Trade Secret Law: (Defend Trade Secrets Act) DTSA
In 2016, trade secrets entered the federal legislation stage with the Defend Trade Secrets Act, which we will call the DTSA. The enactment of this federal statute graduates trade secrets to be more like its kindred IP sectors, patents, copyrights, and trademarks, by having coverage under federal law. DTSA is not the only law that a trade secrets lawyer will need to know. Existing state trade secret laws, contract law, some criminal laws, mandatory disclosure laws, and possibly international trade secret law will also be relied on. However, the DTSA is a great starting point for outlining what a plaintiff is likely going to need to establish to survive a motion to dismiss its trade secret misappropriation claim in a civil proceeding. In other words, if we run through the DTSA for the misappropriation cause of action, you will get a substantial coverage summary of trade secrets law in about 10 minutes.
- The DTSA is a federal act that amended parts of Title 18 of the United States Code. Some of you may already be aware of this, but the title of Title 18 is crimes and criminal procedure referring to federal crimes and procedures. Part one of Title 18 covers crimes and chapter 90 of part one of Title 18 is entitled protection of trade secrets. Section 1836 of Title 18, despite the existence of this section in the federal criminal code, covers civil proceedings. Subsection B of section 1836 creates a private cause of action. It says, quote, "An owner of a trade secret that is misappropriated may bring a civil action under this subsection if the trade secret is related to a product or service used in or intended to be used in interstate or foreign commerce" end quote. Criminal penalties are found in Title 18 as well, but our 10 minute overview is going to center on this private cause of action. So we need a trade secret under that definition and it needs to be misappropriated. And we can only qualify for a DTSA civil action if we hit that interstate or foreign commerce trigger. This is because the DTSA was enacted by our federal Congress pursuant to its powers under the commerce clause found in article one, section eight clause three of the U.S. Constitution. The commerce clause gives Congress the power quote "To regulate commerce with foreign nations and among the several states and with the Indian tribes" end quote.
Trade secret protection does not have a constitutional seat like patents and copyrights in which Congress has direct authority to enact legislation. Rather, trade secrets law was enacted pursuant to Congress's power over interstate commerce. As a result, to have a foothold in the DTSA, the trade secrets must be related to products and/or services used or intended to be used in interstate commerce or commerce with a foreign nation. Sale or intended sale and interstate commerce is a fairly low bar so long as the product or service is legal under federal law.
- Now we need to learn what a trade secret is and what misappropriation is. By the way, figuring out what falls under the definition of each of these buckets will be addressed in far greater detail in several later lectures. For our 10 minute overview, let's quickly look at these definitions, both of which are found in 18 USC, 1839. As a side note, the definition of trade secret existed in federal law prior to the 2016 DTSA. It was a portion of the criminal law known as the Economic Espionage Act, which still remains in 18 USC, 1831, et seq. The DTSA did modify the definition somewhat. In this overview, we will include the definition as it stands today. After all, this lecture covers trade secrets today. The term trade secret is defined to mean information of many types. The definition lists those types of information. It includes, quote, all forms and types of financial, business, scientific, technical, economic, or engineering information, end quote. The definition continues by giving a non-exhaustive list of examples of what that information might look like, which includes patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible. The definition continues yet further, to ensure inclusion of information, regardless of quote, how it is stored, compiled or memorialized, physically, electronically, graphically, photographically or in writing. So, let's summarize. Element one of trade secrets is that it is information. Now let's move on to the other requirements. Element two is that the owner thereof has taken reasonable measures to keep such information secret. We will get into what is, or is not a reasonable measure, but besides looking at case law, let's consider the policy behind trade secrets. That policy is to further commerce. A careful trade secret owner is permitted to disclose as much as it needs to commercialize the secret. Moving on to element three. Element three is the economic value requirement. The economic value must stem from the secrecy of the information. The statutory definition says it this way, that the information derives independent, economic value, actual or potential, from not being generally known to and not being readily ascertainable through proper means. Again, we will dig deeper in later lectures into what is meant by not generally known and not readily ascertainable. The economic value requirement is further qualified under the 2016 DTSA, in a way that is particularly helpful, now that bits of information can potentially be considered disclosed on the internet and other such places. The DTSA states that the person who could ascertain such information would be one who can obtain economic value from the disclosure or use of the information. Now that we have the definition of a trade secret, let's look at misappropriation, which is also defined in 18 USC, 1839. This definition has two approaches. One type of misappropriation is directed at the person who acquires the trade secret by improper means. The other is directed at disclosure or use of a trade secret without consent.
