This week, the United States Senate passed the Defend Trade Secrets Act of 2016, which, if passed by the House and signed into law by President Obama, would give trade secret owners, including manufacturers, a federal private right of action for theft of trade secrets for the first time. The law provides for the award of damages for trade secret theft as well as injunctive relief. It even includes a provision allowing a court to grant ex parte expedited relief to trade secret owners under extraordinary circumstances to preserve evidence or prevent dissemination of the trade secret. The ex parte provision, as DuPont’s Chief Intellectual Property Counsel put it in a Senate hearing, “enables a trade secret owner under limited, controlled conditions, to proactively contain a theft before it progresses and the trade secret is lost.”
Trade secrets are a form of intellectual property that are of increasing importance to many manufacturers for a variety of reasons. A trade secret can be any information that is (i) valuable to a company, (ii) not generally known, and (iii) not readily ascertainable through lawful means, as long as the trade secret holder has taken reasonable precautions to protect it. A classic example of a trade secret is the formula for Coca-Cola. A more recent example is DuPont’s innovative Kevlar product, which was the subject of a large scale trade secret theft in 2006. Trade secret theft is a huge problem; a recent Pricewaterhouse-Coopers study showed that trade secret theft costs American businesses $480 billion a year.
To sue someone for trade secret theft, a trade secret owner must prove that (i) the information stolen qualifies for trade secret protection (i.e. it meets the above definition), (ii) the trade secret owner took reasonable precautions to protect the information, and (iii) the alleged thief misappropriated the trade secret, i.e. took it unlawfully, or as one legal textbook puts it, “through deception, skullduggery, or outright theft.” Robert P. Merges, Peter S. Menell, and Mark A. Lemley, Intellectual Property in the New Technological Age, Revised Fourth Edition 2007. And while there are federal claims for the theft of other forms of intellectual property, such as claims for patent or copyright infringement, traditionally trade secret theft has been the exclusive domain of state law. This is despite the fact that interstate or international trade secret theft has been a federal crime since 1996. If it becomes law, the Defend Trade Secrets Act of 2016, would give manufacturers a direct route to federal court to defend their trade secrets.