Trade secrets

How the new Defend Trade Secrets Act could help protect your intellectual property

By Tina Irgang

President Barack Obama this week signed the Defend Trade Secrets Act, a new law that will allow businesses to sue in federal court to seek compensation for stolen trade secrets — anything from proprietary code to a closely guarded recipe for fried chicken.

Previously, such suits were only possible in state court, notes The Salt Lake Tribune. The legislation was crafted by Utah Republican Sen. Orrin Hatch, along with Chris Coons, a Democrat from Delaware.

“Trade secret theft already is a federal crime, but without the right to sue in federal court, companies must seek redress in state courts amid a patchwork of state laws,” notes Fortune.

Major companies such as Boeing and Johnson & Johnson had been pushing for the enhanced protection, Fortune adds.

But the Defend Trade Secrets Act (DTSA) won’t just affect those big players, according to Forbes columnist Eric Goldman: “The DTSA has an unusually broad reach, and you are likely to encounter the law many times each day. Trade secret issues arise with every employee hiring and firing, in every business 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 and family. The DTSA now governs all of these activities.”

Goldman also argues that the law is unlikely to achieve its stated goals, which include protecting American companies from corporate espionage and cyber attacks. The law does nothing to deter this kind of activity, which is already illegal, Goldman notes.

New protections, new obligations

However, others argue that the law provides powerful new protections for those whose trade secrets have already been stolen. For example, the DTSA for the first time allows the government to seize stolen intellectual property without prior notice to the defendant. “This is potentially an extremely powerful remedy for plaintiffs and is intended to stop the dissemination of a trade secret, especially to overseas, before its value has been lost through public disclosure,” notes IP Watchdog.

Another important aspect of the law is that it doesn’t just extend to traditional forms of intellectual property, such as copyrights, patents and trademarks. Indeed, “trade secrets,” as defined by the law, includes almost any confidential business information, such as pricing strategies and client lists, notes Fast Company.

“Trade secret owners now … have the same access to federal courts long enjoyed by the holders of other types of IP,” notes Michelle K. Lee, director of the U.S. Patent and Trademark Office, writing for The Huffington Post.

While it offers new protections, the DTSA also imposes new obligations on employers. The law provides new immunity to whistleblowers who disclose company secrets to the government or an attorney to report illegal activity. As stated in the law, “an employer shall provide notice of the immunity … in any contract or agreement with an employee that governs the use of a trade secret or other confidential information.” If an employee isn’t provided with such notice, the company may not be able to recover damages in a suit involving that employee.

Each year, the theft of intellectual property costs the American economy some $300 billion, according to a 2013 report by The Commission on the Theft of American Intellectual Property. Here’s hoping that the DTSA will go some way towards reducing that impact.

Tina Irgang is the production editor for SmartCEO. Contact her at tina@smartceo.com.