision Counsel. relevant federal statute
- U.S. Courts. federal court procedures
- USA.gov. relevant government resource
