What The Defend Trade Secrets Act Means For IP Protection

  • CLIENT ALERT

    Prospective Federal Trade Secrets Act Could Usher In a New “Golden Age” For Trade Secret Protection and Supplement Protection of Technology In An Era Marked By Uncertainty in Patent Protection

    Among the four principal forms of IP protection – patents, copyrights, trademarks and trade secrets – only trade secret misappropriation currently lacks a civil cause of action under Federal law.  That may be about to change.

    Last Monday, in a relatively rare display of bipartisanship, the United States Senate unanimously passed the proposed Defend Trade Secrets Act (DTSA).  In order to become law, the DTSA also must be approved by the House of Representatives and signed by the President.  The House version of the bill has over 120 sponsors and most observers believe it is headed towards approval.  The White House issued a statement stating that it “strongly supports” the DTSA, and that it will help “protect [companies’] valuable trade secrets anywhere in the country.

    The DTSA would provide a uniform federal regime for enforcing corporate trade secrets, which is currently done using a patchwork of state laws.  The majority of states (New York being a notable exception) have adopted a Uniform Trade Secrets Act (UTSA).  However, the DTSA would bring complete uniformity and the right to subject matter jurisdiction in Federal district courts.

    Co-sponsor Senator Orrin Hatch opined that “[t]rade secrets such as customer lists, formulas, algorithms, software code, unique designs, industrial techniques and manufacturing processes are an essential form of intellectual property,” while his Senate colleague Chris Coons declared that the DTSA “is an absolutely essential way to strengthen the ability of America’s inventors to defend their trade secrets.”  

    The DTSA, should it become law, might provide more certainty for owners of Intellectual Property, some of whom have been buffeted by recent Supreme Court patent cases, such as the June 2014 Alice v. CLS Bank case, which held that certain patent claims were invalid under 35 U.S.C. Section 101 as being drawn to “abstract ideas.”  

    While the Court opined that business methods are patentable under certain circumstances, the case left great uncertainty about the precisely what those circumstances are, and in the nearly two years that have passed since the case came down, little clarity has been brought to this issue.  What is clear (and troubling) to patent owners is that the majority of patents challenged under Alice have been held invalid by the courts.

    In the best case scenario, the DTSA could usher in a new “golden age” for nationwide trade secret protection.  Rapidly advancing encryption technologies could also buttress trade secret protection, as these technologies could help make it difficult for third parties to use “reverse engineering” to circumvent both existing and future trade secret protections.

    Eaton & Van Winkle’s IP attorneys have substantial experience in helping clients protect and enforce trade secrets, as well as patents, trademarks, and copyrights.  We stand ready to work with your company’s legal team to address your trade secret and other IP matters.  For further information, please contact us at IP@evw.com.

    ©  Eaton & Van Winkle, LLP, 2016.  All rights reserved.  This memorandum was prepared as a service to clients and friends of the firm to report on recent developments that may be of interest to them.  The information in it is therefore general, and should not be considered or relied on as legal advice.