By Sherry Bragg
Businesses at every level – from Fortune 500 companies to solo-inventor enterprises – rely on trade secret protections to safeguard their intellectual property trade secrets. American companies and innovators now have additional protections for their valuable intellectual property assets in the newly enacted federal Defend Trade Secrets Act (DTSA). This legislation represents the most significant trade secret reform legislation in years.
Essentially, the DTSA extends the current Economic Espionage Act of 1996, which criminalizes certain trade secret misappropriations, and allows trade secret owners the opportunity to pursue claims in federal court under federal law, in addition to traditional state court claims. The new federal trade secrets law also presents some very important practical considerations for businesses.
First, the DTSA has a broad reach, and it will likely affect every aspect of a company’s operations. Trade secret issues arise every time a company hires or fires an employee; every time a company enters into a contract containing a non-disclosure or confidentiality clause; and every time an employee discusses the company’s business with a business partner, the public, or friends. All of these activities are now governed by the DTSA.
Second, the DTSA will potentially increase the legal costs associated with protecting a company’s trade secrets. Because of the overlap between the DTSA and state law, companies will need to incur additional costs in order to understand and conform their practices to accommodate both sets of laws. When dealing with trade secret litigation, companies will now have to prosecute or defend against both state and federal claims, adding to the already expensive cost of litigation.
Finally, for better or for worse, the DTSA may create greater opportunities for trade secret owners to win more cases, and to file more lawsuits. By providing plaintiffs with another set of laws and another venue in which to litigate, the DTSA creates more strategic avenues to success. The increased odds of success could spur more litigation, some of which may be for illegitimate or anti-competitive reasons. This, again, could increase litigation costs.
For these reasons, companies would be wise to educate themselves on the DTSA in order to take advantage of, and protect themselves from, the important legal and business consequences of this new federal trade secret law.